How to Manage Risks to Protect Your Small Business
Proper Risk Management Will Help You Run Your Business Smoothly
Unexpected situations are part of life. No matter how much we try, we can’t ignore them. Pretending they will never happen will only make things worse.
As a business owner, actively managing risks is critical to the health of your business. You must be prepared to face a wide variety of unexpected circumstances. Being caught off- guard and having no reaction plan could derail your operation.
Identify Your Risks
Putting your finger on the risks that may affect your business is the first step to managing them. It’s about understanding which things pose a threat to your business success. To understand what your most significant risks are, you must conduct a comprehensive analysis of business activities that could potentially present challenges to your independent insurance agency or other business.
Identifying your business risks is not a way to sweep them under the rug. Your risk management plan is not supposed to make those risks go away but help you manage them by accepting, transferring, or reducing them, in most cases.
Some common risks are:
- Building risks, like fire or explosion
- Hazardous material risks, like spills or accidents related to acid, poisonous liquids, or gas
- Human risks, like illness or injury
- Location risks, like floods, hurricanes, and other natural disasters
- Technology risks, like power outages or communication failure
Assess Their Probability
Once you have identified your risks, you must prioritize them by their likelihood to happen. You can define your scale —very or somewhat likely to happen, neither likely nor unlikely, very or somewhat unlikely to happen. You may also want to assess your risks to determine their level of impact.
Create a Risk Management Plan
At this point, you are ready to put together an action plan that outlines what needs doing in case a risk becomes a reality. Insurance is one of the main things that can help you safeguard your business from a variety of threats.
Prevention is the best way to minimize risk. Things like performing maintenance on your equipment, creating succession plans for when you lose a key employee, doing maintenance on your premises, and providing proper training, can make a difference.
How do you manage risks for your agency? AAI is here to provide you with tips and resources to help you through all sorts of situations so that you can come out on top every time.