Risk management can sometimes become an afterthought when you’re trying to improve your business. It involves a little more attention to detail and time for sorting out the good practices from the bad. However, when you do decide to look over every element of your company - from marketing to suppliers to employees - it’s essential to notice some red flags that may urgently require fixing. Before reworking your entire business model out of fear for dangerous consequences, let’s explore the key areas of your company that may require the most change.
1. Insufficient Emergency Funds
Whether it’s building-related expenses, work injuries, unexpected taxes, or other major financial hits that may not be covered by insurance, it’s always best to plan ahead for additional costly situations. Unfortunately for your business, it’s not a matter of if financial pitfalls are going to happen, but when.
Once you’re faced with immediate expenditures that daily income cannot support, you have to go to Plan B. Instead of going further into debt, which could eventually lead to bankruptcy, try setting aside adequate emergency funding for the (hopefully rare) times your business will need to pay a huge bill right away.
2. Lack of Legal Documentation
There’s all different types of documentation needed before you officially go into business. Your company may be required to have certain permits, licenses, insurance, and contracts in order to stay within the legal system. Also consider the specialists, inspectors, and legal representation you might need to hire on occasion. Depending on your type of business, one small permit that you haven’t yet acquired could lead to major damage—both to your finances and to your personal reputation within your community.
Documentation risk extends to day-to-day business transactions, as well. You could easily suffer from client loss due to poorly written or non-existent Terms & Conditions. Additionally, your product suppliers or deliverers could offer unfavorable performances and negatively impact your quality of goods that you normally provide to customers. Suppliers have the potential to risk your entire business if you fail to establish a solid Service Level Agreement (SLA) that describes the exact details of their services to you.
3. Underperforming Staff Members
It’s no question that your employees are the face of your business. Although you may believe that your company generally operates optimally with its current staff, there still could be one or two people who are displaying habits that don’t align with your business style. This includes employees who are often late to work, take extended breaks, become absent altogether, or show up with toxic patterns of behavior.
Even one staff member who negatively influences other employees could threaten the positive work culture of your business. Customers usually appreciate being able to interact with familiar employees so that there’s healthy comradery and established trust between each other. If you notice staff members suddenly disregarding rules, leaving work early, or exhibiting a disinterested attitude towards customers, your customer base will surely dwindle to the point where your business becomes in jeopardy.