When you choose to own a business, nearly every decision you make as a business owner will come with some sort of risk. Because of the inherent risks of running a business, choices you make should be carefully considered. While there are more risks than the ones listed here, these are the risks you should be most familiar with when dealing with your regular business operations, in order to avoid legal or financial implications. When in doubt, seek advice from a legal or insurance professional who has experience dealing with business operation risks.
Some of the financial risks you have to contend with as a business owner include the risk of clients not paying, which results in either late payment or non-payment. If you’re relying on your client’s invoices being paid promptly, this risk can be extremely disheartening and affect other areas of your business. Other financial risks include your building expenses such as a sudden hike in your business space rent, inflation in fuel prices, and an increase in inventory, storage costs, and interest rate on business loans.
Workplace Safety Risks
Workplace safety risks will vary depending on your business type, though all businesses will have some kind of workplace risks. Safety risks in the workplace include accidents or illness that employees sustained during their normal business operations, and especially incidents that can occur if you are not careful and keep your workplace safe for employees. To avoid most workplace risks, you should comply with the Occupational Safety and Health Administration and follow their guidelines to create a better work environment. Workplace safety risks also apply when an unsafe environment causes injury or illness to a customer or visitor. If something does occur, the risk can end up costing your company when expenses aren’t covered by insurance.
Product Quality Risks
If you own a business where you sell products such as food or beverages, cosmetics, or skin care products, you have a higher product quality risk. If your products don’t meet certain standards, you could be dealing with legal and financial issues down the line.
Regardless of the type of business you run, you’ll have competitors. The strategic risk is the risk associated with operating a business in a certain industry, whether you’re competing against other restaurants, coffee shops, retail stores, or salons. Your strategic risks include problems arising from changes in the industry, customer needs changing, research and development, and acquisition or merger activity, to name a few.
Most businesses need equipment and materials on a daily basis that keep your operations a float. However, if something was to happen to your equipment, it can negatively affect your business, and thus becomes an operational risk. This includes equipment breaking down or malfunctioning, which requires repairs or possible replacements. For instance, if you own a flower business and the van you use for deliveries breaks down, the consequences can be catastrophic, both for the cost of repairing the van as well as any business lost due to the downtime.
There is always going to be a compliance risk, in regards to your current government or state laws and regulations. You must always be up-to-date on the current laws and regulations, and if you aren’t, you will be risking a host of problems. This includes employment regulations, health and safety laws and guidelines, product regulations such as labeling food properly, and other laws set forth by your local government as it pertains to your industry.
Business operation risks can put a damper on your daily operations, as the risks often mean you could lose your business assets through legal or financial consequences. The best way to protect your business is with business insurance that will cover these and other risks.