Do You Know the Risks Facing Your Business?

calendar March 28, 2019

There’s a well-known story that Microsoft started out as two guys building software in a garage. Whether or not this is technically true, we all know how the story ends. With a very large, very influential, very successful company.

What does this narrative have to do with the risks facing your business? More than you might think.

It’s all relative

As companies grow and change, so do the various risks they face. A small business just getting off the ground, with a couple of employees and no location to speak of will have very different concerns and exposures than a multi-national corporation with offices around the world.

Whether you’re a software giant, a manufacturing company, or a family-owned restaurant, part of your job is assessing and managing your business risks. Not just once, but repeatedly as your organization continues to develop over time.

Types of business risk

Here are several kinds of business risk you’ll need to consider, identify, and manage.

Strategic Risk is risk associated with things pertaining to your business plan, model, direction, and environment. Even the most well-thought out strategies and plans don’t always work out as anticipated. Sometimes the market gets in the way. Or the economy. Or some other factor that causes your business model to become weak, unsustainable, or obsolete.

Operational Risk comes from the hidden dangers inherent in the day to day process of running your organization. These could be issues related to equipment or system failures, negligent employees, fraud, and breakdowns in policy or processes. It could also result from external events such as theft, fire, or natural disasters. Anything that interrupts your core operation is considered an operational risk.

Compliance Risk refers to your exposure to legal fines and penalties resulting from failure to comply with all applicable laws, regulations, specifications, policies, and standards that pertain to your industry, business, and operations. This encompasses a wide spectrum of issues, including misclassification of employees, safety and environmental violations, discrimination claims, privacy issues, wage and hour violations, and more.

Human Risk is caused by the simple fact that it takes people run your business. And as we know, humans are not always consistent or predictable. Employees can create risk for your business in a variety of ways. Errors and mistakes, poor management, unsafe practices, inadequate training or knowledge, theft, fraud, violence, harassment, etc. The more employees you have, the greater the risk. But even if you’re a sole proprietorship, you’re still only human. At some point, you could end up putting your own company at risk.

Technology Risk is associated with the technological systems your business relies on. Power outages, software failures, security breaches, cyber-attacks, and other technology issues can cause anything from minor interruptions to major catastrophes. The same technologies that help you run your company more effectively and efficiently can also wreak havoc on your organization.

Financial Risk is anything that interferes with the ability for your business to maintain positive cash flow. Financial risks can be both internal and external and include things like market fluctuations, interest/exchange rates, inaccurate projections, clients who default on payment or internal theft and embezzlement. It can also be as simple as poor budgeting, bad financial decision making, and mismanagement of debt.

Reputational risk has to do with how your business is perceived by potential customers and the public. Things that affect organizational reputation include lawsuits, product failures and recalls, political issues, customer incidents, negative reviews, and social media. Positive business reputations take time to build, but they can be lost in a second. If your company reputation takes a hit, it can result in a significant loss of customers, partnerships, sponsorships, and ad revenue. You may also find it difficult to maintain company morale and attract and retain talent.

Getting your house in order

Even if your business is still in the garage, you’ll want to think about what factors could negatively affect your finances, operations, and overall success.

If you’ve already outgrown your startup phase, you’ve also outgrown your initial risk management assessment and plan. And probably your garage. Which means it’s time to take another look at how you’re running your operations and managing your risk.

As a company leader, it’s important to reevaluate your risk management strategies on a regular basis. Identifying and mitigating potential threats isn’t a one-time task. It’s an ongoing endeavor that is critical to the health and survival of your organization.

Putting together the right risk management team

Of course, you’ll want to involve your company owners and leaders. But it’s also important to work with an insurance consultant who is familiar with your industry, knows the specific risks associated with it, and is dedicated to helping you and your business grow, thrive, and succeed.

If your agent doesn’t seem particularly knowledgeable or eager to dive into risk reduction strategies with you and your team, keep looking until you find someone who is.

Risk has the potential to bring down small businesses and organizations. Make sure you’re working with an insurance professional who is committed to building yours up.


Combined, Inc. helps employers build cost effective, long-lasting benefits strategies to keep their businesses and employees in optimum health. Located in Diamond Bar, CA, we help clients throughout the greater Los Angeles area identify and manage complex employee benefits challenges. FOR FREE CONSULTATIONS, COMPLIANCE REVIEW, DEMO TRIAL, ETC. CONTACT US