As a business, you have a responsibility to your customers, your employees, and those you partner with in a professional capacity to be aware of all of the risks presented to your business and how they can impact you. Effective risk management requires an extensive audit of your business to identify all of the threats you might come up against during your business operations and what you can do, if anything, to prevent or mitigate the damage these risks can cause.
Any business owner determined to be successful will focus on what can go wrong as well as the good things in a business or ensure all bases are covered and nothing is going to swoop in and pull the rug out from under them. Remember, proactive measures are your best defence against potential risks, empowering you to stay in control of your business’s fate.
And honestly, it’s not hard to see the impact neglecting this aspect of running a business can have. The results of poor risk management are prevalent in all industries, and even large corporations have fallen victim to security breaches that have cost them thousands in fines and the rest of their customer base, too. By actively engaging in risk management, you’re not just protecting your own business, but you’re also contributing to a larger community of responsible business owners who understand the importance of this aspect of business operations.
Whether you’re protecting your company physically or digitally, these tips can help you ensure your security protocol is in place and effective where it needs to be.
Cyber Threats
Starting with one of the most prevalent issues facing all kinds of businesses these days: cybersecurity attacks, small businesses are being increasingly targeted by threat actors. Many people don’t have the resources to put stringent protection in place or knowledge of how they can be attacked, leaving them vulnerable to threats.
In the UK last year, over 7.7 million cyber attacks on small businesses and over 1 million reported unauthorized access incidents. The US didn’t fare any better, with 61% of SMBs targeted in 2021, and in 2024, 46% of all breaches were of businesses with under 1,000 employees. If that gives you food for thought, paying close attention to how cybercriminals might breach your defense is a good idea as it ensures you employ the best cyber security practices for your business.
Top cyber security tips include
- Educating employees
- Using strong passwords
- Changing passwords regularly
- Using firewalls and antivirus software
- Backup your data
- Use AI for real-time monitoring
- Conduct periodic reviews
- Stay aware of threats and new developments in the sector.
Economic Threats and Risks
A business can face various economic risks, and understanding these risks and how they impact you is vitally important. Economic risks to businesses include changes in interest rates, inflation, exchange rates, political unrest, or changing government regulations. For instance, a sudden increase in interest rates could lead to higher borrowing costs, impacting your cash flow. Similarly, political unrest in a key market could disrupt your supply chain, affecting your production and sales.
It’s important you understand how each economic risk can impact your business and the provisions in place to assist you in overcoming additional challenges presented to you. It might be that you need to make operational changes to diversify your product line; you might find that alternative financing sources could work in your field, especially in different currencies. You might want to look into different markets where your products can be sold and uncover new audiences to help you expand your customer base and give you a new source of income, for example. All of these issues can be mitigated and protected against in some way, and knowing how you can do so will serve you well if any of these issues impact our profitability.
Physical Security Risks
Understanding the physical security risks to your business means you can protect your premises and your employees and ensure that you make it as difficult as possible for any crimes to be committed. Whether it’s theft by employees or customers if you work in retail or have employees using your building or facilities, you might find physical threats in the form of attacks to staff, changes in the weather, e.g., flooding from storms, vandalism, and more.
Physical security threats harm the business by exposing vulnerabilities for others to exploit. For example, severe storms might allow looters easy access to your store, or you might find that people are trying to break into your warehouse on a regular basis or that you are the target of terrorist attacks in the local area.
Protecting your brick-and-mortar location and physical assets is something you need to do on an ongoing basis. Neglecting to do so can leave you at risk of not being able to operate should the worst happen. Maintaining security measures is paramount, as it ensures your business’s continuous operation and safety.
How do you mitigate against physical threats? First, you need to have an action plan, and should any of the identified threats against your business occur, you might find physical security options like video cameras, security guards, or fire extinguishers come in handy. As can staff training, internal CCTV to monitor employees and access other buildings, and tech such as security as service products that allow you to monitor your business even when you are not there can offer peace of mind.
Financial Risks
Financial risks are those money-related decisions that can land you in trouble if you allow them to come to fruition. Financial risks include poor cash flow, bad investments, financial instability, theft, and more.
You could find yourself facing financial issues such as employee wage theft, where employees make up their hours and submit false timesheets to get paid for hours they didn’t work or weren’t entitled to. It could be that you are making poor spending decisions and you’re trying to expand and take on more debt as a business before you can sustain the business you already have, or it might be that you face clients unable to pay, which in turn leaves you in financial hardship due to poor planning due to an inability to manage finances correctly.
You need a complete overview of your company’s financial health. This involves conducting a financial health check, which includes assessing your cash flow, profitability, and debt levels. You also need effective forecasts to work from and improved budgeting and spending control to help you overcome challenges such as lean periods so you can remain operational without having to make changes or cut back due to reduced money flowing through the business.
Operational Risk
Operational risks are the risks that present themselves from the day or running of your business. It might be the natural disasters that stop you from being able to work. It could be system failures, breakdowns, or machinery or equipment you rely on. It could be employee error, lack of trained employees, quality standards, etc.
All of these aspects can limit your business from being fully operational every single day, and not only do you need to be aware of the risks but also proactive in protecting against them.
This means you need improvement preventative maintenace plans to reduce the risk of unplanned downtime, consistent, effective employee training to help minimize or eliminate employee mistakes, and you need to have backup plans for times when people can’t get to work, i.e., extreme weather conditions such as hurricanes or in the event of your business not being suitable to work from so your entire operations don’t grind to halt.
Identifying and protecting against business risks requires an extensive audit of the company to identify and assess the risks. Then, preventative measures that can help reduce the risk or eliminate it altogether are needed to enable the company to stay operational.