Don’t Let Risk Undermine Your Business
As an entrepreneur, running a small business can feel overwhelming, and there are significant risks involved. But you can manage many of these with proper planning, and reduce the potential downsides.
Here in Asia Pacific, Aon's latest Global Risk Management Survey cited the two biggest challenges to be business interruptions, as well as cyber-attacks or a data breach. Now, you’ve probably thought about these from time to time, but have you got a real strategy in place – in case something happens?
Being aware of what you’re up against is critical for an Independent Doer, so you can plan around these challenges and ensure the business you’re building will succeed in the long term so you don't let risk undermine your business.
What business risks do you face?
No matter what industry you’re operating within, you can’t escape Murphy’s law.
That is, whatever can go wrong, will go wrong – and this applies to just about anything.
You might suffer an employee accident or a customer injury. A data breach or a system failure. A natural disaster, or an ongoing pandemic that disrupts your operation and hurts your ability to meet your overall goals for the business. And when you break these risks down, they fall into two categories.
Internal risks come from within your company.
They're usually the things that you can overcome with proper risk management, good processes, and some attention to detail. For example, workplace accidents are one of the most common. To overcome them, develop safe workplace procedures and safety guidelines for your team to follow.
External risks come from outside your company.
They're usually the things that are outside of your direct control. Though you can minimize the fallout from these incidents with sound risk management, external risks are typically larger and unpredictable. Like the Covid-19 pandemic, businesses had to respond fast and adapt to new ways of doing business.
What risks should you prepare for?
Depending on your industry and where you’re operating from, certain risks may have a higher probability of playing out. But there are four, overarching challenges that entrepreneur, startup and freelancer should prepare for.
Business Disruption Risks
There's no question that Covid-19 has had a devastating impact on small businesses around the world. Global restrictions and shutdowns meant that many brick-and-mortar locations had to close their doors until lockdowns eased. Supply chain and logistics bottlenecks increased transport and sourcing costs and pushed many businesses over the edge.
As a result, many businesses have seen layoffs and shutdowns. While others chose to rapidly innovate in an attempt to keep their operations afloat. Adding new products, services, and online ways of selling in the “new normal” - to keep their doors open.
Cybercrime and Data Risks
With the Covid-19 pandemic accelerating the move online, alongside our increased connectivity, many small businesses have become a tempting target for cybercriminals. Unfortunately, many Independent Doers fail to implement the cyber protections that larger companies have. Assuming they’re an unlikely target they don’t adequately protect themselves. The truth is, hacking a small business is often far too easy.
And it’s not just external risks. Small businesses may face threats from disgruntled employees, who chose to commit data theft or deletion. Exploiting their access to a company network to steal or delete customer’s sensitive personal information.
Competition Risks
One downside of the shift online is that you’re now competing with everyone. As more and more small businesses sell their products on the internet, consumers have more and more choice. The additional products make it a buyer’s market, which can put a negative downward pressure on prices. Customers begin to see your products as a commodity, interchangeable with the rest.
To overcome this, you need to consider your reputation alongside your plans to stay relevant. Your business cannot afford and bad press, while you must continually develop new and improved products and services to best suit the changing needs of your audience.
Fire and Explosion Risks
It’s also essential to cover fire in this list of risks, as it’s one of the most predominant internal risks you’ll face. Allianz ranked fire 7th in their Top 10 Global Risks, putting it at a higher likelihood of impacting your business than labour shortages, changing markets, and even a changing macroeconomic environment.
Unfortunately, fire is also one of the most expensive causes of business losses worldwide, and the financial impact in the aftermath of a fire usually results in a business permanently closing its doors. Not to mention the real threat to life – yours, your employees and your customers. It’s imperative to have an updated emergency plan and working fire prevention methods, and an appropriate level of insurance.
How can I reduce my risk today?
The first step you need to get in order is a plan.
Get a piece of paper, and list out the basics you’ll need to cover in case the worst should happen. Brainstorm how your business might continue in one of the situations above, and what obstacles might you face getting back online?
One thing that is important to consider here is your profession.
Your plans need to deal with the risks you are most likely to face, which will differ depending on your job. For example, a baker might have a much more considerable fire risk than a desk employee working from their home living room. But the home-based work will have a much greater need for quality internet to stay connected from this remote location.
These rough plans are a great start because it works like a checklist, all the things you need to do in the event of an emergency, so you're not trying to remember it all. Instead, you’ve got something you can follow step-by-step as it happens, acting fast to get operational again.
But more than just planning, you also need to protect your investments.
What solutions can protect my business?
Once you’ve got a contingency plan in place, it’s a smart idea to purchase insurance. You’ll find policies that cover a wide range of risks, from theft to property damage and even coverage for natural disasters.
In addition, policies designed for small business are generally affordable, and you can even take out a business income insurance plan which, under the covered situations, will compensate for any loss of income should a disaster strike. What you need to do, is find a plan that covers the specific needs of your business, so you don’t lose everything you’ve been working for.
For premium members in Singapore, we’ve made available an exclusive deal on small business insurance through our partnership with Aon. Underwritten by Chubb Insurance, it’s what Independent Doers need to enjoy real peace of mind that their business isn’t at risk.
