Risk Management for Small Businesses

Risk Management for Small Businesses

Risk Management for Small Businesses

by Karen Jensen | Featured Contributor 

We are a nation of small businesses.  In fact, over 90% of U.S. businesses have less than 20 employees.  But many small businesses aren’t developing or implementing a risk management strategy – and that’s a big mistake.

I know as small business owners, we wear a lot of hats, but there are tried and true business practices that are absolutely necessary to ensure business success – risk management is one of them.

Risk management doesn’t have to be scary or intimidating.  It should be part of your overarching business plan. (If you don’t have a business plan, you might want to consider writing one of those too)

Are you a small medical practice?  Running an Airbnb property?  A restaurant with public wifi? An exporter of goods or services? Have an Etsy or Ebay store?

What is a risk management strategy?

There are lots of fancy definitions, but a solid risk management strategy really sums up everything about your business, how you keep it running and what you will do if it stops running (by design or by accident).

Some examples are:

  • your cash on hand and what you owe (financial risk management)
  • identifies and protects your proprietary information (Intellectual property risk management)
  • protects your customer and employee data (governance and compliance risk data)
  • your business continuity plan defines your business will do in the case of an unplanned event

I talk with so many small business owners who really have no idea of what their current state of business is.

The beauty of a small business is that you can make it anything you want.  If you design jewelry and sell it at local green markets on the weekend, you probably don’t need a lot of complicated software.  But if you want to build an Etsy store or your own website, you are going to need to know some basics.

  • Free versions of anti-virus and malware aren’t as good as paid versions. It’s essential for an online presence to employ reasonable tactics to protect your information and your systems.
  • Outdated software isn’t supported by the manufacturer. Windows 7 hasn’t been supported since 2015.  Yes, the security patches will be deployed until 2020, but seriously?  Why are you still running Windows 7?
  • Make a list of all the software applications you use. Are they current?  Do you use them?  This doesn’t take long and should be part of your business continuity plan.
  • Review your business credit card statements as carefully as you review your personal statements. Recurring charges that are unnecessary?  Services you don’t use with recurring billing?  Think lean and mean.  Only buy what you need and don’t pay for things you aren’t using.
  • Do you have employees? Consider writing an employee handbook.  I know quite a few small business owners who hired friends and family, who later sued them for employment practices.  Think hard about hiring friends and family.  If you decide to do it, make sure you define roles and set clear business practices.
  • If you want to build a growth strategy, make sure your business is in order. Spend the money to have your business reviewed by a small business attorney and a financial expert.  You can’t get an SBA loan without 2 years of tax returns, so it pays to get this all set up correctly in the beginning.  There are lots of attorneys and financial planners who specialize in small business architecture.  Invest in your business!
  • Let’s talk about technology. Technology can be such a big and frightening word for small businesses.  There are so many emerging technologies to follow, sales pitches about the new software you “must have” and just keeping up with the day to day requirements.
  • Small businesses are the weakest link in the cyber security chain. Over 60% of small businesses that are the victims of cyber crime go out of business in six months.  Can you do business without your customer database?  There are numerous reputable tools to help small businesses be cyber secure.  Many of them are also free so there’s no excuse!

I’m on a mission to help more small businesses succeed!

Keep me posted on your small business story.

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