Unlike large, multi-national companies, small enterprises don’t have a large workforce and multi-talented team that can seamlessly execute strategic, marketing and business operations. This sets small businesses up to face very unique challenges.
Of course, this doesn’t mean the multi-national companies do not face their own risks, but small businesses are vulnerable to a range of financial and security risks. As a small business owner, it is important to be aware of these risks in order to manage them. In this post, we will walk you through seven of the most common areas of risks that small businesses face.
Financial Risks
Business owners often spend their own savings and may take out a loan to fund the working capital of their company. This can include employee salaries, utility bills, and other regular expenses.
If your business is running on limited budget without a rainy day fund, you are putting yourself at extreme financial risk. As we have seen all too clearly in 2020, economic recessions and downturns can occur at any time, and these events can be sudden and unexpected. It is therefore critical to have a strong financial strategy that includes plenty of buffer in case of disaster.
Liability
Liability is another important area of risk, but it is unfortunately often overlooked by small businesses. For example, every business needs to ensure that their electrical systems are compliant with relevant laws and regulations. As these laws can change, sometimes frequently, it is a good idea to consult with a professional like PHS compliance.
Consulting with compliance professionals and/or retaining a lawyer is essential to keep on top of laws and regulations. While it may seem an unnecessary expense especially for new businesses, a lawyer or legal advisor is highly recommended for small businesses. This investment can save you thousands of dollars in the long term by helping you avoid lawsuits. Legal advice is also critical when you are drafting HR policies and employee contracts.
Business Interruption
Economic recession and natural disasters can occur at any time and can present significant challenges to small businesses that may make it difficult for them to operate their business. This is due to the simple fact that natural disasters, such as earthquakes and floods can damage your property and inventory, as well as interrupt business operations.
Supply chain disruption is another common risk that can impact your business growth. So, you need to pay special attention to the manufacturers and suppliers you rely on for regular inventory and product manufacturing. The best way to manage business interruption risks is by developing a strong business continuity plan.
Changing Technology
Small businesses need to keep up with the latest trends and technology. So, in order to grow your business and boost your audience engagement, you need to provide them with a quality service. That’s only possible when you follow the current market trends and embrace the latest technology. A lack of resources can make it challenging for small businesses to adopt the latest technology, but research and proper planning can help you mitigate the risk to some extent.
Cyber Security Threats
Small businesses typically do not have the resources to install the best cyber security systems, let alone hiring a professional and experienced IT team. With cybercrimes increasing dramatically over the past few years, failure to maintain the security of your business network, devices, and confidential information can lead to security problems that may be detrimental to your business.
These security threats can cause reputation damage as well as financial and data loss, making it important for businesses to use advanced security protocols and high-quality monitoring systems to keep the security risks at bay.
Reputation Risk
Brand reputation plays an integral part in any company’s success, and the risk of failure, negative customer reviews, unsatisfied customers, and lawsuits are all factors that put your business at risk when it comes to company reputation.
Even one negative review can ruin your brand’s reputation, so to avoid the reputation risk, you must keep up to date with what your customers think of your brand. Do your products and services satisfy their requirements? Are they happy with your after-sale customer support service? These small factors can make a big difference on your company’s reputation.
Growing Competition
Competition is inevitable. No matter how unique your business niche is, chances are you need to deal with competition. Thankfully, you can manage competition risk by tracking your top competitors’ performance and the strategies they are using. Furthermore, you should refine your business strategy to improve audience engagement and customer retention in light of your competition. Otherwise, you will lose your prospective customers and sales.
Small businesses, like businesses of any size, face a range of risks across a number of areas. By managing these risks, small business owners can help to ensure the success of their business in the long run.
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