Running a business is risky enough. If you’re not careful, however, your business can be exposed to a host of potential threats that could affect its bottom line and even cause it to fail—and fast. Fortunately, there are steps you can take to mitigate these risks before disaster strikes. Here’s a list of nine common business risks and how to avoid them so you’ll know what to look out for:
Cyber attacks are some of the biggest threats to companies. However, there are proactive steps you can take to mitigate the risk of a cyber attack happening to your business. One way you can reduce the likelihood of a cyber attack is by implementing certain policies and procedures. For example, many businesses implement strong passwords and use two-factor authentication (2FA) when logging into sensitive systems or databases. Other ways to mitigate your cybersecurity risk is to set up firewalls, keep your antivirus updated, and continually train staff on cybersecurity best practices.
Data breaches are a serious risk to businesses of all sizes, but they’re especially damaging for small and medium-sized companies. In fact, many companies that suffer a data breach close within six months. A data breach can occur in many ways including malicious intent, human error, or equipment failure. When it happens to your business, it will have a significant impact on your reputation and bottom line.
Preventing these breaches requires proactive steps such as implementing encryption to protect sensitive information stored in your systems as well as having an adequate response plan in place should you be breached.
Depending on where you live, the risk of a natural disaster like a typhoon, tornado, or earthquake could be very real. Natural disasters are a common risk for businesses. In fact, it’s not uncommon for an entire industry to be disrupted by a natural disaster at any given time. For example, if your company is in the energy business, you may be affected by hurricanes or even devastating earthquakes.
As a business owner or manager, it’s important to understand what kinds of natural disasters might occur in your area so that you can mitigate their impact on your organization. This will help keep employees safe while they’re working and keep your data protected no matter what.
Another business risk is the risk of lawsuits. Lawsuits can be expensive. This is a fact that we all know and fear, but the reality of it is not always fully understood. For example, if you are sued and lose a case, it could cost you legal fees as well as compensation for damages. In addition to having to pay out money, there is also the possibility that this will have an impact on your business reputation—which could lead clients away from doing business with you or prevent them from purchasing from you at all. Lawsuits can force a company into bankruptcy or force it out of business entirely. The costs associated with these kinds of lawsuits can quickly spiral out of control into millions of dollars and beyond.
Fraud and Embezzlement
Fraud and embezzlement are criminal acts in which an employee or business owner misappropriated money. In fraud, a person makes a false representation of a material fact to another person or organization in order to obtain property belonging to that entity. Embezzlement involves taking funds from your employer or organization while theft involves taking funds that belong to other people.
Intellectual Property Theft
Intellectual property is the name given to an idea, invention, or artistic creation that has been legally protected by a patent, trademark, or copyright. Intellectual property theft occurs when someone uses your intellectual property without permission.
Employees could take intellectual property from their employer and use it for another organization. Hackers could break into your computer system and steal any information they find on your hard drive. Corporate spies could monitor employees who have access to sensitive company information before stealing it to give to competitors or other third parties.
Outsourcing is a common way of managing risk in business. However, outsourcing can increase your company’s risk if you don’t do due diligence on potential vendors. To mitigate this risk and make sure that your chosen vendor has the best interests of your business at heart, ask them questions about their security practices as well as their operational practices.
Strategic risk is the risk of loss from a business decision that has a major impact on the future of your company. It’s important to understand and mitigate strategic risks because they can have a significant impact on your bottom line, your ability to execute business plans, and your ability to compete with other companies in your industry.