Every business faces a wide range of risks, from unpredictable accidents to problems caused by your own mistakes. Business risk management is a common-sense part of helping to protect your business.
If your business relies on external finance, lenders and investors will want reassurance that risk is being controlled. Managing insurance risks may also be a required part of getting insurance, and can help reduce insurance premiums.
How to manage business risk
Start by looking at what your business does and what is involved: your premises, equipment, employees and so on. Then identify the key risks. These can include both external risks, such as a natural disaster, and internal risks such as accidents caused by inadequate safety procedures and equipment.
Assess the likelihood of each risk, and how severe the impact would be. Prioritise managing the business risks that are the most likely to have a major impact. In some cases, as part of your risk assessment you may be able to eliminate a risk altogether.
If not, look for ways to reduce the likelihood of a problem occurring and the impact if it does. Employee training and working procedures can play an important part in reducing business risks. You may also want to make contingency plans to help your business recover quickly if a problem does occur.
Where risks can't be reduced to an acceptable level, you may want to get insurance. In some cases, insurance is legally required. For example, you must have employers’ liability insurance in case an employee is injured or becomes ill because of their work.
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Key business risks
Business assets need to be protected against damage or loss. Securing your premises is a good start.
Your IT systems, and the data held on them, are at particular risk from both theft and cyber attack. IT system failure can have devastating consequences, and you are legally required to ensure that personal data is adequately protected. As well as IT security measures to protect against malware, a routine backup procedure is essential.
You have a legal responsibility to manage health and safety. This includes assessing the risks your business poses to employees, members of the public and anyone else who might be affected by what you do.
Your business can also face a wide range of potential legal claims. As well as contractual disputes, these can include claims from customers and employees, or enforcement action from the authorities. With litigation potentially involving significant costs, you may want to consider legal insurance.