29% of Americans say they turned to entrepreneurship because they wanted to be their own boss. But 20% of businesses fail within their first year, so it can be a quick failing dream for many.
There are several reasons why new businesses fail, but one main one is a lack of awareness of risks.
Commercial risk management can be a fantastic way to ensure your business won’t be in trouble. However, it can be costly to hire professionals to perform this job 24/7.
So when’s the right time to start commercial risk management? Read on to find out.
At Your Company’s Inception
The best time to have commercial risk management done is as soon as you start thinking about creating a business. It’s crucial that you assess potential risks at the start so you’re prepared. Here, you can also develop a risk management strategy.
Identifying and addressing risks early on can literally save your company. These steps can help prevent or even mitigate potential issues in the future, so this is a vital action for your business’s beginnings.
However, if you haven’t performed risk management and your company’s already up and running, don’t worry. It’s never too late to begin implementing risk management practices.
Before Major Growth or Expansion
Your business is currently going great, so you want to think bigger! That’s only natural, but it’s not guaranteed that it’ll be a success.
Before you make any significant changes, it’s good to review and strengthen your risk management practices. With growth comes increased complexity, as well as exposure to new risks.
It’s vital that you understand what these are before you jump in. Otherwise, you might be in for nasty surprises that’ll catch you off-guard and even cause you to close up shop.
Before Obtaining Financing or Insurance
Taking out a loan or insurance policy is a huge move, and you have to be in a good place before anyone will trust that your company’s on solid ground. If your business has risks attached to it, then lenders and insurance providers are likely to say “no” when you contact them.
An excellent way to prove that you’ll be a reliable customer is to have a commercial risk assessment done. This provides them with a comprehensive risk profile that shows you won’t be a liability.
Having a well-structured risk management plan can improve your credibility. This will encourage lenders and insurance providers to give you approval. In fact, this plan can potentially lead to better terms and conditions too.
Change in Market Conditions
Any industry won’t be static, so you need to be prepared for changes in market conditions. These and regulatory environment changes can introduce new risks.
If you’ve noticed such shifts, then it’s ideal to reevaluate your business risk management approach. You have to make sure that it’s still relevant and effective. And if it’s not, then you need to be proactive in forming a new strategy to adapt to evolving conditions.
After Major Incidents or Losses
Things happen for a reason, so don’t ignore it if your company goes through a major incident or financial loss. Chances are, it’s happened because you have a lack of risk management.
Many people fall into the trap of thinking that if things are going fine, then they must be doing something right. This is just as flawed as thinking you’re fine driving around without a seatbelt because you’ve never gotten into a crash, and if you have, you’ve come out unscathed.
Take these major incidents and losses as a wake-up call to prioritize risk management efforts moving forward. It’s imperative that you get the experts in to help you formulate an effective strategy.
Crisis Preparedness
You never know if something unfortunate will happen. This is why you should have a contingency and recovery plan in place; in case your data gets hacked or lost through a natural disaster, you’ll minimize losses and keep your business running as smoothly as possible.
Before you create those plans, it’s necessary to do commercial risk management first. Having a framework in place can help you respond more effectively to crises when they occur, especially in today’s dynamic business environment.
For crisis preparedness, having a solid team of experts on the case is beneficial. You can hire a lawyer or use a modern law firm alternative to ensure that your legal risk is at a minimum.
Regular Reviews and Updates
As we’ve mentioned before, all industries don’t remain static. This means that not only should you perform risk management at your company’s inception, but also throughout its duration.
The most important thing to remember is that risk management is an ongoing process and not a “one-and-done”. Regularly reviewing and updating your risk management strategies will help you stay prepared. It’ll be much easier to adapt to changing circumstances, which will ensure your business’s longevity and robustness.
Know Your Commercial Risk
Owning a business can be an exciting venture, but it comes with some big responsibilities too. Not knowing the full extent of your commercial risk can cause your company to crumble, so avoid that by having professionals perform risk management for you.
When you have a great team that regularly reviews and updates your strategies, then you won’t have to worry. Just remember that risk management isn’t about eliminating all risks. Rather, it’s about making informed decisions to achieve the right balance between risk and reward to have the best outcome for your business.
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