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Depending on the nature, size and complexity of your business model, your risk exposures will differ. It is important to know what factors go into your business so that you can have a better understanding of what can impact it.
The main risks generally to which small businesses tend to be exposed include:
Business Disruption
This can have several causes including natural disasters, fire, flood, and other such incidents that may cause the operation to be halted. In many cases, small businesses are more challenged to withstand such disruptions than their larger counterparts.
Financial Risk
Compared to larger corporations, many small businesses tend to have significantly smaller budgets to work with. As a result, they must be much more prudent in the way that they manage their funds to ensure that they are able to withstand financial risk exposure.
Legal and Reputation Risk
Any business can find themself in a situation that may require legal representation or may cause additional scrutiny as a result. However, many small businesses may not be able to afford high priced legal representation or public relations teams to help manage this process in the most effective way.
Strategic Risk
In many large organizations, strategies are set by Boards comprising high levels of knowledge and expertise in the technical and operational fields. In smaller operations, there may be technical expertise but, in many cases, there may be resource gaps in other critical areas. This becomes more evident as the market or environment changes over time.
Market Risk
There are always challenges associated in being the small fish in a big pond. It is no different with small businesses trying to compete against larger corporations. Larger corporations usually have more physical and technical resources to be able to set themselves apart with new products, strategies and initiatives. Small businesses may then have to adjust or respond to remain relevant.
Systems Risk
This doesn’t just apply to technological systems but how the operations work in general. Smaller businesses generally have less resources and therefore need to be significantly more efficient in the way that they are used to remain relevant. Additionally, the loss of a key human or mechanical resource has the potential to severely impact the system causing reduced efficiency and sometimes disruption of operations altogether.
Small business may have their challenges but there are also several advantages to being smaller that can be maximized. In addition to learning about how to manage the risks described above, you can also learn to maximize the benefits that you do have to increase your likelihood of success.
Contact us for a free consultation today to find the solution that is right for you!