Any business that's operating faces multiple risks on a daily basis. These risks may apply to your investments, employees or the products that you sell to customers. To protect your company, you need relevant business insurance policies that provide coverage to various risk exposures. The policies should be capable of restoring your company back to where it was before a risk happened.
But before you begin exploring business insurance options, you first need to know the types of risk that your business may face on a daily basis. Here are 4 of the most common risks you should prepare for.
Strategic risk
Strategic risk is a type of risk that occurs due to the decisions you make for your business. It mostly applies to how external elements may affect the operations of your company. For example, if you launch a new product in the market and it ends up with low sales, you may suffer significant losses as a result. Another example of strategic risk arises from relocating to a new market. If your business shifts to a new location and is unable to gain significant market share, you may also incur losses as a result.
You can mitigate strategic risk by obtaining a relevant insurance policy. Some insurers provide a Business Owner's Policy that covers the company against loss of income. You can also mitigate strategic risk by carrying out market research and making sure you're always aware of current trends in the marketplace.
General liability risk
During the course of daily operations, your business is exposed to multiple risks that can affect a third party. For example, a construction company may cause harm to a member of the public if one of its machines becomes faulty. Similarly, a customer shopping in a retail store may slip and fall, becoming injured in the process.
General liability risk can be covered by a liability insurance policy. These policies cover bodily and property damage that may occur to a third party as a result of your business operations.
Financial risk
Financial risk is another top concern for your business. These risks arise from loans or credit sale transactions to clients. If you extend a loan or allow your customers to purchase goods on credit, there is always a risk that they may fail to repay (or to repay on time).
You can protect yourself against financial risk by diversifying your income streams and obtaining insurance.
Daily operational risks
There are also risks that may affect the daily operations of your business. These include a machine breaking down on the worksite or data systems crashing and paralysing IT operations.
The best way to manage an operational risk is to establish a plan B that will get you up and running as soon as possible. This may involve renting an extra machine or having a data backup plan for computer operations.
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