Businesses of all shapes and sizes have a plethora of challenges to contend with. Because of the various puzzle pieces that need to be in place for the company to function as intended, and because each of these pieces is dynamic, there is always a degree of uncertainty, and diligence is required to stay on top of things.
Enter risk management, an industry and a service that focuses on eliminating those uncertainties to promote a more structurally sound business for its clients. Here are a few examples of how to use risk management to protect your business.
Electricity is part and parcel with modern civilization, making it a necessity for many tasks. Businesses have an increased need for this vital utility, because it has to power all of the lights on the premises throughout entire days, for starters. In addition to this, businesses often possess several computers and other electronic devices that are essential to getting the job done. For this reason, a consistent supply of energy is required.
However, energy procurement is one of many potential risks companies face. As a rule of thumb, depending on other businesses places your company at risk, and energy is no exception. For example, your power company may hike up its rates unexpectedly, stretching your budget thin. On the other hand, your energy provider’s value on the stock market may indicate the potential for that company to go under. In these cases, finding an alternative is a pressing matter, and knowing about these factors in real time and acting in advance is a huge advantage.
Credit is another all-important factor in modern society, but its importance is often overshadowed. Your own credit would have cleared a certain bar in order to get a business loan with which to open your company, for example. On the flip side, your business may extend a line of credit to customers in order to keep those customers happy. In many cases, this is a viable strategy, because it allows you to finalize a sale where you otherwise wouldn’t, and defaulting on that extension will negatively impact your customer’s credit score.
However, some customers are more trustworthy than others, and it’s a luck of the draw situation in which you can draw a bad hand. Too many customers taking advantage of your lenient credit policies can tank your profits and begin eating into your cash flow, so having a real time understanding of the impact this is having on your business is essential for changing those policies or cutting off specific trouble customers before it’s too late.
Safety is a major priority for businesses, especially in industries in which safety concerns are a daily reality. Failing to provide an adequately safe working environment for your staff is bad all around, so it’s best to ensure that your place of business meets the brief in terms of safety.
A good place to start is understanding and complying with federal and industry regulations. Not only will this guide your hand and give you the safest possible worksite, but it will also serve as another form of risk management, that of compliance with said regulations. These regulations are often self explanatory, but there are also many of them, making it difficult to adhere to holistically. When you fail to clear the bar of complying with safety regulations in particular, you face the possibility of several major problems at once.
For example, an injured employee may require worker’s compensation to pay for their medical bills while the federal government gives you a hefty fine. While it’s the lesser of these three problems, that employee may also permanently leave the company, and the best case scenario is that they will be out of work for a while. These are easy mistakes to make, and the consequences are severe, so proper risk management is required to protect your business from ruin.