Regardless of your company’s size, risk management is an important function. The aim of risk management is to identify potential loss-generating events and try to prevent them or at least mitigate the financial effects. Commonly associated with insurance planning, risk management also encompasses loss prevention and control to provide a holistic view of what can go wrong at a company and how the business can be protected.
Unlike larger companies that have dedicated risk management and safety professionals who specialize in the field, small businesses have to rely on staff and outside resources, such as those offered by an insurance company, to develop the most effective risk management strategy to meet their needs.
The first step in developing a risk management plan is to spend time thinking about potential exposures and losses. Small businesses face an array of risks, including property damage, legal liability, employee accidents or injuries, technology outages and a host of possible disasters, both natural and otherwise.
Your insurance agent and carrier will offer a variety of resources to help you identify and understand the potential risks facing your business, and can arrange access to experts who can provide specialized advice about reducing those risks.
As the owner or financial executive at your business, you need to consider the potential effects of each risk. Some exposures, such as losing your workplace in a fire, may be catastrophic, while others may be relatively minor. It’s important to understand all of your exposures so you can direct your risk management efforts to address the most serious ones.
The next step is developing ways to reduce those risks and their potential effects. Instead of storing your inventory in one facility, for instance, it may be a good idea to divide it between two smaller storage areas at different locations so a fire at one building won’t destroy your entire inventory.
Once you’ve identified the risks, categorized them by severity, and identified potential mitigation strategies, the final step is arranging property and liability insurance to provide financial protection if a loss occurs.
Even when you are prepared, sometimes things can go wrong, and it’s important to ensure that a relatively minor loss won’t impact your company’s financial position. Insurance and other risk management strategies can help you deal with adverse events and promote business continuity.
This news is provided as a service to you by Marlin Business Services Corp., a nationwide leader in commercial lending solutions for the U.S. small business sector. Marlin’s equipment financing and loan programs are available directly and through third-party vendor programs, including manufacturers, distributors, independent dealers and brokers, to deliver financing and working capital that help build your success.