Risk management isn't about eliminating risk all together. Even if you wanted to, it’s just not possible. The goal is to mitigate risk to acceptable levels that allow your business to function successfully without opening yourself up to unnecessary costs and liability.
Financial Constraints In Risk Management
Your company’s finances are typically at the top of the list when it comes to risk management. There are limits to what actions you can afford to take, as well as limits to what financial consequences you can afford to risk facing. While companies are always looking to lower risk, they also have to watch their bottom line. Sometimes, the safest option is prohibitively expensive.
As a small business, the best approach is often to consider the best level of protection you can afford with a plan of improving your position as your business grows. In order for this to work however, you have to continue to be willing to reevaluate and make changes that meet the needs of your growing business. Getting cold feet when it’s time to reinvest in yourself will negatively impact you in the long run.
You Don't Know What You Don't Know
Informational constraints are also obstacles to effective risk management. You need to keep abreast of the latest topics, equipment, resources, and news of your industry. Regardless of your industry, it is dynamic. Nothing is static in today's world. For this reason, you must have avenues of information open at all times.
The smart and financially prudent approach is to read books, magazines, blogs, articles, trade publications, and anything else where you receive quality information. Speak with experts about your plan to manage risk and ask for feedback. It is also a good idea to attend an industry conference at least once a year. Conferences give you a chance to see how other companies are dealing with issues. Yes, they cost money, but if you go to them with goals and plans in mind, they can be well worth the investment.
You Could Be Your Own Worst Enemy
People can be their own worst enemy. Not because they want to be, but because they are human. There are two things people like to do. First, they like to stick with the status quo. This means they may like to "stay in their lane" and keep doing what they have always been doing because it’s comfortable.
The other thing is they like to make decisions based on "rules of thumb". In other words, personal biases. While gut reactions can be appropriate in some instances, with risk, it's better to rely on statistics and sound probability calculations to determine risk.
Our team at Culture Insurance is staffed with people who are experts in managing risk. We have years of experience in analyzing and exploring all levels of risk across a variety of industries. If you are concerned about managing risk, give us a call today. We would be more than happy to sit down with you and explore the options available to you so you can manage your risk effectively and concentrate on running your business.