VersiTrax Risk Management for Small Business

Risk Management for Small Business

Business is risky and when you run a business, it creates numerous risk exposures which could cause substantial damage for the business.  Therefore, having a comprehensive risk management plan in place is extremely important.

Businesses both large and small spend lot of resources on risk management. Small businesses especially need to be more careful and cautious to protect and plan their business accordingly against risks.

Listed below are the top four categories of risk and why small businesses need to have a risk management plan:

Market Risk:

Market risk is that when due to change in value of external factors the value of your assets decrease. These changes include commodity prices, interest rates and foreign exchange rates. For small businesses, economic and environmental factors do affect business.

Are you equipped with a plan to identify and monitor the influences that influence your business? It is wise to identify these market risks and writing them down so that you can formulate a plan to address these external influences.

Credit Risk:

When a counter party fails to make payment they owe you, this risk of loss is called credit risk for instance, when a customer/vendor defaults on paying you as per the terms.  There is high probability of such occurrences during challenging economic situations.

Is your small company prepared to face such a loss? What is your risk management plan for this? Do you have the bad debts expenses and loss established according to an accounting point of view? Some ways to deal with credit risk are: purchasing insurance if possible, using risk-based pricing and diversifying your counterparties or customers.

Operational Risk:

Operational risk is the loss from failed or insufficient internal processes. These can include systems, people along with external events.  Some of the specific sub categories of operational risks include external and internal fraud, client, employment and business practices etc.

Many companies, both large and small often tend to underestimate or overlook operational risks. It can devastate your firm like credit or market risk. It is important to identify measure, monitor and manage the operational risk. This is connected to carry out efficient operating processes. These involve having logical, well-organized and defined roles and responsibilities and internal controls.

Reputational Risk:

This happens to be the most significant intangible asset that is possessed by the business because to an extent it represents how much the firm is meeting with expectations of its stakeholders. Reputation risk surfaces due to negative publicity that could be due to certain business events. Whether they are accurate or not, it results in loss of value and compromises the reputation capital of the business.

It would be wise to consider defining and monitoring the impacts of the operational risks and incidents on perception of business. The processes and relationships of suppliers, customers, employees and community are included in these.

Small Business Risk Management:

In order to efficiently run a small business, you may have a lot of responsibilities that might become overwhelming as everything happens to be a priority. You can both boost your business and manage all of the risk areas having a risk management plan on place.

Getting the services of professionals like VersiTrax could minimize or eliminate the risks by providing you with helpful solutions for your business.

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