In a sense, every business venture is a risk and every entrepreneur a risk-taker. The list of disruptions that can ruin a business is endless. The goal of risk management is to anticipate and mitigate as many liabilities or business interruptions as possible, whether they come in the form of lawsuits, natural disasters or even losses of income, suppliers, management or other key personnel. If you’re a business owner, partner or manager, you need to know and regularly revisit the basics of risk management:
1. Insurance: Proper coverage is the cornerstone to risk management. Essential protection includes property, loss of business income, liability, worker’s compensation and benefits coverage. If you’re a business owner, you’ll also want to consider more specific director, officer and employment and professional practices liability policies appropriate to your industry sector. However, even the most comprehensive policies have limits, so it’s important to understand all the fine print before signing the bottom line.
2. Legal Review: Appropriate full incorporation or limited-liability incorporation of a business is just the beginning. Beyond incorporation, a trusted attorney should also review a company’s operations, policies and procedures for legal compliance with current employment, anti-discrimination, product liability, copyright and intellectual property laws. While no review can fully prevent a headstrong plaintiff from filing an action, it can greatly reduce exposure and bolster any potential defense in court. In addition to the advice of competent attorneys, owners and management should remain informed about legal issues affecting their industry through trade and business organizations, publications and seminars.
3. Documentation: Closely tied to a legal review, detailed documentation of every operational aspect of a business also goes a long way toward minimizing risk exposure. This will include a comprehensive policies and procedural manual, and (where applicable) product information, liability disclaimers and waivers, service checklists, precise customer and human resource data, well-documented invoicing, warranties, and even consumer recall information.
4. Succession Planning: Illness, death or disability can strike a business owner, key partner or manager at any time. In joint partnerships, one of the principals may tire of the business and wish to cash out. A properly drawn succession plan will go a long way toward an orderly transition. Normally such a plan should include a buy-sell agreement backed by life and disability insurance for each partner in a joint venture. (A certified public accountant can help set the values for the agreement.) That way, surviving partners aren’t left scrambling for the cash to buy out a deceased or disabled partner’s share of the business.
Many business people will rely on insurance brokers, lawyers, CPAs or tax advisors to guide them through the basics of risk management. However, the truly “take-charge” entrepreneur or management professional will want to arm himself with the sort of in-depth, first-hand knowledge that can only come with a business administration online degree. As a fully accredited online institution, American Sentinel University offers a comprehensive learning experience that fully prepares candidates for the high-stakes challenges growing companies face. In fact, investing in an American Sentinel University business degree online may just be the smartest step toward risk management an aspiring business person will ever take.