Savvy business owners constantly identify, assess and manage risk. Almost every decision, such as whether to sign a contract, how much to charge, who to hire and how to manage a project, are risk management strategies. But business owners often don’t comprehensively plan to manage risk. Businesses may simply rely upon insurance as their risk management approach. We recommend a broader view and analysis of risk.
The purpose of this article is to provide some basic topics to consider in any the risk management process. Business owners should review the list of categories, and devote time and energy to properly identify risks, assess the degree of risk, shift the risk where possible, and manage and reduce the risk if it cannot be eliminated.
- Basic Disaster Preparation and Planning – What is the plan if the server crashes or the office burns down?
- Risk management – Do you have a structured approach to risk management, including ta current objective assessment of the potential severity and probability of the business operation’s risks?
- Insurance – Do you have suitable liability, vehicle, business interruption, product liability, key man life insurance, and directors and officers insurance?
- Business Planning – Do you have a detailed written business plan which analyzes performance of the company against the plan and identifies strengths, weaknesses, opportunities and threats?
- Basic Company and Market Vision – Similar to business planning, but a projected set of values, identification of market position, and methods to use personnel, technology and the, economy your to best advantage.
- Government Filings- Does the company comply with federal and state tax, business registration, licensing and permitting requirements?
- Company Minute Book- Does the company have appropriate organizational documents, proper business records, bylaws, minutes, etc.?
- Stock/Membership – Do the company records properly reflect actual ownership, capital contributions, intra-owner debts, loans, etc.?
- Laws – Does the company comply with corporate, tax, employment, worker safety, environmental protection, consumer protection, discrimination, securities and retirement plan statutes?
- Recordkeeping – Does the company have reliable records concerning required filings, income, expenses, contracts and employees?
- Business entity protections for individuals – Does the company have appropriate documents practices and procedures to minimize the chances of individual legal liability for adverse business outcomes?
- Intellectual Property Protection – Are trade secrets, trademarks, websites, patents, and materials subject to copyright adequately protected?
- Employment – Do the company’s human resources personnel know how to properly advertise, interview, hire, train, evaluate, supervise and terminate employees without running afoul of discrimination statutes?
- Contracts – Does the company have properly drafted, comprehensive, signed agreements which protect the company’s rights in the event of a dispute?
- Cost Saving Measures- How does the company manage expenses, including salaries, rentals, utilities, insurance, breakeven points, etc.?
- Succession and Exit Strategy Planning – Does the company have a plan for valuing the company, selling the company, transferring authority, and paying for a business buy out by an insider?
If your business is developing a risk management strategy or would like to discuss its existing risk management strategy, please contact David Closson, attorney and head of our Business Law Group, at [email protected].