Does Your Business Need Risk Management?Does your business need risk management?

Being a small business comes with a lot of risks.

These can range from impactful staff departures and challenges from competitors to costly mistakes and damage to your reputation.

We’ve listed five common risks that you might face, alongside details on how to successfully manage and mitigate them.

We hope this article gives you an idea of not just the challenges you might face as a business, but to what extent you should be preparing for them.

Losing key members of staff

Intimate knowledge about the workings of your small business can sometimes end up in the minds of just one or two specific employees. While these key staff members are hugely valuables, this reliance also has the potential to derail your business at short notice.

Challenges quickly arise if one of your key employees is incapacitated or quits. Depending on your industry, such a change could result in confusion on the shop floor, slow table service in a restaurant or needing to close certain areas of your gym.

Mitigate these risks by preventing the emergence of a knowledge gap in the first place. Ensure that all your employees are educated on the operations of your business so that any gaps can be filled quickly.

Reactive employee scheduling can be used to boost numbers in your workplace, successfully patching knowledge gaps while an official replacement is found for your sick or departing member of staff.

Competition from other businesses

While large-scale businesses are better placed to survive challenging periods of strong competition, it’s much harder for smaller businesses. That’s because a great competitor can win customers without you necessarily having the power to successfully counter their efforts.

Let’s say that you own a hotel with just five rooms on the seafront. You’ve been the only hotel there for two decades and, as such, are free to set the price you see fit. An emerging competitor might choose to undercut you—driving away your customers in the process.

Mitigating this challenge is no small effort. You’ll need to either reduce your prices or strive for a USP that’ll make you the number one choice regardless of cost. If you insist on keeping prices higher than your competitors, you need to provide additional services they don’t.

Damage to your reputation

As a small business, damage to your reputation can be devastating. While large-scale organisations are surprisingly good at shaking off bad news, the same can’t be said for smaller companies.

Being spoken about negatively online, whether justified or not, has the potential to discourage would-be customers from using your service. It’s good practice to keep abreast of what is being said about you online and take action accordingly.

Suffering from cyberattacks

Cybersecurity breaches are becoming increasingly common. While larger organisations have the resources needed to withstand attacks, many small businesses aren’t so lucky. Investment in security systems in the former has led to increased targeting of the latter.

Don’t make the mistake of believing that you’re not at risk. In fact, half of UK businesses reported experiencing a cyberattack in the 12 months before April 2024. Charities weren’t spared either, with 32% being attacked.

Reducing the risk of a security breach involves having the right software in place, ready to protect your business. For small businesses without an IT team, consider hiring a third-party company to complete a cybersecurity audit and implement their recommendations.

Increased risk of human error

With fewer staff members in your organisation when compared to your large-scale counterparts, the chance of human error and accidents occurring is much higher: 90% of workplace accidents are the result of human error.

A single employee might be the only person in your small business responsible for an important function, which can lead to a higher likelihood of mistakes.

For example, take a corner shop that employs five people in total. There simply isn’t time for a task such as payroll to be overseen by multiple people, increasing the likelihood of human error.

This differs from a large-scale company which may have five people responsible for payroll. Using a payroll system is a worthwhile consideration for small businesses as it reduces the risk of error, ensuring that all your staff are paid accurately and on time.

These five common risks can catch you off guard and leave you in a tight spot. Fortunately, by being aware of them and mitigating them wherever possible, you’ll ensure a smooth and safe service for customers at all times.

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