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What is Risk Management and Why do Businesses Need it?

If you run a business, having risk management is essential for its success and ensuring potential obstacles can be more easily dealt with. Moreover, having a risk management plan in place can improve a business’s draw to lenders and help protect a company’s resources. Unexpected problems can arise at any time and if your business is not prepared to weather the storm, you could end up facing some serious losses.

Why it’s Important

No matter how well your business is doing, there is always a chance that something can go wrong. With a risk management plan, you can minimize the losses and damage you might suffer.

Here are some of the reasons why risk management is crucial for the survival of your business:

  • It will minimize the effects of any unexpected issues you might encounter.
  • If you have a family, it can ensure they are protected in the event of your death, a medical emergency, or severe financial hardships.
  • Your financial status will be better protected since you will be able to ride out any changes or problems.

Insurance in a Risk Management Plan

Typically, insurance plays a substantial role in risk management plans since it is one of the most effective ways to reduce the impact of potential risks on a business. That said, insurance is not one-size-fits-all, so it is important for a company to choose a type of insurance that will best address the risks it is most prone to encounter. As such, you will first need to identify the risks your business might potentially face to ensure you obtain the insurance that is best suited for it. The last thing you want is to purchase insurance that is unnecessarily protecting your business against risks you will likely never have to deal with.

Employment Law and Risk Management

Employment law has and a substantial impact on risk management and, to protect themselves from lawsuits, many businesses have adopted standard safety procedures, sexual harassment policies, and other guidelines designed for promoting efficiency and reducing lawsuits. Although insurance can cover some employment law issues, it cannot address them all, which is why you need to retain experienced legal counsel to ensure all of your bases are covered.

Contracts and Risk Management

Contracts also present the potential for many risks, which businesses should guard themselves against. Risk management in contracts can help create policies that address a variety of issues, such as requirements for contracts to be written, designated authority levels for negotiating and signing contracts, and requirements for all contracts to be reviewed for the purposes of risk management.

Contact a Business Law Attorney Today!

If you own a business, risk management should absolutely be part of how you choose to run it. At the Smith Willis Firm, our business attorneys are experienced in helping our clients’ businesses flourish by creating new ways for them to manage risks and reduce costs.

Find out more about what we can do for your business by contacting our firm at (770) 766-5811 for a free case review.