Small businesses don’t have the extensive resources or the stunning manpower that their larger brethren do, but these companies still need to soldier on through many of the same risks. That means they face many of the same challenges that large businesses do. Without the latter’s combined knowledge, manpower, and resources, small businesses can often have difficulty overcoming these challenges.
That’s where risk mitigation comes in. Instead of figuring out ways to deal with problems as they arise, risk mitigation tries to prevent them in the first place, and that’s not a bad strategy at all.
To help you figure out how risk mitigation works for small businesses, here are the three most significant risks small businesses face and what you can do about them!
Where Financial Risk Comes From
Financial risk is one of the more easily identifiable risks shared by both small businesses and large conglomerates. It’s also one of the biggest risks faced by the founders of small businesses, precisely because they’ll have massive debt riding on their shoulders from personal loans they took out to get their business running. That means pressure to be successful and 24/7 stress.
Along the same vein, cash flow is another aspect of the financial risk faced by small businesses. The money for machinery, manpower, training, locations, and other capital has to come from somewhere, and owners are often forced to take out credit card debt or personal loans.
That might seem like your only option, but if your business doesn’t work out, it will leave you with crippling debt.
Managing Your Financial Risk
One of the best ways to mitigate financial risk is to make the right investments at the right time. Instead of focusing on scaling up operations as fast as possible, small businesses should invest equally in market penetration and growth.
That means growing your marketing and awareness departments in tandem with increasing sales. The best way to do this is by using your marketing budget wisely and ensuring it’s working for you, not just in theory but in practice.
Why is Cybersecurity Risk a Priority?
The thing about today’s world is that while companies have access to better connectivity and information than ever before, they’re also generating boatloads of data themselves. Even something as simple as a grocery store probably stores client data for reward programs, meaning a data breach could easily leak potentially sensitive client data.
Why is that a problem? Because it doesn’t stop there. Once somebody’s details are out there, they can face anything from harassment by malicious third parties to identity theft. If that’s a risk you’re putting your customers at, they will not stay with you for very long.
We’re trying to say that being hacked isn’t just a problem big companies have to face. It’s a genuine threat to small businesses as well, and if you don’t want to end up on the 6 o’clock news, you have to take the proper steps to protect client data.
The Types of Cybersecurity Risks
Today, there are many types of cybersecurity risks companies must face if they want to keep their data and business records safe. Here’s an inside look at the most common types of cyberattacks faced by companies:
- Web Application Attacks: These happen in the form of malware downloaded through public sites like Facebook or Twitter and are often an attempt to install ransomware or even trojan horses on a company device.
- Phishing: Usually done through emails that contain offers or voucher codes these days, phishing is an elaborate attempt to steal personal data: or, in this case, your work login details. The hacker will then use these details to log into the company using your details.
- Automatic Scripted Downloads: Also called drive-by downloads by cybersecurity professionals, some websites will try to automatically download malware ransomware or even keystroke loggers onto your computer.
Staying Safe from Cybersecurity Risks
Cybersecurity threats today are many and varied in how they originate and how you’re attacked. In addition to the always-present fear of an insider threat (which admittedly isn’t that common), there’s stuff like data breaches, ransomware, man-in-the-middle attacks, or even DDoS attacks that can bring operations to a grinding halt.
It’s essential that companies, and especially small businesses, have a comprehensive cybersecurity plan in place so they can stay protected on all fronts.
What is Strategic Risk?
Strategic risk is probably one of the least thought-about types of risks faced by small businesses, but at the same time, it’s also one of the most important. It refers to how small businesses don’t usually have things like a formalized decision-making process or risk management strategies – all things that a larger company has to clear up and plan before making any significant change in their operations.
We’ll talk about one of the most common scenarios here. Let’s say you’re the owner of a baking shop franchise with 2-3 locations spread over a couple of towns. Because you are, inherently, the owner of a new business, there’s probably no formal decision-making process in place. It’s entirely up to you to make sure you’re not doing the wrong thing for your business, and that can be a hefty burden to bear 24/7.
How to Address Strategic Risk
While it sounds like nothing short of a DEFCON-2 alert, addressing strategic risk is much easier than it sounds. Preparing for this means doing your research and planning. Most importantly, though, you’ll want a second pair of eyes looking over your shoulder, no matter how experienced you are, to make sure there’s no obvious stuff you’re missing.
This can be quickly done by bringing your staff together for a brainstorming session. Think about different risks your company faces, and then ask your team what the company is doing to mitigate each risk specifically.
There are a lot of different risks small businesses have to endure if they want to make it big. However, if you have a head for business (and somebody to advise you when it comes to spending your capital), there’s only one thing you need to worry about, and that’s your data security. Remember, customers won’t trust you if you can’t promise that you’ll keep their data locked up, safe, and secure!
An author of Namaste UI, published several articles focused on blogging, business, web design & development, e-commerce, finance, health, lifestyle, marketing, social media, SEO, travel.
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One thought on “The Biggest Risks Concerning Small Businesses”
My first business failed because I didn’t do good financial planning. Risk analysis is key. I didn’t think of the areas where I could lose money on. I had to get back to my day job to finance the business.