Businesses that are not protected from risk are vulnerable when unpredictable situations occur and spiral out of control. While situations like skyrocketing interest rates and politics cannot be controlled by the business owner, entrepreneurs can protect themselves against lawsuits and other risks. Many businesses have shuttered their doors permanently because they did not prioritize risk management. With the stakes being so high, company owners should understand the importance of effective risk management strategies.
How Can I Determine What Risks My Business Faces?
A risk management strategy starts out by identifying sources of legal threats. The main dangers come from contracts, structural changes, regulations, and litigation. Specific threats can be pinpointed and compiled into a list that describes the risks in detail. Next, they can be categorized into the ones most likely to the ones least like occurring, taking the likelihood of financial loss into account.
Risks can also be frequent and infrequent: employees might steal things, there could be bad weather that cancels an outdoor festival, but insurance would cover these kinds of losses. Other legal risks include potential slips and falls inside a hardware store, intellectual property lawsuits, or a major fire. The legal consequences can be compensatory or punitive, like monetary fines or injunctions that close companies down.
Just like individuals, businesses have certain insurance needs, and having the same policy for years without regular reviews is risky. Business owners can also purchase life and disability insurance to cover losses and provide for their loved ones.
Businesses that sell products can hire attorneys to review their goods for litigation and regulatory risks. An example of a risk might be an improperly labeled product: if a consumer follows incorrect directions and becomes injured, the company might be held liable. Another area of risk management is contracting. Companies that hire vendors use contracts, which require the proper language to spell out what both parties’ responsibilities if the contract is broken.
Managing Physical Risks
Having the appropriate legal framework for risk management is crucial but business owners still need to be diligent about minimizing the chances of adverse events happening. One of the first steps is to analyze the location hazards and put an emergency plan in place. An example of a location hazard might be a gas station down the street that could potentially catch fire. All employees must be made aware of emergency protocols, with a clear chain of command to step in should something happen.
Businesses should also have working alarms, smoke detectors, and sprinkler systems. If there are hazardous materials like toxic liquids on-site, employees have to be trained and properly equipped to handle them safely. These are just a few examples of physical hazards and there are other risks related to employee behaviors, technology, and strategy.
Managing risk might seem like an overwhelming undertaking, but modern legal technologies will help you and your employees streamline the processes so you can focus on running your company.
The Philadelphia Business Lawyers at Sidkoff, Pincus & Green P.C. Help Companies Manage Risk
At Sidkoff, Pincus & Green P.C., our experienced Philadelphia business lawyers can help analyze your company’s risks and develop a solid strategy to manage them and protect your interests. Contact our Philadelphia office at 215-574-0600 or complete our online form for more information. We serve clients throughout South Jersey, Pennsylvania, and New Jersey.