New Enterprise Risks: Nine Things to Avoid When Growing Your Company

For any ambitious business looking to ride the current wave of economic recovery, the old adage that fortune favours the brave certainly rings true. But, to quote the Dalai Lama, great achievements involve great risk. Making risk management an integral part of your day-to-day business activity, and seeing it as enabling rather than stifling opportunity, is always a pragmatic move.

Here are the nine key risks that all growing businesses should be on the lookout for…

Risk 1: Being under insured

Try to resist the temptation to review your insurance documents only once a year. A year is a long time in business as well as in politics, and new people, equipment and office space can quickly add up to create a gap between what you have declared and reality. Make sure your insurance cover doesn’t fall behind as your business invests and grows.

Risk 2: Not having a business continuity plan

Negative events companies have faced include customers and clients not paying, accidental damage such as fire or stock damage, suppliers not providing goods on time, natural weather disasters and faulty stock. A business continuity plan will look first at your key products and services and establish which might have the greatest impact on your organization if they were disrupted for any reason.

Risk 3: An increase in personal liability as a director

If you run a limited company, you might think that your personal liability is limited to the business and that even if you make mistakes, the company will pick up the tab. In reality, the situation is far more complex. Ask your insurance provider about protection for company managers to protect them from claims which may arise from actual or alleged ‘wrongful acts.’

Risk 4: More staff means more responsibility

As your workforce grows, so does your responsibility to ensure their health and safety. This isn’t just about an employee tripping over an untethered PC cable in the office and suing for a twisted ankle. A compensation claim can arise from mental as well as physical health issues these days, with big payout cases for work-related stress, office bullying and excessive working hours hitting the headlines.

Risk 5: Launching a New Product or Service

How would you cope if one of your new products turned out to be faulty or if you expanded into a new area where you have less experience and offered ‘negligent’ professional advice or a service that led to compensation claims? Specialise policies are available (for example, for architects or accountants) to protect your business from claims by dissatisfied clients.

Risk 6: Cashflow Problems

As any entrepreneur knows, cash is always king. But in the UK, more than 80 per cent of day-to-day business-to-business transactions happen on credit terms. Growing businesses are at particular risk of cashflow problems. Credit insurance can provide a financial safety net for when things go wrong; it will chase bad debts and pay out quickly in situations where the debt is non-recoverable to minimize impact on your cashflow.

Risk 7: Opening your doors to the public

Public insurance cover isn’t compulsory, but if customers or members of the public visit your premises or you visit clients’ properties to carry out work, then it’s a high-risk strategy not to have it. Public liability insurance covers you for legal fees and expenses if someone is accidentally injured by you or your business, or if you accidentally damage someone else’s property while on business.

Risk 8: Digital Crime

The digital revolution has opened the door to massive new opportunities for businesses. But as we all become more reliant on technology, our vulnerability to system failures, data losses and cyber attacks increases. Adding e-commerce to your website brings obvious risks. Ask your insurance provider about the growing number of cyber-risk products and solutions now available.

Risk 9: Social Networking and Reputation

As any marketer will tell you, business success is intrinsically linked to market reputation. As your business expands, your message will reach a wider audience of (hopefully) enthusiastic brand advocates. However, hard-won reputations can be destroyed at the click of a mouse, so make sure your business continuity plan also includes a crisis communications plan with full contact details.