When you started your business, you probably had some idea of the kinds of risks you were up against. Cash flow, competition, and market changes are common issues that come part and parcel with owning a business.
But what happens when you encounter an issue that no one expected? How can you protect your business and bounce back?
Before the pandemic, business owners had plenty to worry about. But the arrival of COVID-19 had the minds of entrepreneurs working overtime. Businesses were suddenly thrown into unpredictable circumstances that left them scrambling.
If there’s anything that business owners know (especially after the past year), it’s that you need to expect the unexpected. And, while we don’t have a crystal ball handy, we do think it’s smart to take a close look at the risks facing businesses—as well as how they can better prepare.
Business risks are circumstances that can hinder or prevent companies from meeting financial or operational goals. These threats affect your bottom line and can even lead to the collapse of your business.
Risks can be classified as external (issues outside your company and out of your control) and internal (issues inside your company that you can mitigate or avoid). There are many types of business risks, and they can differ from company to company. For example, they may depend on your geographical location, type of industry, size of your business, and the products or services you provide. But one thing is for sure: no company is risk-free.
Risks can change over time and according to circumstances. Every year, different polls and surveys gauge what the most significant risks are for business owners. And with a year as volatile as 2020, concerns were at an all-time high. The World Economic Forum reports that disruption caused by the pandemic was felt on all levels—economic, geopolitical, technological, societal, and environmental. But it cited political, technological, and societal disruptions as being the top drivers of risks.
With every market under pressure, the pandemic revealed weaknesses within organizations and systems as a whole. Everything from supply chains (remember toilet paper shortages?) to schooling was vulnerable to the pandemic and the additional internal and external risks it brought with it.
There’s no doubt that 2020 was a year of drastic upheaval, and by all accounts, we are still in the thick of things. But alongside those changes were many lessons. The challenges experienced during the pandemic made it clear that no matter the size of your business, you could still be susceptible to unforeseen risks.
Businesses are now looking to improve preparedness measures and establish business continuity plans to avoid similar situations in the future. And the best way to do that is to learn from the past.
Many business risks were influenced by the pandemic, but let’s take a closer look at 5 specific ones—as well as how you can safeguard your business against them.
Business interruptions are those events that bring your business to a standstill. They can be caused by many factors, such as breakdown of IT systems, product recall, terrorism, political violence, environmental pollution, and more. As a result, businesses may be subject to long downtimes, even longer recovery periods, and ultimately financial loss.
During the pandemic, business interruption was acutely witnessed in global production and supply chains. Threats loomed large for all businesses as they struggled to stay afloat amid restrictions, border closures, and lockdowns.
In a world that has become increasingly connected and interdependent on import, export, and trading partnerships, any break in those networks affects every business down the line. One survey estimates that 94% of businesses worldwide experienced moderate to severe business interruptions. Almost no business was immune.
Start by contacting your suppliers to ask about their contingency plans and rerouting options to ensure their business is prepared to handle future problems should they arise.
More importantly, it’s imperative to diversify your suppliers. That may mean increasing the number of suppliers you have on hand, selecting suppliers closer to home, or moving production to nearby countries (nearshoring) or back home (reshoring).
The health crisis nearly crumbled healthcare systems around the globe. And as many fell victim to the pandemic, businesses could do little but stand and watch their workforces dwindle and their businesses suffer.
With their backs against the wall, business owners either temporarily closed or had to permanently shutter their businesses. Data from a recent survey showed that between January and April 2020, 43% of small-and-medium-sized companies in the US closed and employee counts were down by another 40%.
Businesses can begin by analyzing their risks, identifying dangers, and evaluating their current procedures to determine their ability to adjust against such threats.
Based on these findings, businesses can update health and safety policies, identify strategies for emergency responses, develop crisis management and communications systems, and create plans that cover how they will continue to do business should they need to work remotely or close their offices. In addition, organizations should acquire adequate medical insurance for employees, ensuring pandemic concerns are addressed.
Finally, businesses should establish a means to provide ongoing support to workers as they cope with post-COVID recovery or future traumatic incidents.
Rapid digitization brought on by the pandemic has placed more businesses at risk than ever before. While cyberattacks have consistently ranked as a top-3 corporate risk in the Allianz Risk Barometer, the sudden migration from the office to the home has resulted in peak increases in cyber threats and breaches. One poll revealed that more than 90% of respondents experienced increases in cyberattacks on their businesses.
And as our world becomes more technologically advanced, so does our dependence on these systems to help us work and continue to run businesses remotely. With everyone using technology for leisure and work activities, the door to unprecedented attacks has been left wide open. It’s reported that while at home, 47% of workers fall for phishing scams.
To counter cybersecurity issues in their businesses, owners should identify and patch potential weak spots in their systems. They should also increase awareness among staff of phishing scams and the need for cybersecurity.
Aside from educating employees on cybersecurity best practices, businesses should also use the following tactics with employees working from home:
The pandemic spotlighted many areas of social and economic inequality and unrest among workers and society as a whole. Protests, demonstrations, and marches were witnessed worldwide as people gave grievance to poor working conditions and social, political, and environmental concerns.
In the face of various uncertainties, the fallout from the pandemic is expected to continue for the foreseeable future. According to a recent estimate, many countries are likely to experience increases in protests well into 2022.
People are demanding change all over the world and looking at businesses to be socially responsible. A lack of response or an inadequate one could mean severe backlash and could put their reputation, bottom line, and more at risk.
Businesses caught in the middle of these political and societal shifts can start internally by reiterating the company’s core values, addressing the concerns and feelings of their employees, and creating safe spaces for employees to have productive communication.
Externally, businesses can seek partnerships or work with people within the community to start or participate in programs that support their core values.
The pandemic has changed not only how but where we do business. Of course, the rapid shift from office to home is not without its own set of challenges. But despite the potential problems, it looks like remote working is here to stay—at least for businesses who want to retain their best employees.
As the effects of the pandemic wane and many companies are eager to get back to business as usual, many other businesses are considering the benefits of remote work. Moving forward, companies may decide to opt for hybrid or completely remote environments.
Aside from the cybersecurity vulnerabilities, there are the issues of managing employee performance and maintaining company culture, values, and work ethic when employees are scattered.
To foster a positive remote working environment, business owners should make themselves available to their workers. They should establish an open line of communication, listen to their employees, and encourage collaboration.
Additionally, owners should provide remote workers with a clear indication of schedules, expectations, and policies and procedures to follow. Working remotely shouldn’t mean that employees are left in the dark.
There is still much to be learned from the current pandemic that can help us prepare for future events. But here’s one thing we know now: there are ways to get ahead of risks.
Will you see every potential hurdle and roadblock coming? Probably not. Every business owner gets thrown curveballs. However, by anticipating and assessing some of the risks that could cross your path, you can create a plan that will keep your business running—even when the world around you changes.