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What are the main risks small businesses face?

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In order to protect your business against risks, it’s first imperative to understand more about the types of risks your business might face in this rapidly changing world. There are five primary types of risks your business can face. 

  1. Strategic Risk- Every business has a long term strategy which drives their success. Strategic risk is when a business fails to adapt to the company’s strategy as it becomes less relevant and leads the business to struggle. 
  2. Compliance Risk – Compliance risk relates to non-compliance with regulation. This can occur when an applicable law changes which your business doesn’t comply to. A business can also be subject to compliance risks if your business expands and is subject to additional regulations which aren’t adhered to. 
  3. Financial Risk – Financial risk relates to the potential for a sudden financial loss in terms of money flowing into and out of your business. This could include having a huge proportion of your revenue linked to a single client, having too much debt for your business size, or expanding internationally. 
  4. Operational Risk – Operational risk refers to an in-house unanticipated failure that affects the company’s core operations. This risk can be caused by anything from the company’s day-to-day operations, technical failure, internal processes, or by staff. Sometimes, operational risk can be caused by external factors as well, such as power failures, natural disaster or even from a web hosting issue. 
  5. Reputational Risk – Reputational risk can damage the trust that your customers have in your business. This loss of trust can be a downward spiral, starting with negative publicity which leads to loss of customers, unhappy customers, bad reviews and so on. No matter how big or small your business is, business reputation is vital to your ongoing success. Reputational damage can lead to loss of revenue, loss of business partners, and staffing issues. 

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