Risk Management For Small Business

Category: Finance, Insurance.

Risk management is an endeavor in which most successful businesses engage to some degree or another.

No matter who you are, or what business you re in, avoiding risk management is a risky decision in and of itself. Whether it be a formal procedure developed at the executive level of a large company, or a more intuitive examination performed by an astute small business owner, assessing and dealing with risk in general is something most businesses do as part of their basic planning. Why insurance exists in the first place. Indeed, this is the purpose of insurance in general, and it s certainly the reason why business insurance exists specifically. Of course, no major effort in risk management for a business can really occur without taking into consideration the potential for unforeseen harm affecting your operations. Are you really engaging in risk management for you re business if you re not taking seriously the kind of insurance you have for that business?

Risk management for small business? Probably not. You can never be too small a business in order to engage in both risk management and due diligence in the choice of small business insurance for your company. Unless you re adequately covered, you simply have not engaged in proper risk management- no matter how small your business is. The truth is that even small businesses can be seriously undermined or even ruined if they don t engage in the proper assessment of risk that involves insurance coverage. Assessing your risk is the first step.

You need to know what kinds of risks your business faces in order to take that next step in determining how to in fact deal with those risks. When any business engages in risk management, assessment is the first step. Transferring your risk is where insurance comes in. Transferring that risk is obviously one of the more desirable remedies in dealing with risk of any kind. Where business insurance comes in is determining just how much of that risk you re going to in fact transfer to someone else- an insurance company- and how much they re willing to assume that risk for you. If you can get someone else to essentially assume it for you, without making an unnecessary investment in dollars yourself, then not only are you engaging in smart risk management, you re engaging in smart business- period. In fact, the entire insurance industry exists on this basic premise, doesn t it?

Insurance companies are like risk management outsourcing firms. Insurance companies provide insurance so that all businesses can transfer a basic component of their risk assessment to someone else. You make money in properly transferring some of the risk involved in running your business. Insurance companies make money by assuming that risk for you. It s capitalism at its purest. The insurance component of your risk management efforts is probably the most desirable to address.

You really can t go wrong when business entities engage in mutual profit enhancement, can you? There are some risks you simply have to assume for yourself, some risks you have to figure out how to minimize yourself, and some risks you have to learn how to eliminate yourself. The insurance industry specializes in risk management transfer. Those constitute the major remedies after an initial assessment of risk. What differentiates insurance from those other remedies is that the entire insurance industry exists in order to manage it for you. Ideally, things like small insurance exist not only to handle some of your risk management for you, but they exist so that you do it at a cost most favorable to you.

Its risk management outsourcing at its finest and it has literally been fine crafting its skills for hundreds of years. What s easier for a small business owner? Or hiring your own staff to figure it out for you, without the proper experience or knowledge, and without the specific resources specializing in the field? Get the right insurance from a company that offers great coverage at an acceptable fee? While nobody would consider an insurance company to be a magic pill to deal with risk management, they do allow you to outsource one component of it with business and small business insurance that s right for you and your company. Whether you re a Fortune 500 company, or small manufacturer of baseball bats, risk management is probably a necessary component of operating a successful business. Business insurance helps you address basic risk management.

After assessing your risk, you need to someone effectively deal with it. Business insurance providers essentially allow you to transfer a part of your risk assessment to someone else. That s where small business insurance in particular comes in. They re experts at it, and they allow you to focus on your core competencies and other risks associated with doing business.

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