Focusing time and resources into developing a strong risk management strategy can help your business prepare for the main risks that can impact its success. There isn’t a singular plan that works for all businesses, but there are a few core components that should be addressed.
Internal Controls
Your business’ strategy should include internal control policies. Internal controls are the processes and documentation used to govern your overall operations. These protocols typically promote transparency, prevent fraud, and ensure business proceedings are compliant. Incorporating internal controls can help you mitigate fraud and set a tone of accountability throughout your organization. Here are a few internal control best practices you may want to consider in your plan:
• Documenting all key business policies and procedures and making them readily accessible to all employees
• Dividing up responsibilities that involve sensitive information, compliance, and audit-related tasks so that a checks and balances system is created
• Establishing anti-fraud controls for quicker detection and prevention of workplace fraud
Cybersecurity
Cyber-related risks have grown these past few years as cybercriminals have become more sophisticated and relentless with their schemes. A solid risk management strategy accounts for the actions your organization will take should a cyber incident occur to minimize its impact as much as possible. This component may include your organization’s documentation on security protocols, business continuity plans, IT recovery plans, and more.
What’s most important is that you work with your IT team to identify potential risks and develop policies around them so your business is prepared to act and secure its systems if a data breach were to happen. The better positioned your teams are to handle a cyberattack, the less havoc such an attack could cause on your data and operations.
Insurance Options
Insurance is specifically designed to help policyholders mitigate risk — no matter the type of coverage. From protecting against physical damage to providing funds to cover a cyberattack, there’s a range of insurance types available for business owners. Regularly review your coverage options to ensure they’re still meeting your needs and that there are no gaps present. Some policies to consider:
• Commercial Property: Covers the physical aspects of your business, such as your office space and the tools used to operate
• General Liability: Covers costs related to claims involving bodily injuries or property damage to others
• Fleet Auto: Provides auto coverage for a vehicle rather than a driver so there’s more flexibility on who can drive company vehicles
• Workers’ Compensation: Offers medical care and cash benefits for employees who become injured or ill due to their work environment
• Directors and Officers (D&O): Commonly covers fees for legal needs, settlements, and financial losses when the business is held liable
• Cyber Liability: Offers financial coverage for businesses that experience a data breach or related cyber incidents
• Business Crime: Provides coverage for losses due to fraud, embezzlement, theft, forgery, or any other business crime
Building Resilience
Perhaps the most vital aspect of your risk management strategy is its ability to build resilience and adapt to new risks. To achieve this, it’s imperative that your strategy outlines actionable steps for each risk you’re aiming to mitigate. Any team members who will need to be involved in action plans should know their role and responsibilities so they can best do their job when it’s needed most.
If a certain risk should become reality for your business, be sure to assess how well your plan worked or where improvements need to be made so you can update your processes effectively and stay agile for the future. The less ambiguity you have within your strategy, the more clarity your team has to protect your business.
Addressing every risk your business will face is an impossible feat, but a comprehensive strategy could make a world of difference. Protect your business from the people and things that can harm it by making risk management a priority.
Gene Gard, CFA, CFP, CFT-I, is a Partner and Private Wealth Manager with Creative Planning. Creative Planning is one of the nation’s largest Registered Investment Advisory firms providing comprehensive wealth management services to ensure all elements of a client’s financial life are working together, including investments, taxes, estate planning, and risk management. For more information or to request a free, no-obligation consultation, visit CreativePlanning.com.