Risk is a growing concern for many businesses, especially in today’s economy. Florida business owners need to take control of their companies, assess the inherent risks and determine how to best address these risks. Risks generally fall into one of three categories: safety, financial or operational. However, for each potential risk, internal controls can be put into practice to reduce risk.
All business owners face common business risks. Businesses of all sizes face risks related to product development, manufacturing, sales, operations and managing growth. However, these risks can be reduced by focusing on specific risk-reduction measures. Risk management approaches include risk avoidance, risk transfer as well as risk reduction.
Here are 7 ways Florida businesses can reduce their business liability.
Businesses should choose a business structure that limits personal liability. For example, if you are a sole proprietor, change your business structure to a corporation or limited liability so that you have limited liability.
When you insure your business against major risks such as damage to your buildings, equipment and vehicles, product liability, injuries to customers or suppliers or incapacity of company principals, you are securing the future of your business and reducing your potential liability.
Evaluate risky activities your business may engage in, the likelihood of consequences from those activities occurring and the benefits of the activities. Avoid risk by not participating in activities that have severe consequences or low benefits.
Activities that you determine to have severe and likely consequences, but are highly beneficial to the company, to other parties. For example, you may decide to create another, independent company to carry out these activities or assign them to suppliers or partners.
Lower operating risks by implementing a detailed records management system and effective controls. Limit who can authorize specific actions and spending amounts. Implement a reporting system that provides key performance indicator information. Analyze actual performance to goals and objectives and make adjustments as needed to reach projected goals.
Reduce your financial risk by minimizing outstanding balances and identifying credit risks. Set financial standards, policies and procedures. Specify credit score limits and require customers with unacceptable credit scores to pay in advance.
Reduce financial risk by keeping outstanding loan balances to a minimum. Control growth rate of the company so that financing can be managed internally. Transfer short-term credit with long-term, fixed-rate loans.
The higher your business risk, the higher your insurance premiums. Talk with a Lanier Upshaw business risk management expert to discover additional ways to prevent loss. Less risk means you’ll likely file fewer claims for lower amounts, thereby possibly reducing your rates. Contact us here for more information.