Every business endeavour carries with it an element of risk. For example:
- Customers failing to pay their bills,
- Business owners falling sick,
- Failing to reserve sufficient funds to pay bills, expenses, and taxes,
- Miss-managing relationship with banks.
And let’s not forget, being subject to unexpected economic disruption as we have all suffered from – to one degree or another – in the past two years.
What are the remedies?
Many risks, such as bad debts and disruption due to sickness can be covered by insurance, as can losses due to theft or fire.
Prudent businesses may squirrel-away a rainy-day fund to provide funds to weather temporary disruptions to their business finances.
But before considering these options, business owners will need to consider the nature of the risks they face, quantify those risks, and then consider how they can cover or manage those risks.
Every business is different and will benefit from a risk assessment.