Biz Features

The Top 5 Business Risks You Can’t Afford to Ignore

by . August 21st, 2014

By Kim Whitley

Kim Whitley writes  about the business world, the insurance and energy industries, and the environment for Make It Cheaper.  

In the business world, contrary to the popular expression, ignorance is certainly not bliss. This is no truer than where business risks are considered – and turning a blind eye simply won’t do.

Any potential business owner or entrepreneur will be familiar with the general concept of risk assessment – but having just a basic awareness of this aspect of setting up a business isn’t enough to get by if you want to run a successful company in the long-term.

There are five main areas of risk that you will need to pay attention to when setting up your business:


  • Financial risks
  • Strategic risks
  • Employee risks
  • Compliance risks
  • Environmental risks.



Let’s explore each of these in more detail below.

5.)Financial risks

Financial Risk
Obviously, any endeavour that involves an investment of your own money is an inherent financial risk. However, the term ‘financial risks’ concerns much more than this.

First and foremost, do not assume that because you have one customer on board that your business is destined for financial success. You could easily find yourself becoming overly reliant on this customer – or on one particular customer amongst many – so, what happens if their business goes bust? Or they decide to take their business elsewhere?

You will also need to be aware of how financially attractive your company appears to other businesses. If your business presents a high financial risk to stakeholders because it can’t cover itself (for example, has significant outstanding set-up costs) or doesn’t have the financial capability to settle any ongoing bills and payments, then chances are high that if you stakeholders won’t stand gain financially from investing in your business.

4.) Strategic risks

Strategic Risks
Strategic risks, or organisational risks, describe risks which could considerably hamper your business’s ability to reach its goals and objectives.

If there was a somewhat sudden change in customer demand for your product or service, or a new technological innovation threatened your business’s perception amongst customers, would you be able to keep things ticking over while you worked on becoming competitive in your market?

Avoiding this risk is all about being ahead of the curve. To tackle any strategic risks such as these, which are present for all businesses from day one, you will need to work hard to remain relevant and useful to your client base – or even evolve your client base, if necessary.

Your ability to create compelling marketing initiatives and constant progress and evolve your own products and services needs to be something you feel confident doing before you set up your business.

3.) Employee risks

Your employees are a living, breathing representation of your business, and undoubtedly play an integral role in your success. There are, however, inherent risks that come with employing staff.

Your employees are only human, and are therefore likely to experience illness or require unexpected absences at work, or decide to take part in any industry-related strike action that they are legally allowed to have time away from work to attend. It’s therefore essential to ensure that there are processes in place to fill these employees’ roles if ever these incidences occur.

It’s also important to consider the effect that the workplace may have on your employees, and how this could potentially impact day-to-day productivity. Poor adherence to health and safety practices on your behalf could result in an employee becoming ill or having an accident in the workplace – so you will need to arm yourself with the relevant insurance policies in this event.

Finally, it always pays to be diligent when recruiting and managing your employees. Always conduct thorough background checks and put stringent accounting procedures in place to reduce the possibility of fraud or crime in the workplace.

2.) Compliance risks

Regulatory Compliance
Depending on the nature of your business, there could be a number of different policies or procedures which you are legally required to comply with. Failure to comply with any legislation relevant to your business could result in considerable fines, which could not only put a dent in your business’s finances, but alter your brand’s reputation for the worse.

Compliance organisations won’t be interested in whether or not your business actively chose not to comply with legislation, or were genuinely unaware that such legislation existed. This is why it’s so important that you do your research into every nook and cranny of your business before setting up formally.

Examples of some of the core types of compliance you will need to consider are:


  • Employment law
  • Health and safety legislation
  • Taxation regulations.



Some other types of compliance are industry-specific – for example, food standards compliance for a restaurant chain – so it’s important to be aware of these, too.

1.) Environmental risks

Natural Disaster
Some risks will be naturally occurring and outside your control.

Floods, fires and storms are examples of just some of the unexpected incidents which could cause damage to your business, directly or indirectly. The likelihood of such incidents happening in the first place will depend entirely on the location of your business.

For example, a business located in a city or particular location prone to earthquakes, flooding or wind storms is more likely to experience an interruption to their business when compared to a ‘safer’ environmental area.

It is important to consider these environmental risks before you decide on where to set up your business, of course – but you will also need to bear these factors in mind in the long-term when you invest in the relevant insurance policies to protect your business against such occurrences.


Risk assessment is an integral part of setting up a business, and while it’s obvious that this isn’t necessarily the most exciting of tasks for a new business owner, it is still essential if you want to protect your assets as much as possible.


Image sources: Dice author’s own, all other pics Public Domain

Author Bio:

Kim WhitleyKim Whitley is a money-saving enthusiast and writer for Make It Cheaper. Follow her on Twitter for regular updates on her biggest passions: the business world, the insurance and energy industries, and the environment.

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We are not affiliated with any of the products or services mentioned. Author’s opinions are their own and do not necessarily reflect those of


Arthur Piccio manages YouTheEntrepreneur and has managed content for major players in the online printing industry. He was previously BizSugar's contributor of the week. His work has appeared multiple times on The New York Times' You're the Boss Small Business Blog. He enjoys guitar maintenance and reading up on history and psychology in his spare time.