By | | January 1, 2023
When running a business, risk is one of those words that you simply cannot avoid. Not understanding the risk you face in your business could be preventing you from acquiring that sizable contract or that ideal client. There are all sorts of risks that businesses take on and understanding them is vital for any business owner. In this article, we'll look at some of the most typical business risks and how you can protect your company from them.
What Is Commercial Risk?
Commercial risk is a type of business risk that can arise from a company's commercial activities. These risks can come from a variety of sources, including contracts, product liability, employee relations, and competition. Some commercial risks are inherent in every business, while others are specific to certain industries or types of businesses. Managing commercial risk is an important part of running a successful business, as it can help protect the company's bottom line and reputation.
There are many types of commercial risk, but they all essentially boil down to the possibility of financial loss.
Commercial risk can be difficult to manage because there are so many variables involved. For example, a company might take out insurance to protect against the possibility of a fire damaging its inventory, but that won't do anything to protect against the possibility of a defective product. Managing commercial risk requires a careful analysis of all the potential risks a company faces and taking steps to mitigate those risks.
Examples of Commercial Risk
Compliance risk
Compliance risk is the risk that a company will face fines or other penalties for violating laws or regulations. This risk is particularly high in highly regulated sectors like banking, healthcare, and energy. Failure of an organization to adhere to internal standards, such as its code of conduct, can also result in compliance risk. An insurance professional well versed in professional liability insurance can help a business owner find the right policy and coverages to protect their business.
Security risk
Security risk is the chance that data, applications, systems, or networks will be accessed, used, disclosed, intercepted, or destroyed without authorization. Numerous things, such as flaws in the hardware or software, human error or negligence, or malicious third-party attacks, can result in security risks. While some security risks are present in every information system, others might be unique to particular business sectors or industries.
Example of commercial risk: A company's financial data is hacked, exposing the company to financial loss and damaging its reputation.
There are many ways to reduce security risks, such as putting in place robust security controls, performing risk analyses, and creating incident response plans. However, security risks cannot be completely eliminated even with these precautions in place. Therefore, businesses must be ready to handle the effects of a security breach, including monetary losses, legal liabilities, and reputational harm. The correct Cyber policy can help to mitigate this growing risk.
Reputation risk
Reputation risk is one of the most significant commercial risks that businesses face. It can result from a number of things, such as consumer complaints, unfavorable media coverage, or legislative action.
Reputation risk can have devastating effects that are widespread. It could harm a business's capacity to draw in and keep clients, staff members, and investors. Additionally, it may result in financial losses as a result of diminished shareholder confidence and falling stock value.
Businesses must take action to manage and mitigate reputation risk given the potentially serious consequences. This entails keeping an eye on social media and other channels for potential red flags, creating crisis communication strategies, and purchasing the insurance coverages that make the most sense based on your business.
Operational risk
Operational risk is the chance of suffering a loss as a result of subpar or ineffective internal systems, processes, and people, as well as adverse external circumstances. Numerous factors, such as fraud, human error, natural disasters, and IT system failures, can contribute to this risk. Operational risk can result in monetary losses, harm to one's reputation, and legal liabilities. Make sure your insurance portfolio considers operational risks.
What Is the Best Way to Handle Commercial Risks?
When it comes to managing business risks, there are a few important considerations. It's important to identify what risks are present in your business. This can be done by conducting a risk assessment in partnership with your insurance agent and their insurance risk management team. Once you are aware of the risks, you can create a strategy to reduce them.
Regardless of the size of your business, there are always risks lurking around the corner that can cause a crisis. With Cell Brokerage Risk Management Group you have a team of risk management professionals who can help you to craft a strategy to safeguard your business from the risks you face. Contact us to learn more.