Understanding the 5 Kinds of Business Risks

Risk means the possibility of failing to receive a return on your investment. And, as a business owner, you are no stranger to risk. Simply setting up your business was a huge one in and of itself. However, there are many other risks to consider that occur after your business is up and running. At The Wilson Law Group, we regularly help our clients get their businesses set up and maintain their integrity by helping to monitor future business risks after startup. If you have a business, or are thinking about starting one, contact us today to find out more. In the meantime, keeping reading to learn more about the main types of business risk.

1.   Operational Risk

As you’ll see below, businesses face all kinds of risks from outside forces. But what about internally? One type of risk every business has to worry about is internal, operational risk. This refers to risks that are tied to your business’ operations. From problems with employees to making sure all of your work is done well and on time, a lot of things that can go wrong. It’s for these and many other reasons that it’s so important to know about any weaknesses that exist in your company and its operations, so you can be prepared for problems down the line.

2.   Compliance Risk

Compliance risk refers to the risk that not following all applicable corporate, state, and federal rules and regulations can bring. From keeping production and the work environments up to safety standards, to ensuring your environmental output is in line with requirements from certain environmental agencies, compliance risk can be a real challenge.

3.   Strategic Risk

Every business has a plan. And as its owner, you probably spent a lot of time working to make sure that your plan was comprehensive and adaptable. However, there’s always going to be something that occurs that is out of your control. For example, shifts in the market can cause changes in supply and demand, leading to the cost of supplies suddenly increasing. Goals you had set in your original strategy can suddenly seem unattainable. Whenever this happens, the business community refers to it as strategic risk. While you won’t be able to anticipate everything, working with a business attorney can certainly help to keep this risk level low.

4.   Financial Risk

Whenever the business decides to make a new investment or take on any new debts, you have to worry about financial risk. But financial risk doesn’t just mean adding to the stack of bills, it encompasses virtually everything from credit reports to layaway items.

5.   Reputational Risk

In order to be successful, your business has to be well respected amongst its customers and its peers. It follows that every business decision should be made with the utmost care. Because any decision you make could affect your business’ reputation, such decisions are referred to as reputational risk.  

Speak with an experienced business law attorney.

Keeping a business running at minimal risk is tough to do. At the Wilson Law Group, we regularly help our client’s businesses run successfully while avoiding as much risk as possible. Whether you are a veteran looking to start over with a new company or you already run several businesses at once, our team of attorneys can help. If you have questions about risks associated with running a business, contact us today.

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Wilson Law Group

Jim Wilson is the founder and principal attorney of the Wilson Law Group. For the past 25 years he has been combining legal dexterity with an entrepreneurial mindset to help aspiring and established business owners start, finance, buy, sell, and run their companies.

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