Catastrophes, accidents, financial crisis, and unexpected losses – your business can face it anytime, whether you like it or not. But facing such circumstances doesn’t mean your business has to be a “victim”. All you need to do is learn the three basic ways of managing your business risks.
1. Finance the risks
One way of managing business risks is buying a business insurance coverage in order to transfer the possible losses to the insurance company.
2. Transfer the risks
You may want to transfer your possible risks to partners, competitors or even clients, if appropriate. Here are some ways of transferring your business risks to others:
- Use leasing on business property and equipment. Your lesser may assume your property and liability risks if stabled by the leasing contract.
- “Just in time” delivery. In case your deliveries aren’t very time-sensitive, you can use this method, which implies the vendors to store all the merchandise and materials at their warehouse until you need it. You can also ask your supplier to deliver the goods directly to the consumer.
- Make your customer assume the risk. You can consult with your lawyer on ways of transferring ownership and risk of goods to the customer, even if they are still on your premises. Pay closer attention to your warranties and be sure they are tailored to protect you.
- “Hold harmless” agreements. A “hold harmless” agreement is a tool which allows you to transfer your legal and financial risk to a third party. Make sure to consult your lawyer on this type of agreements.
- Let competitors risk instead of you. Risky projects that you aren’t sure your business can handle may be left to competitors. Let them assume all the risks.
3. Control the risks
There are things that no one can prevent from happening such as accidents, storms or financial crisis. But taking into account the probability of an accident to occur you can reduce the impact of such circumstances on your business.