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Risk Mitigation Planning

Mitigating Your Risk:

Preparing for Unexpected Threat

Threats to your stability and bottom line are an unfortunate reality of business. As a small business owner, your goal is to mitigate that risk as much as possible so that your business can weather any storm. Here’s a guide on risk mitigation planning.

Identifying Risks

To plan for a risk, you first need to identify the type of threats your business could face. Risks will differ from business to business, but some common ones include:

  • Environmental Disasters: Depending on where you live, these can include wildfires, landslides, floods, earthquakes, droughts, tornadoes, hurricanes, and even volcanic eruptions. All can not only threaten your business, but also your community. 
  • Public Health Crises: COVID-19 is the most obvious example of a public health crisis, but others like contaminated food and local disease outbreaks can impact a business.
  • Recession: It goes without saying that an economic decline caused by a decrease in spending is a major threat to all businesses. 
A magnifying glass with a triangle in it on a white background.
  • Supply Chain Disruptions: Breakdowns in the supply chain can impact both your ability to ship your goods and receive necessary materials to develop your products. 
  • Market Changes: As supply or demand changes, this has the potential to negatively affect the way you price your products or services, along with your ability to sell them. 
  • Employee Turnover: Any time one of your employees leaves, there is a void in both manpower and knowledge of your business. 
  • Security Concerns: Whether it is a physical robbery, a shooting, or a cyber security breach, the effect on one’s business is almost immeasurable.

Steps to Mitigate Risk

While dealing with any risk to your business can be unnerving, taking steps to prepare can help alleviate that stress. Here are five steps that you can take

Purchase Insurance

Insurance may be the most basic way to protect yourself against unforeseen circumstances. 

For your business, be sure to research the following insurance packages:



  • General Liability Insurance: This broad type of insurance policy provides liability insurance for general business risks, including bodily injury or property damage on the business premises and medical payments.
  • Commercial Property Insurance: This type of insurance protects your company's physical assets from unexpected issues, such as fires, burst pipes, storms, theft, and vandalism. However, earthquakes and floods typically aren't covered, unless they are specifically added to the policy.
  • Data Breach Insurance: There are several types of policies in this field, but their overarching goal is to protect a company from financial losses as a result of a data breach.
  • Workers Compensation Insurance: If you have employees, this is critical. Workers comp covers medical expenses, lost wages, and rehabilitation costs for employees who are injured on the job.
  • Professional Liability Insurance: While general liability coverage protects you against accidents, professional liability insurance does so against claims of negligence from clients or customers.
  • Business Income Insurance: This type of insurance provides an extra layer of protection to cover lost income if your business is forced to cover suddenly and unexpectedly.

Create Contingency Plans

While many situations will arise that you can’t plan for, there are several where you can be prepared. Once you’ve identified all the risks for your business, create contingency plans for each scenario. General steps to take for all situations include creating a rainy-day cash fund and stockpiling backup inventory.

Learn from Issues

It’s important to constantly update your contingency plans. For example, if your assistant manager leaves, and there is no process in place to quickly train a new manager, your new step should be to create a current employee training program. Thus, if your new assistant manager leaves, there won’t be the same issue.

Be Mindful of Long-Term Commitments

Many businesses find issues during times of crisis with making payments on their long-term contracts and loans. Be sure to maintain a fixed amount of cash flow into an account that can be used to make those payments if you face issues.

Diversify Your Business

If there is an unforeseen circumstance that will affect your supply chain, having a diversified business operation that is not dependent on one supplier will allow you to mitigate the economic impact.

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