Common Risks Associated with Running a Business

The moment you decide to venture into business, you should get ready to face risks. Business risks come in various forms and sometimes have disastrous effects. There is the risk that you will not make a return on your investment, that your business will fail, that a workplace accident might occur, and so on.

Fortunately, you can identify these risks and help your company protect against them.

Here are some of the more common business risks you should be aware of:

Financial risk

The financial standing of your business can determine its success or failure. Start-ups particularly face serious financial pressures within their first five years, which if not resolved, can be the end of the business.

There are several ways you can mitigate this risk of bad finances in your business, such as having a clear idea of your finances and a working budget that will help prevent against uncertainties, exploring sources of additional business funding, and identifying viable new market opportunities to enter into.

The human factor

Unless you intend to run a one-person operation, you will need to employ people that would work in your business and help it grow. This entails a lot of risks:

  • How do you hire the best workers for your company?
  • Can you hire qualified talent, and pay their salaries without going bust?
  • Will the competition poach qualified employees with higher pay and benefits?

There is also the limit on yourself to consider.

  • Do you have what it takes to lead people?
  • Will you be able to withstand financial losses that are bound to come?
  • Can you handle the pressure of running a business along with your personal and family life?

These are vital questions, the answers of which can pose a serious risk to the success of your business.

Internal and external risks

Internal risks are usually related to the day to day running of your business, such as lawsuits from injured employees after a work-related accident, theft of goods or money in the company, high rate of turnover, or loss of customers as a result of poor customer service.

External risks are related to things that happen to your business which is outside your control, such as damage to your facilities, natural disasters, and lawsuits from parties outside the company. Almost all these risks can be mitigated by taking out business insurance, but it is also a good idea to consider a business interruption policy so that you can keep your business running while rebuilding.

Market risk

Changes in the economy caused by government policies, world events and even new market trends can pose a risk to any business. The location, nature, and competitiveness of your business can also affect its success. When you enter into a market that is saturated with similar products and services, it can significantly affect your ability to gain a share of the market, even if you come with an innovative approach.

The key to effectively managing this type of risk is to conduct proper market analysis regularly. This way, you can detect the market trend, stay abreast of happenings locally and internationally, and make decisions that would help position your business in the industry.


By understanding the common risks that can affect your business, you can take proactive measures to protect against them. However, a strong insurance policy is one of the best protections that can help when things go wrong with your business.

Author: Oliver Curtis

Hi there. I’m Oliver. I’m just a young boy from the outskirts of… Okay, that’s a lie, I’m not a young boy anymore, although I certainly feel that way at heart.