10 Ways to Improve Risk Management

Learn how to approach risk management with confidence. Discover types of business risks, why risk management is important, and steps for reducing risk.

With increasing liability claims, being able to identify and reduce risks can help to safeguard your financial stability. Preventing claims can keep your premiums reasonable and also enables your business to avoid significant costs and downtime from dealing with accidents.

Legal and insurance experts at the Federation of Small Businesses explain the top 10 causes of liability and property claims, and share the actions you can take to improve your risk management.

What are risks in business?

Every business faces uncertainty. Risks are the potential events, internal or external, that can affect your operations, objectives or reputation. These might be financial losses, technology failures, legal disputes, or security breaches.

Some risks are easier to anticipate than others. While natural disasters or cybersecurity risks may be outside your control, others, like cash flow issues or staff shortages, can be prepared for with the right approach.

Types of risk every business should consider

Understanding the different types of risk is the first step in reducing their impact. Some common examples include:

• Operational risk: Disruptions to your day-to-day business operations.

• Strategic risks: Linked to poor business decisions or changing market trends.

• Project risks: Issues that arise during specific initiatives or projects.

• Financial risks: Such as fluctuating interest rates or unpaid invoices.

• Legal and compliance risks: Including changes in legislation or contracts.

By identifying your business risks early, you can develop targeted risk management strategies.

What is risk management?

Risk management is the process of identifying, assessing, and taking steps to reduce potential threats to your business. A solid risk management plan helps ensure your business can respond quickly to unforeseen events and avoid negative outcomes.

Whether you're a sole trader or managing a growing team, having the right risk management techniques in place allows you to act confidently and protect your business.

Why is risk management important?

Ignoring risks can have severe consequences, from financial loss to reputational damage. Effective risk management improves your ability to: