TEN RULES FOR REDUCING RISK By Leah Horner

TEN RULES FOR REDUCING RISK By: Leah Horner

STEP 1: BUSINESS STRUCTURE ▪ Pick a business structure that limits personal liability. It is good to change to a corporation or limited liability company where you have limited liability. § This is important so the owner is not fully responsible if anyone gets hurt. § Liability Insurance

STEP 2: TRANSFERRING RISK ▪ Transfer risk to insurance companies. You do this by insuring against major risks. ▪ Examples: Damage to your facilities, product liability, injuries to customers or suppliers and death or incapacity of company principals. ▪ This is important because insuring against major risks will help you feel safe ▪ Property Insurance

STEP 3: RISK ANALYSIS ▪ Perform a risk analysis by evaluating the consequences of risky activities. Avoid risk by not carrying out activities that have severe and likely consequences and low benefits. ▪ This is important because it good to be aware of what could happen ▪ Property Insurance

STEP 4: TRANSFERRING THE RISK ▪ Transfer the risk of activities but high benefits to other parties. Create a company to carry out these activities or assign them to suppliers or partners. ▪ This is important because it is good to know where to transfer the activities to. ▪ Liability Insurance

STEP 5: WHAT TO REDUCE RISK FROM § Reduce risk from product failure and warranty claims by implementing a quality assurance program. Link the problems reported by customer service to specific failures in production or testing procedures and institute corrective action. § This is important because every company wants to reduce the risk of a product failure. § Liability Insurance

STEP 6: REDUCING RISK OF SURPRISES ▪ Reduce risk of surprises in operating results. This is done by keeping accurate records and instituting effective controls. Put a system in that limits who can authorize specific actions and how much they can spend. ▪ This is important because every company wants to know the outcome of their results without any surprises. § Liability Insurance

STEP 7: REDUCING FINANCIAL RISK § Reduce financial risk by managing your accounts to minimize outstanding balances. Identify poor credit risks. § This is important because managing finances is one of the most important aspects of running a business. § Liability Insurance

STEP 8: Reduce financial risk § Reduce financial risk by keeping outstanding loans and financing needs to a minimum. If the company can't pay off some loans, replace short-term credit with long-term. § This is like the last one, this is important because managing finances is one of the most important aspects of running a business. § Liability Insurance

STEP 9: RISK RESPONSES ▪ Identifying risks is to prevent any adverse effects. Minimizing the risk, avoiding the risk and accepting the risk are the 3 approaches when planning a risk response. § This is important because every company needs to know what to do when facing a risk. § Liability Insurance

STEP 10: RISK COMMUNICATION § Risk communication has great factors that should be followed. Like, to make it a part of the regular meetings, and ask your team members to report on existing risks as a minimum. § This is important because communication is a business is key. § Letting them know what their options are. (Including workmen’s compensation insurance)