In the dynamic environment of small businesses, the world is constantly changing. Politicians pass new laws, banks change their interest rates, suppliers go out of business, corporations enter new markets. How do you navigate that?

Risk management sounds like a corporate thing, but it's a task every business has to think of. It's making sure that an adverse change in your business doesn't destroy or harm your business.

All risks can be either internal or external, but we recognise 7 main types:

Financial risk covers everything from customers not paying on time to banks withholding payments or calling in debts.

Compliance risk consists of legal and regulatory frameworks that business has to follow and their changes or introduction of new ones like GDPR or DSA.

Technological risk is of either positive nature (you are just not that effective with old technology) or a result of negative action as cyber-security thread or collapse of a technological stack.

Strategic risk describes failure to adequately plan and choose a direction for business. This can often be a failure to recognise shift in consumer behaviour, increasing competition or others.

Human resources risk of key personnel loss is hard especially for the smallest companies. You can get sick, your employees can decide to take another opportunity and leave, or take a long holiday.

Operational risk is a disruption of day to day activities. It can be a failure of key equipment, lost or delayed shipment from overseas or a natural disaster closing your shop.

Reputation risk is what all your marketing employees should try to avoid. The trust of your customers and your suppliers is a key to successful business and swarm of bad reviews online can damage that.

How do you deal with risk? Use a 4-step plan: Identify, analyse, handle and monitor. Out of many strategies for handling there is avoidance, mitigation, transfer, and acceptance. Let's imagine our risk is fire in warehouse.

We can stop using a warehouse and use drop-shipping and Just-In-Time delivery.

We can install sprinklers and other fire-suppressants and train our staff to avoid hazardous activities.

We can insure ourselves against fire damages by insurance company.

Or maybe we will consider the risk as too small and just ignore it.

After deciding how to handle the risk, you should engage in periodic monitoring. Is the risk still present (probably yes), did its impact change, does it need to be handled differently? Ask those question and change your business plans accordingly.

Identifying risk can also produce opportunities. Change your culture, modernise your equipment and your IT stack to best handle your business risks and increase your productivity at the same time.