Risk is simply part of doing business. Large and small companies alike face financial risk, risk to physical assets, risk of market change, risk of employee theft or injury. Every day you open the doors, your company faces some risk somewhere.

While risk can’t be eliminated, it can be managed.

Assessing Risk

As a prudent business owner, you probably carry an insurance policy helps mitigate risk, handing it off to the insurer for a fee – those monthly premiums. The risks faced by your company are usually a combination of those shared by most businesses (such as fire) and risks specific to your industry (such as professional malpractice).

Know where your company is vulnerable. You can’t lower risk if you don’t know where the risk is, so the first step is identifying the likelihood that your business will be negatively impacted, based on your current and future business practices.

Expert Opinions

Insure valuable company assets – from your warehouse to “key employee” life insurance coverage on that essential member of the business team. Your insurance broker, or insurance provider, can conduct an onsite risk assessment to determine areas of physical risk to your business.

Hire a risk consultant to examine your business and risk exposures. For instance, if the success of your company relies on patents (intellectual properties) and those patents are stolen, your company just might be out of business. Each type of business faces a different risk. Risk consultants look for trouble spots you can fix before they actually cause trouble.

Quantifying Risk

How do you put a dollar value on an intellectual property that’s been infringed upon? How do you calculate the cost of a serious employee injury? An unexpected lawsuit? A major marketing miscalculation? New competition?

Measuring risk often involves determining the dollar value of specific scenarios that may occur – a difficult task, predicting the future.

In identifying risk, attempt to evaluate the potential for risk. How likely is it that a loss will occur? For instance, a tornado is a serious risk in “tornado alley” – the American Midwest – so companies located in this region face dangers that businesses in Nevada are unlikely to face. Quantify risk estimating the cost of total loss and multiplying that by the likely percentage of events causing a total loss. For example, if it would cost $5 million to rebuild your facility if it’s destroyed by a storm, and the likelihood of a severe storm over the next 10 years is 5 percent, your risk exposure for that time period would be 5 percent of $5 million, or $250,000.

Inspections and Training

Keep inspection reports up to date. The Occupational Safety and Health Administration (OSHA) can inspect your workplace and provide suggestions to improve safety and help lower risk to employees and the business.

Keep all inspection reports and risk remediation records to demonstrate that your company took responsible action to lower workplace risk to employees and to your company.

Finally, train your employees in safe practices. Provide all necessary safety gear. Update training regularly. Develop a formalized training program for new hires. Hold regular fire and emergency drills. Train your employees to react quickly and safely in a variety of workplace settings – from requiring hardhats in certain areas to the location of the closest fire exit.

Risk is part of doing business, but by conducting regular risk assessments, quantifying risk in terms of dollars, and taking steps to lower the probability that risk will negatively impact operations, you will likely increase the probability of company success.


The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of Zions Bancorporation, N.A. Member FDIC