33 Small Business Risks
John Spacey, July 29, 2016 updated on March 19, 2021
A risk is the chance for something unexpected to happen that results in a loss. Small businesses are particular vulnerable to risk as things can be tough enough for a new venture even when things go smoothly. As such, it is a good practice to regularly identify risks to your business and plan to avoid, mitigation, transfer or accept each risk. The following are common risks that small businesses face.
Budget RiskGoing over budget.
Commodity RiskThe price of basic commodities such as fuel, foods and materials.
Competitive RiskNew competition or competitive actions such as a price war.
Compliance RiskBeing deemed to have violated a law or regulation. This can happen despite your best efforts to comply to the law. For example, you may be responsible for certain actions of employees.
Concentration RiskA business that is too focused on a particular market. For example, a farmer who only grows corn is vulnerable to its price.
Contract RiskWhen partners, suppliers and employees fail to meet their contractual obligations.
Credit RiskThe risk that a customer won't pay what they owe you.
Exchange Rate RiskFluctuating exchange rates that increase your costs or decrease your revenues.
Dispute RiskThe chance of a costly dispute with a supplier, partner, customer or member of the public.
Economic RiskThe chance that the economy will experience a downturn.
Financial RiskThe risk of a financial loss such as a failed investment.
Force MajeureA major negative event such as an earthquake, storm or war.
Health And Safety RiskA health or safety incident related to your business.
Infrastructure RiskInfrastructure issues such as a network outage.
Innovation RiskThe chance that a new innovation will invalidate your business model.
Interest Rate RiskA negative interest rate change such as a floating rate loan when interest rates go up.
Legal RiskA legal event such as a lawsuit.
Liquidity RiskRunning out of cash.
Local Economy RiskThe risk of a decline in the local economy.
Operations RiskFailure of a business process such as a late delivery that requires you to pay penalties.
Passive RiskRisk is often associated with action, but inaction can also be a risk. For example, sitting still while a competitor rapidly improves.
Procurement RiskAn inability to procure what you need at the right price, quality and time.
Quality RiskWhen your products or services fail to meet the expectations of customers resulting in poor ratings and declining business.
Refinancing RiskThe chance that you won't be able to refinance when a loan expires.
Regulatory RiskNew laws that interfere with your business model or profitability.
Reputational RiskAn negative event or chain of events that damages your reputation.
Resource RiskInability to obtain resources such as skilled employees.
Seasonal RiskA special risk related to a business that does most of its sales in a short span of time such as a ski resort in an area with a few months of snow.
Security RiskThe potential for an information security or physical security incident.
Strategy RiskA failed strategy such as a new product that flops.
Taxation RiskThe potential that tax laws or rates will change.
Technology RiskFailures related to technology such as a website outage.
Weather RiskMany businesses that have a physical location are exposed to lower sales in bad weather.
RisksThis is the complete list of articles we have written about risks.
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