Understanding the Types of Risks That Could Affect Your Business

Knowing the threats that your business could face can make mitigation easier. From external to internal, the nature of the threat and its severity can vary.

There are risks associated with running any business that could have long-term negative consequences. Understanding the various types of risks can help you in creating a risk management plan for your business.

One strategy you might consider after reading this article is compiling a list of the specific risks that may face your business in particular. These can vary greatly, depending on industry, locale, and other variables. Consider separating the risks you could face into relevant types: technological, reputational, operational, personnel, and financial risks.


Tech-savvy criminals can pose a threat to the security of a small business’s sensitive data. In the event that trade secrets are revealed to competitors or client financial data is stolen, the results can be disastrous. Databases, social media accounts, and business’s research and development must be vigilantly guarded. Note where your technology might be vulnerable and what steps you could take to help safeguard it.

Small business owners have the ability to keep close tabs on what others are saying about their businesses, and can use unfavorable reviews as opportunities to prove their commitment to customer satisfaction.
Heather Herndon, Director of Marketing and Communications




With the proliferation of social networking, a negative review or post can sometimes impact a company’s earnings, seemingly overnight. While online reviews, blogs and social media can make it easier to spread negative information, they’re also a useful tool for reputation management. Small business owners have the ability to keep close tabs on what others are saying about their businesses, and can use unfavorable reviews as opportunities to prove their commitment to customer satisfaction. Visit popular review sites for your industry and check to see if your company has a profile already. If it does, consider making it a habit to monitor your profiles often for activity or set up alerts, if you have the option.



For employers, risks associated with personnel should be at the top of the list.

  • Employee injuries, for example, can be disastrous for a business. You’ll want to consider making sure that you are in compliance with any health and safety regulations for your city and state. Also, check your company insurance policy to ensure that you’re covered for any work related injuries.
  • Internal fraud can be another major risk factor, and one that is an all-too-common reality. Consider doing an internal audit to see where your company could be vulnerable.
  • If employees do off-premises work, then the business’s liability can follow them. Consider what precautions you might need to take to minimize your risk in this case.
  • Training interim replacements for key personnel can be a prudent risk management strategy. Any business that is too reliant on specific employees for its daily operations can face serious trouble, should those employees move on.


Financial risk relates to how a company handles its money. For example, when it comes to extending credit, how do you determine which business customers to extend credit to? It’s crucial to understand that before extending any type of credit, a company should establish a credit policy that includes details for qualification, invoicing, payment guidelines, and collections. Many prudent business owners will monitor their partners’ business credit files, even after the contract is signed to help ensure that their company isn’t being put at risk.



Operational risks are another concern that can impact a business, if the proper precautions aren’t taken. For instance, in the event of a fire, flood, or chemical leak, a business may be unable to operate as usual, resulting in a loss of revenue. Supply chain disruptions caused by vendors who aren’t able to deliver reliably can also result in business interruption. In the event that a key business asset is damaged by vandalism, misuse, or accidental damage, the cost of repairing or replacing it can put substantial stress on a business’s cash flow.

For a list of more internal and external risks that can affect your business, consult this guide from the U.S. Small Business Administration.

If you want more information on how you can proactively mitigate financial and operational risk brought on by disruptions to your supply chain, you can learn more about our tools to help you monitor other company's business credit.