While it’s possible to get insurance to hedge against many of these eventualities, being ready to respond to them is just as if not more important.

1. Key personnel problems

It’s not a pleasant thing to think about, but what will happen to your business if the worst happens and you or one of your top team is killed in an accident or left incapacitated by illness? You need a plan in place to establish who will take control if this occurs. If you’re sole or majority owner of the business then you also need to consider who ownership will pass to in the event of your passing. 

2. Reputational risk

Last year’s “horse meat scandal” was a massive headache for supermarkets. Consumers suddenly felt they couldn’t trust that the food they were eating was what they were told it was. One year on from the crisis, sales of frozen ready meals were still down by 6 per cent and frozen pork by 18 per cent. 

Reputational hazards can come in a variety of forms, from a sudden drop in the quality of your products to a scandal concerning a member of your top team, or the discovery that you have an unethical supply chain. It’s important to identify these potential risks before they blow up and work to eliminate them. You should also have a communications plan ready in case scandals you can’t anticipate emerge.

3. Business interruption

Widespread floods earlier this year are estimated to have cost small businesses £830m, according to the FSB. Floods and other interruptions like fires, substantial building damage or extreme snow can slow or stop your business operations altogether for substantial periods of time. You need a plan in place to ensure that you can survive such problems.

4. Macroeconomic risk

The 2008/9 financial crisis and subsequent economic turmoil led to the closure of many businesses. Such economic conditions make the failure of some companies inevitable.
While there’s not a lot any individual business can do to prevent such a change in fortunes, you should be build resilience in your business and be prepared to respond in the event that the economy turns. This means having the flexibility to handle a drop-off in consumer/client demand, and thinking about ways you can cut costs if things slump.

5. Regulatory risk

For businesses operating in highly regulated or controversial industries, you need to keep an eye on the political and regulatory climate and be prepared to adapt should the authorities make changes. 

A good example of this is ecigarettes, an alternative to cigarettes which produce nicotine vapour instead of tobacco smoke. This industry has been booming of late, with a multitude of firms springing up to offer the product. But there have been rumblings from the EU of a potential ban of all current versions of the products because their health impact is unclear. Such a ban would be apocalyptic for the industry. 

Even businesses which operate in a less controversial space need to keep an eye on the political environment. For instance would you be able to survive if the minimum wage was replaced by the Living Wage, as has been suggested by some?

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