DoubleDown Forum: Subscribe to Newsletters for SMB Risk-Mitigation Tips

DoubleDown Forum: Subscribe to Newsletters for SMB Risk-Mitigation Tips

The world is facing an unprecedented level of uncertainty, rivaling even the depths of the global financial crisis. While the coronavirus pandemic may be behind us, its profound disruptions continue to reverberate, leaving us in a state of unpredictability.

Even the experts are divided on what lies ahead. Economists surveyed for the World Economic Forum earlier this year predicted economic volatility in 2023, regardless of an official recession. However, the nature and impact of this volatility remain uncertain.

In times like these, proactive risk mitigation is crucial for small and midsize businesses. If you haven’t already, consider implementing the following five strategies to prepare your business for potential challenges:

1. Set Aside Tax-Deferred Funds in a Custom 831(b) Plan

After the global financial crisis and the recent pandemic, governments intervened with trillions of dollars in economic stimulus and business bailout programs. While these efforts undoubtedly averted deeper economic calamities, they also contributed to the current inflation crisis, the worst since the early 1980s.

Business leaders should not assume that such extensive government support will be available in the future. It’s essential to be prepared for self-reliance during challenging times. One way to achieve this is by opening and funding a custom 831(b) Plan.

The 831(b) Plan leverages a little-known federal tax provision, enabling private companies to set aside tax-deferred funds for unforeseen disruptions like pandemics and civil unrest. By customizing the plan, you can address specific risks and threats not covered by traditional insurance. This will help preserve cash flow during temporary business interruptions and bridge periods of reduced revenue.

Though these plans have gained popularity since the pandemic, they are still underutilized due to a lack of rules and guidelines. Should Congress pass legislation requiring the IRS to provide more guidance, there may be a surge of entrepreneurs leveraging 831(b) Plans for financial security during unexpected hardships.

2. Periodically Conduct Comprehensive Risk Assessments

Risks evolve over time, making your risk assessment from five or ten years ago obsolete. To effectively manage risks, conduct a thorough, whole-enterprise risk assessment at least once a year.

According to the American Society of Safety Professionals, your risk assessment should cover:

  • Tangible and intangible macro risks
  • Business threats and opportunities
  • Consequences of these risks and threats, including positive outcomes from opportunities
  • Gaps and limitations in your knowledge about risks
  • Emerging risk indicators
  • Biases and assumptions of those involved in the risk assessment

This comprehensive assessment will help you accurately gauge potential risks and implement appropriate mitigation strategies.

3. Find and Develop New Revenue Streams

Diversification is the key to resilience. Relying solely on traditional revenue sources can prove disastrous when unexpected disruptions occur. Therefore, find and develop new revenue streams to spread your business’s risk.

Diversification doesn’t always necessitate rebuilding your business or investing in entirely new lines. It can involve finding new customers for existing products or expanding into new geographic markets. Additionally, consider entering new industries or sub-industries that align with your business plan, expertise, and strengths.

Balancing practicality with durability is crucial when developing new revenue streams. Aim for a strategy that aligns with your risk tolerance and available resources while being prepared to adapt swiftly if the situation changes.

4. Strengthen Cybersecurity Protocols

The cybersecurity landscape has always been an ongoing battle between attackers and defenders. As defenses improve, attackers become more sophisticated, making cybersecurity a constant concern.

To bolster your cybersecurity posture, adopt an all-of-the-above approach, including:

  • Strict data hygiene protocols for employee-owned devices
  • Two-factor authentication for all company accounts and devices
  • Stronger identity verification and access protocols, such as biometric authorization
  • Comprehensive data retention and backup systems
  • Clearly defined processes for responding to digital disruptions and ransomware attacks
  • Strict security standards for vendors and third parties

By enhancing your cybersecurity measures, you can better protect your business from digital threats.

5. Cultivate a Culture of Continuous Learning, Adaptability, and Resilience

In uncertain times, your team’s ability to learn, adapt, and remain resilient can be the difference between success and failure. Encourage a culture of continuous learning, where employees at all levels strive for improvement and learn from past experiences.

Additionally, emphasize adaptability and resilience as essential skills within your organization. Setbacks are inevitable, but how your team responds to them will determine your business’s ability to weather storms.

Prepare Your Business for What’s Next

While the future may be uncertain, there are sensible steps you can take to fortify your business against potential risks. Expand your financial risk mitigation beyond traditional insurance, conduct comprehensive risk analyses, strengthen cybersecurity, diversify revenue streams, and foster a culture of resilience and adaptability.

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