The most common tool used in risk management is insurance. Besides the standard health, life, and possibly disability insurance, you need to look at the types of liability and property insurance you may need. Specialized insurance for particular risks in your business can also be necessary. For instance, if you have a chemical component of your production process, you may want special toxic risk insurance. Think comprehensive, then pare it down to fit the level of risk you are comfortable with. Many people prefer a comprehensive policy that has a large deductible which reduces the cost of the policy.
As with any purchase, get a number of quotes - and don't choose the cheapest one. No two policies are identical. Look carefully at the pluses and minuses of each policy, the agent, and the insurance company before making a decision. Be certain to arrange for the insurance coverage to start before you open for business. This seems like common sense, but in the rush to get money coming in the door it is often put off. It may take some time for the policy to be written if valuations need to completed or other information checked. Do not expect to decide and have a policy in place the next day.
You still need to deal with those risks you didn't insure against. Each needs a contingency plan; i.e., what are you going to do if this event happens? Write the plan down. Then train every employee what to do in the event something unexpected happens. If a robber comes in and demands the cash in the cash register, what action should they take? If the computer shuts down and won't reboot, what do they do? Put the plan in a place that it is easily accessible and have an extra copy in a safe location. Additionally, you will want a good accounting and financial control information system to alert you to problems that might be arising in cash flow, thefts, fraud, or other financial trouble spots in the business.
Your insurance and your contingency plans are your risk management system. Don't just put them in a safe place, however. Make it an annual commitment to review the system and update it as necessary. No startup is a static venture. Likewise the components of the startup should also not be static. Involve your employees as much as possible. They, more than anyone, can spot the flaws that can be tomorrow's disaster.
Should you need additional financing at some point, having a good risk management system in place will impress the lender and may make the difference in obtaining the funds your need. In fact, a good risk management system should provide the information you need to know exactly when you need to seek additional financing and give you as very clear picture of what your needs will be. It can be an information system about how your business is doing as well as a system to control risk.
