According to a 2023 PwC study, nearly 77% of businesses have faced operational issues since 2018 due to unidentified risks. This statistic shows that companies remain blindsided by common risks despite the best infrastructures, practices, and intentions.
Consequently, they deal with unnecessary financial, operational, and legal issues. In this post, we’ll share a useful guide to prevent risks and legal issues in your company. From liability to cybersecurity and employee wellbeing, we’ll cover it all.
Common Risks and How to Prevent Them
Below are some prevalent risks businesses face and effective strategies to prevent them. By understanding these risks and implementing the recommended preventive measures, you can protect your business against uncertainties and thrive in today’s competitive business landscape:
Businesses must deal with the risk of potential liabilities when running day-to-day operations, including (but not limited to) product defects, service downtime, property damage, vehicle accidents during operations, etc. To safeguard against these risks, you need to:
- Obtain liability, property, umbrella, and other relevant insurance policies for your industry and business size;
- Comply with SOPs and safety regulations with regular training sessions.
2. Employee Lawsuits
No workplace is free of unhappy, frustrated, and resentful employees that can easily resort to suing their employers for different reasons, such as wrongful termination, workplace harassment, improper discipline, discrimination, etc.
In many cases, it doesn’t matter if their claims are legitimate or frivolous. Lawsuits generally lead to financial losses, tarnished reputation, and business disruptions.
Here are some solutions to avoid these issues:
- Create a well-drafted employee handbook outlining clear and concise workplace behavior and operations policies;
- Establish a positive and inclusive workplace culture that prioritizes employee satisfaction and well-being.
As businesses become more reliant on technology and digital solutions, they become more vulnerable to cyber attacks that can lead to IT downtime, theft, customer and financial data loss, sabotage, lawsuits, and penalties or fines. Therefore, you must educate employees about cybersecurity and conduct regular training sessions. More importantly, you must equip your teams and infrastructure with a solid mix of security solutions to enhance protection, including:
- A robust cybersecurity suite: offering multi-device protection, automatic malware removal, and other essential features;
- A power virtual private network (VPN): to encrypt your IP addresses and online traffic so you can avoid Reddit or Quora queries like “Someone has my IP; what do I do?”;
- Password managers: to create longer and stronger passwords without the need to remember them;
- Multi-factor authentication: including biometric verification, one-time passwords, and other methods to add multiple layers of protection.
4. Workplace Safety
Along with cybersecurity, you must ensure your physical work environment is safe.
For instance, if your operations require heavy machinery and equipment, you need to ensure safety compliance and address potential hazards to prevent accidents, injuries, and consequential issues. You can do this by:
- Implementing frequent equipment and site inspections;
- Training employees to use equipment and machines properly;
- Creating an emergency plan to navigate workplace disasters;
- Equipping teams with first-aid kits, personal protection equipment, and other essential resources to prevent accidents or injuries and take responsive measures.
5. Environmental Compliance
Every industry and locality has certain environmental regulations businesses must comply with. Failure to do so can result in heavy penalties, reputational damages, and other issues. Hence, as a business owner, you must:
- Stay up-to-date with changing environmental regulations;
- Adopt green practices and solutions to reduce your carbon footprint and prevent legal issues.
6. Intellectual Property Protection
The infringement of intellectual property rights can result in reputation damage, lost revenue, and other issues. Therefore, you must do your due diligence to reduce the risk of IP theft by:
- Registering patents, trademarks, and copyrights;
- Actively monitoring and enforcing IP rights to prevent, report, and penalize unauthorized use.
7. Employee Drug Use
Employee drug use can impact safety, reduce productivity, and foster a workplace culture where irresponsible behavior is ignored or tolerated. Such a work environment is prone to accidents, assaults, reduced efficiency, and other issues. To prevent illegal substance use from compromising your culture and business performance, you must:
- Implement a strict drug-free workplace policy;
- Conduct regular testing to deter drug use, including urine and blood tests;
- Educate employees about the impact of drug use and facilitate employees struggling with substance abuse with counseling and rehabilitation services.
Additional Ways To Deal With Business Risks
As a responsible business owner operating in an ever-changing risk environment, you must proactively safeguard your enterprise from common pitfalls affecting productivity, performance, growth, and continuity. Here are some ways you can start doing it now.
Taking proactive measures to identify, mitigate, and prevent legal issues or risks that trigger them can protect your capital and financial assets. Security breaches, legal disputes, and other liabilities are expensive and usually incur damages in the form of:
- Legal fees;
- Losses caused by IT downtime;
- Medical bills;
- High insurance premiums, etc.
By avoiding these scenarios (and others), you can ensure your company’s financial resources are used for growth initiatives, not damage compensation.
Your company’s reputation is invaluable. It can influence your relationship with customers, partners, investors, and other stakeholders. Therefore, the last thing you want as a business owner is to face lawsuits, scandals, cyber-attacks, or workplace accidents – all issues impacting your credibility.
Legal issues can stress business owners and management immensely. Hence, proactively mitigating risks and ensuring compliance with relevant regulations can drastically reduce the chances of facing legal issues. A vigilant and compliant business environment fosters a heightened sense of security and peace of mind for all stakeholders.
To ensure continuity and sustainability, you must comply with your industry’s and jurisdiction’s legal requirements. Ignoring or neglecting your legal obligations often leads to:
- Temporary or long-term shutdowns;
- License suspension;
- High employee turnover.
All these consequences can impact growth and sustainability, which may ultimately stop your business from reaching its full potential.
To Sum Up
Mitigating risks and preventing legal issues are indispensable to ethical and sustainable business management. You can maximize liability protection, IT infrastructure security, and employee wellbeing by prioritizing the areas mentioned above. However, you must do your due diligence and proactively create a safe, secure, and legally compliant workplace to ensure continuity and growth.
Remember, committing to the best practices won’t eliminate risk. But it will help deflect as many threats as possible to reduce or avoid financial, legal, or reputational damages.