Occupying a middle market position can be challenging. The risk management strategies that served you well as a startup or small business no longer provide the protection you need. Yet treating your business like a megacorporation or market leader may result in overspending on the coverage you don’t need – while underspending on the coverage you do need. In this blog, we break down a few best practices middle market managers can follow to reduce risk in this unique market position.
What is risk management?
Risk management focuses on sudden, unprecedented, and often ill-received business challenges. You cannot anticipate every potential calamity, nor should you try. Rather, a risk management plan accepts that you can prepare for the maximum number of possible mishaps without having to identify each potential downturn individually.
Risk management can be tough. Good risk management planning takes time, which many middle market managers already feel is scarce. It also demands that managers take seriously the fact that their business could, in fact, face catastrophe – a fact it is far easier to pretend is remote or impossible.
What business risks do middle market companies face?
Growth is inherently risky for businesses. Companies entering or expanding into the middle market space thus face risk by the nature of their growth. While the specific risks a business faces can vary with the business type and industry, common risk categories that deserve consideration include the following:
- Business interruption risk. The COVID-19 pandemic taught many businesses a hard lesson about the losses associated with business interruption. This risk can manifest in myriad ways, but it never bodes well for a growing company.
- Digital risk. The flexibility and efficiency of cloud technologies allow middle-market companies to scale quickly, but this opportunity comes with its own risks. Data breaches, phishing attacks, and ransomware attacks all represent digital risks companies must address.
- Financial risks. Growing businesses often find their funds stretched to the limit. Income may not be an issue, but cash flow often is. Addressing these risks is key to avoiding sudden insolvency.
As the business grows, your attention to risk and detail matters. To ensure you have the coverage you need, reach out to Odell Studner today!
