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The Unseen Importance of Risk Management in Small Businesses

Pierre Pinkerton

This morning on my run, I couldn't help but think about Hurricane Milton and the people of Tampa. It feels like just yesterday that Hurricane Helene swept through, and now Milton is making its mark. The residents of Florida just can't seem to catch a break. Here in Tennessee, we're fortunate to have avoided significant damage, though some in our state weren't as lucky. My heart goes out to those affected, both here and to our fellow Americans in Florida.



As I thought and prayed for these communities, the economic setbacks caused by Hurricane Milton weighed heavily on my mind. The commercial interests lost due to Hurricane Helene—not only in Florida but perhaps even more significantly in North Carolina—are substantial. Often, when we start and operate our small businesses, we don't give enough thought to risk management or consider worst-case scenarios from an operational perspective.


Too frequently, we assume the market and economic environment will remain constant, free of major disruptions. We seldom contemplate the events that could negatively impact our operations or, in some cases, threaten the very survival of our businesses. It's human nature to focus on growth and opportunity, but neglecting potential risks can be a costly oversight.



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**Reflections from the Classroom**


For about five years, I facilitated a Business 101 class where I taught prospective and early-stage small business owners about the major functional areas they'd need to navigate within the first three years. We covered everything from financial management to marketing strategies. Yet, outside of being just a line item in the profit and loss report during our financial management sessions, we rarely delved deep into the importance and basics of business insurance or risk management.


Looking back, I realize this was a missed opportunity. Risk management isn't just another topic to check off a list; it's a critical component of sustainable business operations. After working with small business owners for close to 20 years now, I've learned—and firmly believe—in the necessity of implementing a solid risk management strategy as soon as possible.

Operating a small business is choked full of risks
Make sure you have a risk management plan in place to help protect you and your small business from the unexpected.

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**The Necessity of a Solid Risk Management Strategy**


I'm not going to dive into the nitty-gritty details of specific insurance types and coverages—that's best left to the professionals. But I will say this: as a small business owner, you'd be quite unwise not to have a relationship with a competent commercial insurance agent or broker. They can guide you through the complexities and help tailor a plan that fits your unique needs.


Often, the excuse I hear most from small business owners revolves around the premium costs incurred to retain coverage. This might have been a significant barrier 20 or 30 years ago, but today, there are numerous affordable options available, tailored to the scale and scope of your operations. The market has evolved, and so should our approach to risk management.


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**Reframing Insurance from Cost to Investment**


Whether it's providing coverage for yourself—like short or long-term disability, life insurance, or key person insurance—your employees with workers' compensation, general liability, health insurance, and workplace safety measures, or safeguarding your business assets through property insurance, umbrella policies, auto coverage, business interruption, and IT data recovery plans, the spectrum of protection is broad.


You might also need to consider coverage for your customers, such as malpractice, negligence, surety bonds, or privacy information protection. The key takeaway here is that you, as a small business owner, need to shift your perspective on business insurance. It's not merely a cost; it's an investment in the survival and longevity of your business.


It's not to say that you can prevent disasters from occurring—none of us have that power. But you can certainly minimize your downside risk to a level that gives you and your small business a fighting chance to recover, rebuild, and live to fight another day.




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**Conclusion: Preparing for the Unpredictable**


In the wake of recent natural disasters, it's become increasingly clear that we must prepare for the unpredictable. Risk management shouldn't be an afterthought; it should be an integral part of your business planning process. By proactively establishing a solid risk management strategy, you're not just protecting your assets—you're safeguarding your dreams, your livelihood, and the people who rely on your business.


So, take a moment to assess your current risk management practices. Reach out to a trusted commercial insurance agent or broker. Have those crucial conversations now, so you're not caught off guard later. Your future self—and your business—will thank you.


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