After nearly every significant company crisis, business proprietors lament, “If only I had done X.” Sometimes they knew they should have done these things, but they did not. On other occasions, there was an unanticipated disaster that could have been prevented if certain safeguards had been in place.
Between my own and those of my colleagues, I’ve witnessed a number of errors with severe repercussions for a company’s health. Here are four ways business executives can safeguard their organizations from life’s most unwelcome surprises.
Have Sufficient Coverage For Risk
Insurance is expensive, and you may only carry it because your clients require you to select a box indicating that you are covered. However, one thing about business insurance is certain: when you need to submit a claim, you are extremely grateful to have it.
This does not imply that more coverage is always preferable. The most essential factor is having adequate insurance to cover your weaknesses. Consider cyber insurance policies if, for instance, a single ransomware cyberattack could bring your business to its knees.
Or, if your product shipments are delayed by several months because another barge clogs the Suez Canal, you can mitigate your losses. This would include SRA 831(b) Admin that executes an 831(b) Plan. This is essentially a tax-deferred war chest for hazards that are not covered by conventional insurance. Some of these resources formerly catered primarily to large businesses, but new companies are emerging to provide comparable resources to small businesses and entrepreneurs.
Get It on Paper
A handshake conveys trust and can be an excellent beginning to a business relationship. Occasionally, however, a simple misunderstanding or difference in memory can cast doubt on the details of a handshake agreement. Therefore, even if you fear offending the other party, put all agreements in writing.
This applies twice as much to acquaintances and family. The decision to engage in commerce with a close acquaintance should not be made lightly. I don’t know how many times I’ve witnessed damaged relationships between coworkers because an agreement was not documented and was therefore misinterpreted by one or both parties. If your sibling is a vendor for your company, a written agreement can save future family dinners.
Construct and Maintain Beneficial Relationships
That does not mean you should avoid intimate business relationships. When unexpected catastrophes occur in the workplace, it is often necessary to seek assistance and counsel. You may require the guidance of a mentor or the assistance of a colleague. In times of adversity, these can be the lifelines that save or even save your company.
Obviously, in order to establish these relationships, you must also benefit others. Many times, I’ve strengthened relationships by consenting to speak at an event at the last minute when the originally scheduled speaker canceled. Being willing to come to another person’s aid fosters goodwill among contacts and colleagues. This can be a lifesaver when difficulty arises and you’re in need of assistance.
Maintain cash reserves
It is tempting to spend lavishly on expansion, perks, or thrilling new business ventures when business is thriving. Aside from the possibility of earning a little interest on a money market account, maintaining sizable cash balances may seem wasteful.
Sadly, when businesses have insufficient cash reserves, the unexpected can send them for a loop. The entire world learned this in 2020, when the pandemic struck. We needed sufficient cash reserves to pay our employees even if we lost all of our income.
Thankfully, it never came to that, but if sales had plummeted, having those financial reserves would have been crucial. Remember that PPP loans will not always be available to save you from a crisis.
As recent events have demonstrated, disaster can strike businesses when they least anticipate it. Some of these catastrophes may be self-inflicted. Whether you’re preparing for a recession, a severe weather event, or a supply chain snafu — or just attempting to avoid scoring your own goal — there are ways to mitigate the impact.
Establishing the appropriate safeguards beforehand can help your business endure whatever the world throws at it.