Coming Prepared: 5 Financial Threats to Your Business

Even talented entrepreneurs and other business owners sometimes run into seemingly insoluble problems. A business that was running well and had a bright future can suddenly be facing financial dangers that threaten its continued existence. Being familiar with the five financial threats that most often pose risks to businesses will make it easier to avoid them.

  1. Fires and Natural Disasters

Many small companies have a majority of their assets tied up in a single location. That can put an entire business at risk if a fire should break out or a flood or earthquake hit the area.

All that it normally takes to neutralize such threats is to find insurance that will cover any associated losses. That should be seen not as a luxury, but as a basic requirement of doing business.

Business owners sometimes put off taking out insurance because of a belief that it will never be needed. Of all the financially relevant threats that can impact a business, events like fires and severe storms consistently rank among the most dangerous.

  1. Lawsuits

Incorporating as a limited liability company often seems like a great way to shield a business’s owner from being held legally responsible for its activities. A single lawsuit can existentially endanger a business that a person worked for years or longer to build.

As with fires and natural disasters, having the right types of insurance coverage will help defuse any such threat. Experts frequently advise business owners to assume they will be sued at some point no matter how diligent, honest, and service-oriented they might be.

Once again, it can seem as if such concerns should take a back seat to more pressing matters. When the legal papers do arrive, being protected against liability claims and judgments will always be welcome.

  1. Cyber-Crime

Internet-based criminals used to focus mostly on large companies with plenty of cash and other resources. Many have since realized that small businesses often make softer, juicier targets.

From scams that see bank accounts being emptied to schemes where important files are held for ransom, small businesses need to take cyber-crime seriously. A single attack can cost a hundred thousand dollars or more and even render a business unable to continue operating.

  1. Supply Chain Disruption

Many successful business owners put untold hours into developing strong relationships with reliable suppliers. Those partners, however trusted, inevitably have dependencies and arrangements of their own.

As a result, an entire supply chain can break at almost any moment even when everything seems to be in order. A brief supply chain disruption can cause a company to lose many clients who were expensive and time-consuming to obtain.

  1. Technology-Induced Obsolescence

No company today can afford to ignore business-relevant technologies for long. A single technological development of the wrong kind can render a business’s unique value proposition moot.

Businesses that strive to make the most of technology instead of keeping it at arm’s length are much less likely than others to succumb to such fates. Even in industries where technology has yet to make aggressive, pronounced inroads, staying abreast of the latest developments will help keep a business safe.

Eternal Vigilance is the Price of Success in Business

Being aware of how threats like these can impact a business will always make it easier to account for and avoid them. Any business owner who fails to pay attention to such dangers will be more likely to become a victim. That can leave an otherwise-vibrant business struggling to survive, so staying vigilant will always be the better bet.


Arnel Ariate is the webmaster of Money Soldiers.

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