Starting and running a business comes with risk—financial, legal, operational, and reputational. Risk management is the practice of identifying, assessing, and minimizing these risks before they become costly problems.

Here’s how entrepreneurs can build an effective risk management strategy:

1. Identify risks
Make a list of potential threats, such as:

• Economic downturns
• Legal liability
• Cybersecurity breaches
• Equipment failure
• Supply chain disruptions
• Reputation damage (e.g., bad reviews, PR issues)

2. Assess impact and likelihood
Which risks are most likely to occur, and which would be most damaging? Prioritize based on severity.

3. Create contingency plans
Develop backup plans. What will you do if sales drop, a supplier disappears, or your website is hacked?

4. Reduce risk

• Use contracts and insurance
• Keep clear financial records
• Secure your IT systems
• Train staff to avoid compliance or safety errors

5. Transfer risk
Insurance policies, NDAs, and liability waivers shift risk away from you to third parties or insurers.

6. Monitor regularly
Review risks quarterly or during major changes (e.g., new product, hiring expansion).

The goal isn’t to eliminate all risk—that’s impossible—but to understand and manage it proactively so that you can grow with confidence, not fear.