Unforeseen happenings can be a major threat to the success of a value-added business. Sometimes you can anticipate these occurrences and take protective action. However, there are situations where we are blindsided by events.

Risk is usually defined as a potential loss that you can insure against. An example is the risk of business loss due to fire and the ability to purchase fire insurance.

A loss that cannot be insured against is usually referred to as uncertainty. For example, the possible loss of a market due to a change in consumer’s preference cannot be insured against. So other protective actions must be taken. A business strategy to diversify market product offerings may partially protect you against this type of uncertainty.

A strong equity position in your value-added business balance sheet can help protect you against both risk and uncertainty. The legal structure of the business can also provide protection.

For more information on this topic, see the links listed below of articles posted on related Web sites.

Managing Business Risk

• Production Risk Management – University of Florida Extension -- Some of the major sources of risk in agriculture are production and yield risks, market and price risks, business and financial risks, technology, casualty loss risk, legal risk and human resource risk.
  
• Risk Management Toolkit of Specialty Crop Producers – University of Minnesota Extension.
  
• Setting up a Risk Management System – Small Business Notes -- While it does not need to be formal, your overall risk management system needs to have contingency plans in place for whatever "surprises" might occur, and employees need to be trained in how to handle these "surprises."
  
• Risk Management -- Small Business Notes -- Risk is one of the most overlooked areas for new business startups.
  
• Risk Management Tools – Small Business Notes -- Besides the standard health, life and possibly disability insurance, you need to look at the types of liability and property insurance you may need.
  
• How to Manage Risk in Your Business – Small Business Notes -- Planning for the risks that will occur in your business is critical to your success.
  
• Risk Management Strategies – Small Business Notes -- Risk is one of the most overlooked areas in small businesses in spite of the fact that it is clear to most small business owners that operating any business involves risk.
  

Theft

• Preventing Burglary and Robbery Loss – BizMove.com -- Stores are prime targets for burglars and robbers. Seeking dark and easy-to-enter stores, burglars usually operate at night.

Limiting Liability

• Piecing the Veil of Limited Liability – CCH Business Owner’s Toolkit -- To avoid the day-to-day liability risks when enacting an asset production plan, a small business owner must pay close attention to recordkeeping and initial capitalization to steer clear of the doctrine of "piercing the veil" of limited liability.
• Limiting Liability for Contracts and Torts – CCH Business Owner’s Toolkit -- Explains the significant exceptions to the limited liability for owners of an LLC or a corporation, with respect to the business entity's debts.
  
• Using Multiple Business Entities – CCH Business Owner’s Tookit – Using holding and operating companies is an asset production planning strategy that helps to limit liability in your business structure.
  
• Withdrawing Funds from the Business – CCH Business Owner’s Toolkit -- Owners should strive to minimize the amount of vulnerable capital invested within the business form.
  
• How Growers Can Reduce Liability Risk – Direct Marketing and Tourism Handbook, University of Arizona – Basic business practices can be used to help reduce likelihood of liability suits being filed.

Crisis Planning

• Your Crisis Response Plan: The Ten Effective Elements – HBS Working Knowledge -- Shooter on site. Epidemic. Major power outage. Is your organization prepared to deal with crisis?
• Crisis Management - Small Business Notes -- You have written your business plan, obtained your funding and followed all the steps for operating a successful small business.
  
• The Key to Diverting Disaster: Preparation – HBS Working Knowledge -- A firm's failure to communicate effectively after an emergency strikes can be more destructive than the emergency itself. Here are six tips for creating an effective crisis communications plan.
  
• Three Steps for Crisis Prevention – HBS Working Knowledge -- Can you predict a business disaster?
  
• Planning for Surprises – HBS Working Knowledge -- A company doesn't need a crystal ball to see impending disasters. How to foresee and avoid predictable surprises.
  
• Avoiding PR Disasters – HBS Working Knowledge -- Leaders don't want to think about worst-case scenarios for their companies. But advance planning is the best way to prepare for the unexpected.