Small and medium-sized businesses (SMBs) face different types of internal risks (weaknesses) and external risks (threats). When these are identified, it’s easier for businesses to pinpoint ways they can mitigate them and ensure business continuity. All it takes is one event to wipe out all your hard work, but if you proactively understand your risks, you can better protect yourself from the negative impacts they cause.
What are Internal Risks?
Human risks contribute to many of the primary internal threats SMBs face. Here are some common internal risks and how they could potentially impact your business.
- Fraud. No one wants to believe their employees are unscrupulous, but unfortunately, fraud occurring from within is a very real problem many SMBs face.
- Errors. Humans make mistakes—after all, they’re human—but this can be disastrous for an SMB; for example, if a major deletion takes place or a laptop is lost.
- Illness/death. SMBs typically don’t have a lot of employees to being with. If each of them are not cross-trained, in the event of an illness or death there won't be anyone to fill the gap and a business could be severely disrupted.
- Unhappy employees. Employees suffering low morale are at risk of committing fraud, being lazy, or not putting in the effort necessary to keep operations flowing smoothly. They may also be more likely to ignore warning signs of a potential breach.
- Equipment and technology. Older equipment runs sluggishly, requires more maintenance, or can be easily hacked, shutting down operations and resulting in the loss of customer sales, or damaging a brand’s reputation.
These weaknesses are not a comprehensive list but should illustrate how just one internal risk incident can significantly impact an SMB.
What are External Risks?
External risks are threats that come from outside the organization and can have a direct impact on its ability to operate or achieve its goals. Here are some common external risks and how they could potentially harm your business.
- Business interruption. Any disruption of business, whether due to technology, power outages, natural disasters, pandemics, or other events could lead to serious downtime, which many SMBs can’t afford to absorb.
- Cyber incidents. SMBs are increasingly relying on technology and data, which means if a hacker damages, shuts down, or otherwise compromises a business’s systems, this could come at a high cost.
- Natural disasters. Along with causing disruption, natural disasters, such as hurricanes, tornadoes, floods, or wildfires, could also destroy SMBs.
- Material shortages. It’s always been known that material shortages cause problems for businesses, but 2020 really highlighted how disruptions of supply chains can really be problematic.
- Competitors. SMBs who are in competitive markets need to always be thinking ahead since their direct competitors are almost certainly doing the same.
Again, not a comprehensive list, but to highlight how external factors can negatively affect SMBs. Today’s SMBs face external threats that might be beyond their control, but mitigation strategies can minimize or eliminate potential damage caused by these threats.
How a Risk Management Framework Can Help
Internal risks are a little easier to control, although they aren’t always entirely controllable. External risks are more difficult to regulate since they originate outside of the organization. To combat both internal and external risks, SMBs that opt to utilize a risk management framework (RMF) often find this goes a long way towards helping to mitigate the risks they face.