To be an entrepreneur is to accept a certain amount of risk. It comes with the territory. But smart business owners implement specific strategies to minimize their risk in any way they can. Here are some of the best-known business risk reduction methods:


Think like a farmer — diversify

Farming is a business, after all, and one of the riskiest to boot. But farmers have known for centuries that the best way to hedge one’s bet is to diversify their production. That means raising a variety of different crops. If the wheat market tanks, maybe a high soybean commodity price will make up the difference. Many farmers balance crops with raising livestock. If grain crops get flooded out or devastated by drought, shipping cattle to the market may pay the bills.


Many kinds of businesses can diversify their product lines and offer an array of different services. In short, don’t place all your eggs in one basket.



There are many different kinds of business insurance. The most common forms of commercial insurance are liability, property, and worker’s compensation. One can also purchase business interruption insurance, cyber liability, management liability, general liability, and property insurance. Get the widest coverage possible and focus on your biggest areas of vulnerability.


Limit Debt

One of the biggest necessary risks for any business is taking on debt and loans. Thus, it only makes sense to limit debt as much as possible. The less debt, the better the risk profile of your operation. A key aspect of this is managing the amount of monthly or quarterly payments.


Keep Thorough Documentation

The greater extent to which you document common business activities, such as operational costs, tax payments, lists of inventories, purchasing information, and more. If something goes wrong – such as a supplier overcharging you or employees stealing from you – it is exacting record-keeping that may save the day. Thorough record-keeping also helps you comb through your operation to find hidden problems that put you at risk for failure.


Don’t Scrimp on Cybersecurity

Recently, some of the biggest headlines have been ransomware attacks on major businesses, such as the Colonial Pipeline case. It ended up costing the company millions. It could have been prevented if they had spent extra time and money on shoring up the security of their computer systems.


Today, beefed-up cybersecurity may be the best risk reduction measure in business.