The Most Common Business Risks

The Most Common Business Risks
business risks-common

If you plan to start your own business, you have to be prepared for the risks you may face in the process. Prevention is the best method to protect your business. It is always best to be prepared because your initial plans may need to be changed due to unforeseen circumstances.

This article will discuss some factors beyond someone’s control that may affect the company’s original plans. However, identifying the risks you may encounter and making some proactive steps will help you minimize the level of exposure to the risks. Let’s discuss some of the most frequent risks a business venture may face.

Contractual Risk

When contracts are drafted, it is optimum to seek advice from a business law attorney. There is always the risk of not documenting properly the parties’ rights and obligations involved in an agreement. Running a business involves various activities, from hiring employees to offering services or goods to customers. All these activities create risks for the company. Regardless of breakdowns in the contracts, contractual obligations are not always followed and can lead to serious disputes.

Business attorneys can help you create a system to review all agreements before signing easily. This can be a really useful tool that will save you time and money.

Structural Risk

The legal structure of the company has to be carefully and properly written down. Also, there must be clarity in identifying ownership and management matters. How the business is managed, the personal liability the owners are exposed to, and how the ownership interests are transferred must be clearly stated in the contract. Otherwise, the risk of disputes and lawsuits against the company will be high. For instance, if you do not establish a separate legal entity, you create a structural risk. Legal advice from a business law attorney can assist in avoiding such mistakes and diminish the structural risk.

Operational Risk

Day to day operations must follow the plans and procedures and be monitored to avoid risk. The risk, in this case, exists on multiple levels. For starters, operational risk can be intensified over time. If a business fails to perform everyday tasks like keeping accounting books and records updated, it will be at high risk of failing in general. To solve operational risks, the company will need to spend a lot of money and time. Other procedures that have to be planned and implemented carefully are protecting the intellectual property of the business. These operational risks that could negatively impact the company can be easily avoided if you consult a business law attorney.

Compliance and Regulatory Risk

Compliance and regulatory risk have to be managed effectively to avoid severe civil penalties. The company has to follow the procedures to ensure that it complies with all the applicable laws, rules, and regulations. A recent and significant example is the General Data Protection Regulation that businesses worldwide will face severe fines if not followed properly.


The compliance risks differ depending on many factors, like industry, time, or location. When companies are subject to government laws, rules, or regulations, managing the business to be compliant is extremely important. The risk of the potential violation of rules and regulations has to be mitigated. Another example of negative consequences is when a business fails to pay taxes on time or follow the right procedures.


The term “regulatory risk” is used to describe the formulation of the company’s rules. An example could be the law that increases the company’s minimum salary to its employees. If the company does not comply with this law, there is a high risk of facing severe civil fines.

Litigation Risk

We live in a litigious society. Consequently, the risk of litigation is of high importance. Business owners should try and eliminate litigation risk that could arise with almost all of the above types of risk discussed. A litigation process is time and money consuming, but it can also harm the business’s reputation. Create your business plan and structure, focusing on the details and discussing with professionals with knowledge and business law experience.

Consult A Business Law Attorney in Connecticut

If you are in the process of starting your business, our team in Aeton Law Partners can help you reduce the risks and achieve your business goals. Call us today for a free consultation meeting to discuss how we can identify your company’s plans vulnerabilities and minimize the risks.

Share on facebook
Share on google
Share on twitter
Share on linkedin
Share on email
Why Your Connecticut Business Needs an Independent Contractor Agreement
Own a Connecticut Business? Don’t Get Hit With a Religious Discrimination Lawsuit
Protecting Your Connecticut Business From Identity Theft
Must-Have Items For Your Connecticut Business Contract

Please do not include any confidential or sensitive information in this form. This form sends information by non-encrypted e-mail which is not secure.

Submitting this form does not create an attorney-client relationship.