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No one likes to dwell on worst-case scenarios, but risks are a constant when running a business. From fraud and cash flow challenges to supply chain surprises and market shifts, risks can show up in all kinds of ways.
The good news? With some effective strategies and tools, you can manage these challenges before they turn into full-blown problems. Let’s take a closer look at the types of business risks you may come across and how to manage them proactively.
What are business risks and why do they matter?
Business risks are events or situations that could disrupt your operations, impact your bottom line or hurt your reputation. These range from everyday challenges like supply chain delays, to more serious ones like fraud or compliance issues.
While you can’t avoid all risks, many can be managed or prevented with the right approach. Proactively addressing risks:
- safeguards your finances by preventing payment disruptions or fraud
- builds customer trust through secure and reliable processes
- ensures business continuity by reducing downtime
Knowing the types of risks your business might face gives you the power to prepare and protect yourself, and create a stronger foundation for your business to adapt and grow.
The main types of business risks
Business risks can take many forms, but here are the key categories to be aware of:
Financial risks
Financial risks are among the most common obstacles that businesses deal with. These include things like unpaid invoices, unexpected costs and fluctuating cash flow, which can make it harder to stay on top of expenses or pay suppliers on time. Chargebacks can also impact your cash flow and create extra challenges.
Operational risks
These risks affect your ability to keep your business running smoothly. Delays from suppliers, equipment malfunctions or staff shortages can disrupt operations and impact customer satisfaction.
Reputational risks
Issues like data breaches, negative reviews or poorly handled disputes can quickly affect how customers perceive your business. Since trust takes time to build, protecting your reputation is crucial.
Compliance risks
Every business operates within a set of rules, whether it’s tax laws, employee safety regulations or payment security standards. Non-compliance could lead to fines, legal trouble or a pause in operations.
Fraud risks
Fraud is one of the most serious and growing risks for businesses today, especially those handling digital payments. From online scams to stolen card details, fraud can not only impact your revenue but also damage your reputation. In the 2024 financial year, card-related fraud in Australia jumped 28.2%, reaching $868 million in total. Preventing and managing fraud isn’t just about protecting your revenue – it’s also about protecting your customers and boosting their trust in your business.
6 ways to manage business risks
It’s not all doom and gloom – managing risks early on can save you a lot of hassle and set your business up for success. By tackling potential challenges head-on, you’ll build a business that’s more equipped to handle change and stay resilient. Here are six strategies to get you started:
1. Identify potential weaknesses
Take a closer look at your business processes to find any weak spots. For example, are there patterns in chargebacks or delays from certain suppliers or customers? Or gaps in your payment processes that could leave you open to risk? Using a secure payment system like Square, for example, not only provides advanced security but also helps manage chargeback disputes for free, saving you both time and stress.
2. Set clear terms and policies
A simple, easy-to-understand refund policy not only helps customers feel confident in their purchases but also protects you from fraud and chargeback risks. By setting expectations upfront, you reduce the chances of misunderstandings or disputes down the line.
If you invoice customers, having clear payment terms can help reduce payment delays and misunderstandings. Square Invoices even lets you automate payment reminders and recurring billing to stay on top of outstanding payments and keep your finances on track.
3. Invest in staff training and engagement
Your team plays a key role in minimising risks. Offer staff training to help them spot issues, handle disputes professionally and follow best practices. Regular training keeps them sharp and ready to respond to any challenges that arise. A happy, engaged and motivated team also boosts productivity, reduces turnover and helps prevent disruptions to your business.
4. Respond to reviews
Responding to both positive and negative feedback shows you care about your customers’ experiences and value their input. Plus, it builds trust and loyalty, encourages repeat business and helps improve your reputation.
5. Stay up to date
Complying with relevant laws keeps your business legally sound and shows you’re serious about professionalism. You can use the Australian Business Licence and Information Services (ABLIS) free tool to check which regulations apply to your business. Signing up for industry newsletters, joining relevant groups or subscribing to updates from regulatory bodies can also help keep you in the loop.
At the same time, risks continue to evolve, so it’s important to stay updated on new threats and trends. Regularly review and refine your risk management strategies to keep pace with these changes.
6. Leverage technology
Technology is your ally in managing risks. Using tools like Square Dashboard lets you track trends in chargebacks and payment delays, while Square Risk Manager offers advanced fraud detection and prevention capabilities. Having a clear view of your financial transactions in one place can help you spot red flags faster and manage risks more effectively.
How to manage online fraud with Square Risk Manager
Square Risk Manager is a powerful, easy-to-use fraud prevention tool that helps protect your business from online fraud and suspicious payments. It integrates seamlessly with Square’s payments ecosystem to minimise risk and give you peace of mind.
Here’s how Square Risk Manager can help:
- Fraud detection: Every transaction is checked in real time using advanced machine learning. This identifies unusual patterns and flags suspicious activity, allowing you to take action quickly.
- Custom rules and alerts: You can set rules and alerts to fit your needs. For example, you might flag transactions where the billing and shipping addresses don’t match, or automatically decline payments from high-risk locations.
- 3D Secure (3DS) technology: This feature adds an extra verification step, such as a one-time passcode or biometric scan, for transactions flagged as risky. If the payment is disputed as fraud, the card-issuing bank takes responsibility, not you. Just ask AMR Hair & Beauty – they saved $100,000 a month in fraud losses thanks to this tech.
- Block lists: If you spot a trend in fraudulent activity, you can block specific cards, email addresses or IPs to stop repeat offenders from targeting your business.
- Analytics and insights: Visual dashboards make it easy to track fraud trends, review flagged transactions and make informed decisions.
Square Risk Manager doesn’t just prevent fraud – it gives you control over your business security. Even better, it’s free to use with Square’s payment processing tools. No matter your business size or type, Square Risk Manager adapts to your needs and works seamlessly with other Square tools to support your business. You can get started with this step-by-step guide to activate Square Risk Manager.
Simplifying risk management is easier with the right systems and strategies. Proactive protection helps you safeguard your operations, your income and your customers. Learn more about how you can stay protected with Square Risk Manager.
