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Risk Avoidance for Small Business Owners

Risk AvoidanceRisk Avoidance
min read
August 21, 2023

How risky is your business? The answer to this question can have a big impact on your insurance premiums. If your business takes needless risks, your insurance premiums can skyrocket. 

When you try to avoid risks, you proactively prevent claims from being filed against you and your business. And when you have fewer claims filed, you help your insurance premiums go down and make your company easier to insure.  

That’s what risk avoidance is all about. It’s recognizing that there are steps you can take to avoid getting sued or filing claims, and then doing those things. 

What Exactly is Risk Avoidance?

Risk avoidance is the practice of eliminating or minimizing potential risks to your business. Risks include things like employee injuries, theft, cybercrimes and more.

You can avoid risks in many ways, like:

You’ll never get rid of all the risks. But making it a habit to avoid risks as much as possible helps reduce the chances of things going wrong.

Top Small Business Risks and How to Avoid Them

To help you better understand this risk mitigation strategy, here are some common risks that business owners might choose to avoid.

Employee Injuries

As a business owner, your employees are your most valuable asset. You want to avoid unnecessary risks that could lead to one of your workers getting hurt. 

Here are a few things you can do to keep your employees safe: 

By making it a point to focus on safety, you’re helping to reduce the chances of someone getting hurt. An accident could still happen. But if it does, it shouldn’t be because of unsafe practices you allowed to go on. 


Your insurance is there to protect you if someone breaks in and steals something from your company. But if something is stolen, you don’t want it to be because you left the door unlocked. 

The following steps can help you avoid theft: 

You’ll also want to think about your specific business. Look at where you’re vulnerable for theft and take steps to secure your assets. 

Hurt Customers 

An injured customer is one of the most common insurance claims. To help keep your customers safe, here are some risk avoidance strategies to try: 

It’s important that you also take time to develop protocols in case someone does get injured in your business. Does your entire staff know what to do if someone falls? If they don’t, train them.


Do you collect customer names and email addresses? Whenever you store private data, you’re responsible for keeping it safe. With the rise in cybercrimes and identity theft, part of your job is protecting your employees and customers from hackers. 

Here’s what you can do to reduce your risks in this area: 

Additionally, have high standards for any company you partner with. Make sure they aren’t your weakest link.

Every company has its own unique set of business risks that it needs to avoid. But by thinking strategically and using common sense, you can protect your business and team from potential harm.

Benefits of Risk Avoidance

Opting to avoid risk can be beneficial to your company. Here are a few reasons why:

1. Keeps Insurance Rates Low

One of the main benefits of avoiding risks is that it helps you keep your insurance rates as low as possible. When you can show an insurer that you’ve done everything in your power to minimize your risk exposures, you’re more likely to qualify for lower premiums. That’s because insurers feel they’re less likely to make payouts for you.


Minimizing your risks generally also leads to fewer claims. The fewer claims your business has on record, the more insurers see you as being a lower risk to insure. This also helps get you the best rates.  

2. Protects Employees

Employees are one of your company’s biggest assets. By implementing a risk avoidance strategy, you can help protect them from potential harm.

3. Helps You Avoid Costly Accidents and Lawsuits

The cost of an accident or lawsuit can be devastating to a small business. And while business insurance helps minimize your financial risk, having claims filed against you can cause your insurance premiums to skyrocket. It can also harm your reputation as a business owner.


Having insurance is important. But all the insurance in the world won’t help if you run your business carelessly. That’s why your goal should be to prevent getting sued in the first place. Avoiding risks can help you do that.  

Alternatives to Risk Avoidance

Risk avoidance is one type of risk mitigation strategy. But, it’s not the only one. It’s also not the best choice in some situations. Why? Because if you avoid all risks, you might be limiting your business’ potential. 

For example, if you avoid building an email list because you don’t want to worry about keeping that information secure, you’re missing out on an opportunity to connect with your customers. Or if you decide not to offer mobile services because you don’t want your employees to accidentally cause damage in someone’s house, you’re losing a profitable income stream.

Too much fear of risk can hold you back. That’s why your risk management plan can include several different strategies. Here are four others to consider in addition to risk avoidance:

1. Risk Transfer 

When you transfer risk, you pass it along to someone else. For a business, this is commonly done by purchasing the right types of insurance. That way, if something happens or you get sued, your insurance policy offers protection. This transfers your financial risk to the insurance company and can protect your organization’s assets. 


As a business owner, you make sure you have the right insurance coverage. You may need multiple policies to ensure you’re fully protected. Some common ones include: 

If you have questions about what insurance you need, speak to a broker who specializes in business insurance. 

2. Risk Reduction 

Part of your risk management strategy should include risk reduction, a.k.a. taking steps to minimize risks. 

The first step in this process is identifying the risks that could come your way. You can do that through a risk assessment or by auditing your company to see what risks you’ve dealt with in the past. 

Once you’ve identified the risks for your business, you can come up with ways to lower the likelihood they’ll happen. 

For instance, to minimize cybersecurity risks, you’d want to ensure your information security systems are up to date. You’d also want to train your employees on these systems so everyone knows how to securely handle customer information. 

Those tasks help minimize the risk of hacking. There are other steps you can take for other particular risks. For instance, you can: 

Make identifying risks a regular part of your weekly or monthly meetings with your team—you can even make it a daily practice if you think your small business faces a lot of risk. That way you can come up with strategies as risks arise, helping to prevent them from occurring. 

3. Risk Acceptance

When you accept risk, you’re acknowledging that it’s a part of doing business. You can’t avoid every problem that comes along, so you must be prepared to deal with the consequences if something goes wrong. 

The key is learning which risks you need to accept, and which ones you can avoid, transfer, or reduce. A risk management process can help you decide which path to take for every risk you come across. 

Avoid the Right Risks to Lower Your Premiums and Grow Your Business

Running a business is risky. But, you don’t have to stand by and watch helplessly as your employees get hurt or your company gets robbed. You can proactively identify potential risks and take care of them. 

The more risks you can avoid, the less likely you are to get sued. Insurance companies recognize this so by using a risk avoidance strategy, you can help reduce your insurance premiums. Often the longer you go without a claim, the lower your rates are going to be.


Plus, your employees and customers stay safe and you pay less. That’s a win-win!

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