Risk Management Strategies for Scaling Businesses

Scaling businesses must take calculated risks to remain on the cutting edge, whether managing a medical practice or launching a new product. However, managing risk isn’t what it used to be in the healthcare industry. Investing has changed, AI drives drug development, and data protection is an entirely new ball game. Leaders must balance risk and opportunities with finesse. In this post, we discuss risk management strategies for scaling businesses and how creative solutions support momentum.

Assign Purpose to Capital

Many early-stage companies, especially those backed by venture capital (VC), have concrete reasons for raising funds in a Series A or B round. Many are developing new products or hiring more employees to support growth. Others are formalizing their customer acquisition strategies or purchasing additional office real estate. Often, reasons for needing capital are evident: expansion and growth.

However, sometimes the purpose of acquired capital becomes blurry. Plans change, and company missions can tank, whether due to a global pandemic or an overlooked governance issue. Unfortunately, misguided money is often equivalent to wasted cash — a hole in the company’s pocket. This scenario is where strategic risk management steps in.

In today’s challenging economy, shaky as it is, company leaders must assign a clear purpose for any capital they acquire. Setting milestones is an excellent way to checkpoint capital. Is the money doing its assigned job? Have issues surfaced requiring funds to be used elsewhere? Is the company scaling or merely growing? They’re different. 

Monitor fundraising cash closely, and avoid using broad or vague statements about its purpose. Instead, be direct and precise. Stay the course without allowing new cash flow to pivot the company from its core mission. 

Keep Pace but Stay Cyber-Safe

Most people casually interchange the terms scaling and growing; however, there’s a distinct difference between the two, albeit both are positive. Growing is about increasing revenue at any expense, with little regard for the bottom line or profit margin. Conversely, scaling focuses on increasing top-line revenues while minimizing or maintaining costs. 

But why does this distinction matter? Keeping pace with digital science innovation and leveraging AI means companies must scale vs. grow. And this concept is vital to navigating the current cybersecurity landscape.

Cyberattacks hit record highs during the COVID-19 pandemic, practically begging leaders to practice more comprehensive cybersecurity. Data exfiltration and leakage became more prevalent than ransomware or phishing emails — just what the healthcare industry wants to hear. Furthermore, according to a recent IBM report, the cost of a data breach in the healthcare industry increased by 42% since 2020, averaging roughly $10 million per breach.

Keeping pace with tech innovation requires leaders to follow the nuanced saying, “Slow is smooth, smooth is fast.” In other words, scaling businesses can’t skip over vital best practices, such as conducting regular system backups, ongoing employee training, and compliant data protection. Risk management strategies must encompass our current cybersecurity landscape. Tailored cybersecurity is key in these regards, which brings us to the next point: customization.

Rely Heavily on Customization

It’s common for legacy insurers and even insurtechs specializing in startups to offer “out-of-the-box” insurance programs. Some of these startup insurance packages are quick and easy to purchase, requiring very little information to activate. However, not all of them provide adequate levels of protection, creating unwanted exposures.  

Fortunately, insurers watched intently as the healthcare industry got hammered over the past few years. In response, they’ve custom-built policies to protect scaling businesses in this industry better. Companies no longer have to settle for insurance plans that aren’t customized to specific exposures — no more wasted money on costly losses. But insurance is only one piece of the risk management pie.  

Digital Infrastructure

As discussed earlier, navigating the current cybersecurity landscape is a beast. Scaling businesses must consider customizing their IT infrastructure and cyber framework. Only a tailored approach will land companies safely on the other side of the cybersecurity gauntlet. 

Regulatory Compliance

Additionally, regulatory bodies often appear to be living and breathing entities, changing and adapting to shifting needs and landscapes. Think of how HIPAA is rapidly evolving, introducing new protection laws to keep up with the times. Compliance is critical; companies must develop tailored compliance check-ins according to their operations.  

Partnerships

Lastly, scaling businesses must establish ecosystems that make sense for them. Big names are attractive and alluring and might be the ticket to successful networking. But this approach only works if a company’s business partners align with its core aim, regardless of popularity. Leaders must focus on building partnerships customized to their big-picture goals. Strangely enough, customizing an ecosystem is a commonly overlooked risk management strategy. 

Use Insurance for More Than Mere Protection

We often think of insurance as a last resort, something reached for after a loss. In this case, insurance policies work as a shield or safety net, protecting companies from financial damage.

However, insurance is far more powerful than a mere shield. Having a defense is invaluable, especially during times of recovery. Yet, many important players — investors, financial institutions, business partners, etc. — consider insurance protection an asset. It legitimizes scaling businesses, per se. 

Companies are much more attractive to potential partners with ample insurance than without insurance. Healthcare leaders must learn to leverage this unique position to become stronger and more well-versed in the industry. Naturally, teaming with a commercial insurance broker specializing in healthcare makes this concept more doable, mainly because a broker can help companies achieve intelligent risk management strategies that their competitors have unwittingly overlooked.