What’s a high-risk business and how should it be managed effectively?

There are different reasons why a business might be labeled “high risk.” These include two realities: it operates within a high-risk industry and there’s a real risk of financial failure. Either of these two conditions might apply and affect the firm’s ability to secure financing, insurance, as well as merchant accounts.

Visa and MasterCard, for example, have issued their own guidance around what could be considered high risk. High risk defines which business types or industries should be scrutinized, with the tendency to focus on higher brand or reputation risk (such as those engaged in adult entertainment) and high financial ones (such as the travel industry and airlines).

Some official high-risk industries include tobacco, drugs and pharmaceuticals, skill games, construction, mining, agriculture, and gambling. Banks also consider companies with bad credit histories high-risk ones. As a consequence of the growth of e-commerce and constantly evolving business models, the list of these high-risk industries and businesses is naturally expanding.

Business leaders who manage or are taking over a high-risk entity need to apply strong and effective leadership to help the company survive, thrive, and overcome reputational risks brought about by their existing difficulties. Compliance is one important matter – ensure that your company is compliant with laws on the local, state, and federal levels, as well as with regulations, such as meeting the standards of the Occupational Safety & Health Administration (OSHA).

It’s just as crucial to build a skilled, sturdy talent pool within the organization. These human assets should have the hard and soft skills to make things work for the company and see it through to the future. Leaders are tasked to meet the ongoing challenge of facing public and government scrutiny and come out of it bigger and better every time.

Michael Saltzstein is a visionary leader of global risk services, financial structures, multi-line claims, and strategic planning and enterprise initiatives. He is effective in delivering multimillion-dollar expense reductions and bottom-line improvement, maximizing coverage, and minimizing cost. Read more on this page.