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Poor Operational Processes Create Legal and Business Risks

Written by John Rabil | Jan 21, 2021 9:57:00 PM

Businesses inherently face risks from their inception, it’s part of the deal, opening a business is going to mean incurring some risks. That said, all risks aren’t created equal, businesses can proactively identify potential risks, address them before they become issues, and build processes to help the company both operate more effectively, efficiently and minimize risks. The flip side of that is also true, improper, poorly managed, or the complete absence of processes can expose a company to significant legal and business risks. 

Businesses should carefully consider where they can create processes and actively manage them in order to both increase the potential for success and limit potential liability and issues. That doesn't mean it has to be an overly complicated process where many hours are spent putting something together (although depending on the area of business and importance of the process that may be the case), figure out what works, what other people involved in the business can handle and how to regularly update business processes in order to miss as little as possible. 

Here are some operational process issues businesses face and how they can become bigger issues if not addressed:

Undefined Business Processes

Some numbers suggest that, on average, about 50% of all organizational problems are caused by undefined business processes. Work done by businesses, especially anything that is repeated over and over, should be clearly defined through business systems and processes. However, the vast majority of businesses fail to put in place even the most routine processes - like client onboarding - which often means that individual workers are doing things any way they see fit. This opens up the potential for significant confusion, missed dates, deadlines, and opportunities. If everyone isn’t on the same page and operating in a cohesive system there is the potential to mess up orders, services, or products, which may lead to a breach of contract leaving a business at best out of money and at worst looking at a potential lawsuit. 

Operational Silos

Operational silos continue to be more of a problem as technology continues to advance. Businesses are structured into departments, which often serve as independent operating verticals - think Human Resources, Sales, Marketing and Customer Service - all operating in their own world, with their own goals and own targets that may not all be aligned together to reach company-wide goals. The issue that often comes up here is each of these different departments uses unique operating procedures and in many cases even different technology to manage their operations. Communication works differently department to department and information is shared differently. All of this can lead to significant confusion and delays when considering that most of the separate departments all play a role at some point in the customer or client journey. Not having the organization synced on communication, information storage and accessibility, and goals can present a serious business risk in terms of meeting client needs and scaling up the business.  

Poor Employee Management

Employees are one of the most important assets a business has. They are also one of the biggest potential risks a business has. Not properly managing employees, from the job posting all the way through separation (for whatever reason) presents a host of issues that businesses could make more efficient and effective by setting up repeatable processes. Job posting, applications, and interviews are a legal land mine if not handled properly and a significant number of companies have no system in place to ensure laws and regulations are being complied with. What questions can you ask and not ask on a job application and during the interview process? What are a business’s obligations when running a background check on potential employees? What’s the process for terminating an employee for cause? What constitutes cause?  Employee lawsuits against businesses are on the rise. This isn’t an area to take lightly. 

Data Storage

What companies are doing with data collected online is becoming more and more of an issue. Countries and individual states are adopting their own rules and regulations that mandate compliance. Businesses run in a global marketplace these days, no matter the size of a company so the reach of these laws and regulations is ever-expanding. It is becoming increasingly important for businesses to understand how they collect data, how they store it, and how they share it. Depending on how a company is set up and operates, handling data could be a major operational need. Not understanding and systemizing how data is being handled can expose a business to breaches, lawsuits, fines and potentially lead to closing down for good. 

It doesn't have to be overly difficult to build in business processes. At some point, they will become a necessity to take a business to the next level. It’s easier to put them in place sooner rather than later, it makes companies more profitable, effective and limits potential liability. 

Are you a Virginia based business with questions about setting up business processes to increase efficiency and limit potential risks and liability? Contact us for a free consultation.