Risk management in the cannabis industry can seem overwhelming when looked at as a whole. Not only is the industry new to the regulated marketplace, meaning there aren’t decades of reliable data to build assumptions on, but cannabis remains a completely federally illegal enterprise. Plus constantly changing rules and regulatory priorities and the quick advancement of technology, all these factors play their roles in affecting cannabis-related businesses.

But that doesn’t mean risk management isn’t possible. Risk management means identifying and evaluating the risks to a business, prioritizing risks, and developing strategies to minimize and monitor risk. Not all risk management tools are available to cannabis-related businesses (such as financial services or trademarks), which means the leadership of these organizations must seek other ways to manage their risk.

The first step is to identify where the risks are for your business. Cannabis businesses have, in the current state of affairs, a potentially large amount of risk to manage. From mistakes up and down the supply chain to natural disasters, there are many “loss causing events” that could happen, depending on the kind of cannabis license in operation.

Evaluate all the potential loss-causing events that you identify (this may require input from your broader team to cover all departments):

  • How often could the loss-causing event happen?
  • How big of a loss would it be?
  • How would we manage this loss?
  • How could we mitigate or prevent this loss?
  • How will your owners/employees/equipment/property be impacted by the loss?

Once the baseline losses are evaluated, you can’t just stop there. Take that data and use it to create a risk management team and toolkit that will prepare you for the worst-case scenarios.

  1. Select the right insurance plans
    Now that you have a better understanding of where loss could occur, you have a better understanding of the kind of insurance coverage you’ll need. There are several types of cannabis business insurance; talk to an agent about how policies can be tailored to meet your needs. You’ll also need to be sure you have all the insurance prerequisites for your state license.
  2. Get a Safety Plans
    Humans are the most important asset to a company, and making the effort to have robust safety plans keeping them safe while onsite can save you a lot of headaches and loss claims. Create a safety plan that details emergency plans, injury and illness responses, and outlines other pertinent safety information that are specific to your facility and niche. Even simple changes can have huge impacts on the wellbeing of staff. These plans should be written and/or reviewed by a professional who understands the safety needs of the cannabis industry.
  3. Find a CPA
    To keep you in the good graces of the IRS, a trustworthy and experienced CPA is hard to beat. Ideally, the CPA you choose should understand the cannabis industry and be up-to-date on the ever-changing tax code, especially when it comes to cannabis-related business filings. A good CPA will have strategies that can help you reduce your tax burden legally.
  4. Find a Lawyer
    Though you may not have any legal pursuits now, having a lawyer to call is essential when you need to defend against liability and/or claims against your business. Don’t make the mistake of waiting until it’s too late to call a lawyer. Find someone you can trust and have their number saved in your business’s contact list.