Risk Management For Cannabis Companies
The cannabis industry is one of the most highly regulated industries in the world and the potential for catastrophic pitfalls and significant business interruption seemingly resides around every corner. By developing a comprehensive risk management program that minimizes risk and creates a plan of action when problems do occur, you’ll be one of the successful businesses that won’t be derailed for lack of preparation or planning.
WHAT IS RISK MANAGEMENT?
Although most people have heard the phrase risk management, many have no idea what it means. Just as it sounds, risk management involves assessing possible risks and managing those risks to minimize long-term problems. You may not realize it, but most of your day is spent managing some type of risk.
When you get dressed in the morning, you choose clothes that are best suited for the weather to minimize the risk of cold or rain throughout your day. When you brush your teeth to prevent cavities and tooth decay, you are managing the risk of future dental problems. And when you get in the car and buckle up your seat belt, you are managing the risk of possible injury in the event of a car crash.
RISK MANAGEMENT PLANS FOR YOUR CANNABIS COMPANY
The same general principles apply to your cannabis company. What are the risks associated with your business – if you are a cultivator, some of your concerns include maintaining stable environmental conditions for the grow area and preventing pest infestation that could destroy your crop. To minimize these risks, backup generators and alternative water sources are some of the measures you can put in place if there’s a problem with your primary systems. To prevent pest infestation, you’ve likely developed a company-wide protocol to minimize the chance of infestation, identify issues at the earliest stage and develop an action plan if things do go wrong.
For edibles manufacturers, do you know if the source for your product is fully tested and state compliant? What food safety and employee training requirements apply to your business? What do you need to do in the event of a product recall? These are just a few examples and what this all means is that risk management is critical for every aspect of your business operations.
Who are you hiring and is it compliant with state employment laws, what employee training is required under your state license, how do you fire or terminate an employee without exposing the company to a lawsuit? What about your contracts, are they professionally prepared by someone with cannabis industry and business experience or did you grab a template online and hope to do it yourself?
For tax and legal issues, are your accounting and compliance software programs up-to-date and is there a point person for the company who continually monitors legal and regulatory changes that may impact your company? What about insurance coverage? Have you evaluated all possible types of coverage from business interruption to fire and liability and do you understand what types of claims and incidents are excluded under your policy.?
As you can see, we’ve just scratched the surface on possible risk management scenarios for your business but there’s a lot more to cover. KOLA PARTNERS can help your marijuana business develop a thorough risk management program that is specifically tailored for your company. As part of our services, KOLA will identify risks associated with hiring and employment, highlight contract issues with possible exposure, create best practices and SOP’s, develop employee training programs and institute action plans to prevent or minimize disruption in the event of problems.