Risk-Mitigation Strategies to Help Businesses Thrive in 2024

The cannabis industry’s rapid expansion continues to present both opportunities and challenges. As the market matures, companies must adapt and strategize to thrive in an increasingly competitive and regulated environment.

The robust growth of the industry has led to market saturation, intensifying competition, and reduced investment, resulting in price declines and financial strain for many businesses.

To compound these challenges, operational costs are rising, reducing profitability. As risks escalate—from regulatory changes to catastrophic events, product recalls, and increased competition—a comprehensive risk-management strategy becomes vital for sustained profitability.

Although acceptance of the plant is becoming widespread, market oversaturation has driven down prices significantly. Retail sales are projected to soar to about $54 billion by 2027, but average retail price has dropped substantially—down 20 percent in the United States between 2021 and 2022, with some economists reporting fewer than a quarter of cannabis businesses were profitable in 2023.

Losses due to vandalism and theft can impact an organization’s profitability, and the looming threat of plant pathogens and extreme weather events can further jeopardize revenue streams. Droughts, floods, storms, and wildfires have affected yields for some growers, and 62 percent of respondents in HUB International’s 2024 Outlook Executive Survey cited natural hazards as a top risk to profitability. To counter these risks, enhancing operational efficiencies and adopting robust risk-management protocols is crucial.

The demand for a skilled workforce remains high in the sector, but finding and retaining qualified employees amidst declining profits can prove challenging. The industry is poised to generate as many as 100,000 new jobs by 2025, according to a recent Vangst report. Combined with the dwindling U.S. unemployment rate, significant challenges could arise in sourcing qualified personnel.

Respondents to HUB’s survey highlighted recruitment, retention, absenteeism, and employee well-being as pivotal concerns influencing the vitality of their workforce. Unfortunately, many prominent corporations have scaled back benefits to meet financial goals, and that can impede their ability to attract and retain top talent.

Investing in employee training and avenues for growth, personalized benefits, and competitive packages become key differentiators for companies aiming to recruit from the top tier. Employers in the sector should aim to provide quality employee experiences including bespoke benefits, diverse health plans, initiatives promoting financial wellness, and employer-sponsored retirement plans. Such benefits can elevate engagement levels among employees and enhance overall productivity.

Expanding operations or product lines presents new opportunities—and exposures—for stakeholders. Many companies aim to diversify by developing new products or entering new markets, but such expansions come with inherent risks, especially concerning regulatory compliance, product safety, and legislative challenges across different regions. In fact, 66 percent of companies surveyed cited governmental regulatory and legislative initiatives as the biggest threat to profitability this year.

To mitigate potential liabilities and ensure smooth transitions, before expanding organizations must not only assess risk and ensure they adhere to regional regulations but also review their insurance coverage to ensure the coverage will remain adequate as circumstances evolve.

Operating in a complex marketplace with a sensitive product requires a solid risk plan. Hazards like fire risks from grow lights, worker safety concerns, extreme weather threats, and rising cyber-fraud pose continuous challenges. Sadly, many operations lack adequate loss prevention and business continuity plans, leaving them underinsured and vulnerable to catastrophic events.

Investing in stronger risk-management and comprehensive risk transfer, along with formulating and practicing detailed business continuity plans, can help mitigate these risks. However, navigating the intricate insurance landscape requires expert guidance to ensure adequate protection, particularly concerning stock coverage and product safeguarding.

As you develop a tailored risk-management strategy for 2024, make sure you:

• Analyze exposures and strategically finance risks to build resiliency.

• Conduct thorough research on regulatory issues and associated risks before expanding your business. Ensure you understand current risks before assuming new ones.

• Use data analytics to offer personalized, competitive benefits packages to attract and retain talent. Benchmark benefits against industry standards to optimize spending without compromising quality offerings.

Growth creates new opportunities, but operators must take a proactive approach to navigating risks. By employing best practices, operators can ensure sustained profitability, workforce vitality, operational resilience, and successful expansion in 2024 and beyond.

Jay Virdi, chief sales officer at HUB International, connects clients with a team of experts to achieve their business goals while protecting them from expected and unexpected risks in a highly scrutinized industry. He is a Chartered Insurance Professional under the Insurance Institute of Canada and holds an Honors Bachelor of Arts degree in Economics and Business Management from the University of Toronto.

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• Source: https://mgmagazine.com/business/finance-acquisitions/thrive-to-survive-with-risk-mitigation-strategies-for-2024/