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Risk Management Challenges for Cannabis Businesses

Although opening a dispensary, cannabis farm, or another cannabis-related business can be highly rewarding, it also comes with various risks. Cannabis is still federally illegal in the United States, and cannabis business owners often deal with complex cannabis laws on everything from taxes to marketing. As such, every cannabis entrepreneur should learn about the biggest […]

Risk Management Challenges for Cannabis Businesses

Although opening a dispensary, cannabis farm, or another cannabis-related business can be highly rewarding, it also comes with various risks. Cannabis is still federally illegal in the United States, and cannabis business owners often deal with complex cannabis laws on everything from taxes to marketing. As such, every cannabis entrepreneur should learn about the biggest risk management challenges for cannabis businesses.

Learning all about the risks of running a cannabis business can help you avoid falling into common pitfalls. By staying ahead of potential problems and minimizing potential risks, you can ensure your cannabis business thrives. Doing this as soon as possible is a smart way to protect your business and all of your assets.

Although there are many types of cannabis businesses, they often share the same risks. Some of the most obvious problems include theft, regulatory risks, and legal problems. However, you should also account for issues such as cyber-attacks. Fortunately, taking the right steps can help you manage these problems and limit your risks as much as possible.

Here’s a helpful guide to the common risk management challenges for cannabis businesses and how to tackle them.

Funding Risks

One of the biggest problems that cannabis business owners face is getting funding for their operations. Although cannabis is now legal in various states, it can still be hard to get funding via conventional methods. For instance, you can’t get a business loan from a regular bank for a dispensary since marijuana is still federally illegal.

What’s more, it’s easy to stumble into financial trouble. For instance, your business might have legal problems or stocking issues. It’s best to get as much funding as possible to limit any financial risks. Even if you’re starting a cannabis business on a budget, you’ll want to get extra funding to account for potential risks.

Although it’s not as easy for cannabis businesses to get loans as other businesses, many alternative funding methods are available. For instance, you can look into equity funding and talk to investors. You can also find venture capital firms focused on the cannabis industry. Some cannabis businesses even use crowdfunding to get the money they need.

You might even want to get funding from multiple sources. After all, having some extra cash can save your business if something goes wrong unexpectedly. Of course, getting good cannabis business insurance can also help your business survive through financial pitfalls.

In-Store Security

If you’re selling cannabis products, CBD, or even accessories such as vape pens or smoking devices, in-store security is particularly important. Cannabis products are in high demand and, just like any other store, you’ll want to protect your stock from opportunist thieves. As such, you should minimize in-store security risks.

The type of security you’ll need largely depends on what kind of products you’re selling. If you’re selling cannabis products, you’ll need to store products in secure glass display cabinets. These let customers view your products without having direct access to them. You can even find displays designed for cannabis products.

Setting up security cameras around your dispensary can also help you spot thieves. Many dispensaries also have security guards. Not only can they help spot and stop thieves, but they can also help check customers’ IDs as they enter the store. Overall, they can help you minimize security risks in your store.

If you’re running a small hemp store or head shop, you might not need to go to the same lengths. However, taking security measures is still important. You might want to use secure display cabinets for your most expensive items. Having security cameras will also be extremely helpful if anything goes wrong.

In-Store Security

Employee Theft

It’s not always customers that steal from stores. On the contrary, research suggests that 75% of employees steal from their employers at least once. While the occasional pen going missing isn’t a big deal, you’ll want to protect your business from more serious forms of theft – especially as your employees will often handle valuable products.

Monitoring transactions and practicing proper bookkeeping can help figure out if any employees are stealing from the cash register. Many cannabis POS systems can even help you keep track of transactions and handle your bookkeeping for you. That way, if employees are taking money from the tills, you’ll know.

Employee theft doesn’t just happen at the point of sale. You’ll also want to take security measures to stop your employees from stealing stock. Placing cameras around your stockroom can help deter would-be thefts and also help with catching them if they decide to steal anything. You should also keep a close eye on stock levels.

Sometimes employee theft even extends to your digital assets. For instance, an employee could steal a list of patients or customers. You’ll also want to make sure employees aren’t tampering with your timekeeping system. 

Physical Risks

Any business operating from a physical location will need to account for certain physical risks. For instance, if you’re running a cannabis dispensary, you’ll need to watch out for issues such as weather damage, vandalism, floods from broken water pipes, hazardous material risks, and other potential physical risks.

These risks can become even more serious in some other types of businesses, such as cannabis cultivators or manufacturers. For instance, cannabis farms will need to watch out for pests and weather damage to their crops. Manufacturers will need to look out for trip hazards or broken machinery at the workplace.

Some businesses, such as those offering remote cannabis ancillary services, won’t need to worry about these issues. But even if you’re operating an online business, you might still need to consider potential physical risks. For instance, some online CBD retailers keep their stock in a warehouse and therefore still need to take a few security measures.

The best way to manage these risks is with commercial property insurance. A good insurance claim will cover you financially if any physical damage occurs. It’s also worth taking some protective measures. For instance, installing weatherproof doors and windows can help minimize damage from things like heavy winds and floods, and some cannabis growers use greenhouses to protect their crops.

Legal Issues

It’s no surprise that legal issues are one of the biggest risk management challenges for cannabis businesses. The marijuana and hemp industries are still legally complex with all kinds of laws to follow. On top of that, laws often vary between states, making things even more confusing. As such, cannabis business owners should ensure they’re legally covered.

Hiring a cannabis business lawyer is a good way to reduce the risk of legal problems. They’ll know the ins and outs of how to operate in the legal cannabis industry. Of course, they can also help you with the general legal challenges of running a business – such as avoiding liability issues.

Since staying legally compliant is particularly important, many cannabis businesses also hire compliance experts. These are professionals who know how to ensure the business remains compliant in whatever state they operate in. They can help you avoid minor issues that could eventually develop into legal issues.

Business insurance can also help cover your business. Look for a business insurance quote that covers legal costs. That way, if your business is dealing with an expensive court case, your insurance provider can help protect your business financially. All kinds of unexpected court cases can emerge against businesses, so make sure your business is covered.

Cannabis Cybersecurity

Cybersecurity

Many business managers go to great lengths to protect their physical assets, but don’t forget that your digital assets are just as important. Cybercriminals across the world often target businesses with a range of cyber attacks. These can be incredibly damaging to your business if you’re unprepared.

Some of the most common cyber attacks include simple methods such as social engineering or phishing for account passwords from employees. Make sure that anyone who has access to your digital assets (including patient data, financial data, etc.) is trained to look out for signs of these attacks.

You should also protect your digital assets from viruses and malware. A good endpoint security system can help you detect these attacks and stamp them out in advance. You should also keep regular backups of important files. While you can do this via the cloud, physical backups are often the safest option.

Be wary of who gets access to your sensitive business data. Many businesses use security systems to limit what files each employee can access. Even if it doesn’t seem necessary, this can often help you prevent major problems when it comes to digital security.

Compliance Risks

Running a marijuana business usually comes with all kinds of regulatory guidelines. Everything from how you pay taxes to how you package your products comes with strict rules. If you fail when it comes to compliance, your business could get in serious trouble. As such, this is one of the biggest risk management challenges for cannabis businesses.

Make sure you and your employees are well-informed when it comes to cannabis compliance laws. Each state has different rules, so you need to follow the rules of your state closely, along with federal guidelines. Even for things like marketing, you’ll need to make sure you’re staying compliant.

Of course, make sure you’re also up-to-date with regulatory matters. You’ll need to make sure you have the right licensing for all your business operations. For instance, cannabis dispensaries that want to offer delivery may need to get a separate delivery license along with their retail license. You should also keep track of when you need to renew your business licenses.

Since it can be hard to keep track of all these rules and regulations, cannabis businesses often hire compliance managers. These experts will help you regularly adapt your business to ensure it’s fully legally compliant. They’ll also give you advice on all kinds of daily business operations to make sure your business doesn’t face any compliance issues.

Getting Cannabis Business Insurance

Implementing a strong risk management policy and taking steps to avoid common risks can help your business prevent a variety of hassles. However, unexpected circumstances can still arise, so you should always have an extra layer of protection. That’s where cannabis business insurance comes in handy.

Business insurance is essential for all kinds of businesses. Quotes can vary depending on the type of coverage you need, but insurance firms often cover physical property, stock, employees, legal issues, and more. You can then rest assured that your insurance firm will help cover you financially if anything should go wrong.

Some cannabis businesses struggle to find good insurance coverage. Some traditional providers may avoid insuring cannabis businesses. Fortunately, you can now find a range of cannabis insurance providers that tailor their quotes to the needs of your business. Choosing a provider that’s experienced in dealing with cannabis businesses is always the best bet.

You might wonder – how much does cannabis business insurance cost? The answer can depend on various factors. For instance, cannabis cultivation companies might need to pay more to insure their stock and equipment than an ancillary service would. It can also depend on the provider you choose, the level of coverage you need, and how much excess you’re willing to pay.

With that said, getting cannabis business insurance is always worth it. Even if your business avoids risks perfectly for years, you’ll be glad to have insurance the day something goes wrong and you need financial coverage.

Getting Cannabis Business Insurance

Conclusion

From keeping up-to-date with compliance requirements to avoiding theft and cyber attacks, these are some of the biggest risk management challenges for cannabis businesses. Whether you’re operating a small marijuana-related startup or a large-scale dispensary, make sure you take measures to avoid these risks.

You can’t always avoid every risk – but having good insurance coverage and legal guidance can help. You should also learn how to create a cannabis dispensary security plan. Taking these steps can help you prevent all kinds of future trouble for your business. For more helpful guides and resources for your cannabis business, including promotional custom-branded products, visit Cannabis Promotions.