Risk management is an essential part of running cannabinoid companies in the ever-changing hemp industry. Entrepreneurs in this marijuana-related industry have enjoyed a relatively friendly regulatory environment under federal laws like the Farm Bill of 2018. A number of cannabinoids have achieved full national legalization (and the advantage this market has over the cannabis market).
However, state regulations can impose their own limits on cannabis-related businesses, and some cannabinoids have been restricted. Regulatory compliance already requires a significant amount of energy and may require more in the future.
Cannabinoid businesses are also being affected by a tide of other changes affecting retail businesses, including employee turnover, more competitive labor markets, and disruption in loan markets.
These and other risks can disrupt your cannabinoid business, but risk management can offer you some protection. In this guide, you’ll learn what risk management is, what risks are involved, and what strategies can be used to avoid disruption.
What Is Risk Management, and Why Do Cannabinoid Business Owners Need It?
Risk management is the process of predicting events that cause losses to your business and creating strategies to respond to them. This is an important practice if you deal with cannabinoids because this industry is exposed to some serious loss-causing events. You need risk management because your cannabinoid business may need a strong plan to get through one of the following types of crises:
- Theft (both employee and customer)
- Regulatory overhauls (such as those that recently targeted THC-O)
- Droughts, floods and other natural events that destroy crops
- Store damage or vandalism
- State and federal fines
- Intellectual property disputes (for example, over labels and names for your products)
Any one of these crises can cause a cannabinoid business to fold. You have several traditional options for risk mitigation, including general liability insurance.
However, not all traditional options will help you control your operational risks. Putting risk management plans in place before these events happen is one way to protect yourself long-term. Let’s explore some of these risks in more detail.
How Can Cannabinoid Business Owners Control Risks?
Cannabinoid business owners can work to control risks in several ways. They can keep up with the news about their industry, consult with lawyers regularly, develop stock around the possibility of disruption, and organize with other retailers.
Follow Cannabinoid News
Cannabinoid retail is still very much an emerging market. Things can change rapidly in these conditions, and one of the first, best ways to protect yourself is by staying informed. Big discussions usually come before changes in the law, and seeing them (or participating in them) can help you predict what will come next.
Consult With Lawyers Regularly
Legal counsel is important in any industry. Still, in an industry where the rules are constantly shifting, speaking to a lawyer is essential before making any big moves to expand or change the way you do business.
While cannabinoid businesses are highly lucrative, operating them can require some careful negotiations between national and state law. You must also contend with laws around age limits, banking, and other needs.
Plan for Disruptions
To protect yourself from risk exposure, you should plan ahead for disruptions in your store, stock, or employees. This goes beyond mere insurance coverage. There are several ways you can plan for common disruptions in the cannabinoid industry:
- Keep a diverse selection of cannabinoids on hand: Individual cannabinoids may be more vulnerable to rule changes like those that made THC-O illegal. By keeping a diverse selection on hand (Delta 9 THC, CBD, Delta 8, and THCa), you can have options on hand to recommend to customers who can no longer get the active ingredient that they prefer.
- Build relationships with growers and vendors: Developing strong relationships with your vendors is an important part of preparing for disruptions (such as shortages). When natural acts damage the supply chain, vendors typically take care of their most dedicated customers first.
Work With Other Cannabis Partners to Advocate for Legal Changes
One of the best ways to control future legal risks is to organize with other cannabinoid retailers and make yourself heard on matters of law. By joining or forming organizations to advocate for your needs, you can more effectively ensure that legislators will listen to your concerns before they pass laws that affect your business.
The more retailers you can organize, the more effectively you can advocate. Large organizations can often get meetings with lawmakers and even build enough of a treasury to back candidates or ballot issues.
Several existing organizations work with retailers of hemp, cannabis, and other types of cannabinoids. Explore and consider joining organizations like the National Cannabis Industry Association and the National Association of Cannabis Businesses.
Work With a Cannabinoid Supplier You Can Trust
You face a significant amount of risk as a cannabinoid entrepreneur, even selling a product that’s legal at the federal level. With the right risk assessment and planning, all of these risks can be mitigated. Stay on top of industry news, seek legal counsel for big moves, build a diverse stock to avoid disruptions, and organize with other retailers to ensure your voices aren’t lost in state legislatures.
A final method that cannabinoid companies can use to protect themselves from risk is being discerning about producers and suppliers. Higher standards from suppliers can help lower the risk of loss-causing events like recalls. THDWholsale is here to help if you want to order cannabinoids from a supplier who takes quality cannabis very seriously. Our USA-grown hemp is regularly lab-tested, and the results are available to our valued clients here on our website. Please contact us to learn more about how we can help you.