cannabis insurance

Cannabis Insurance: 5 Steps Every Risk Management Plan Should Include

Part of risk management is certainly buying commercial insurance; however, there’s more to it than that. Let’s talk about this essential 5-step process.

Is your risk management plan ready to go? A comprehensive plan is an integral part of doing business for every company. No matter your revenue, team size, or quarterly growth, every business needs a risk management plan because every industry faces risks. These plans help you identify exposures, take action to cover them and identify gaps in your cannabis insurance policies. If you need a plan or help to figure out where to start, here’s how it works.  

What Is a Risk Management Plan? 

A risk management plan is a living document that identifies, assesses, and tracks areas of exposure in your business. This plan is critical because it details a crisis plan and action items for when risks become a reality. 

Having a risk management plan is crucial to doing business in the cannabis industry. Risk is an unavoidable part of doing business in any industry, and having a solid risk management plan makes it easier to sleep at night knowing that you have a safety net for when things go south.  

A risk management plan is a large document with several pieces. Putting this document together can seem overwhelming, but there is a system that works across all industries. Here’s what your risk management plan needs.  

What Are the 5 Steps of a Solid Risk Management Plan?

Every risk management plan has five pieces to it. By tackling them one at a time, you break an enormous task down into small pieces that are easy to knock out and quickly form the foundation for a solid plan. 

1. Identification

As our co-founder, Carl Niedbala always says, “We don’t know what we don’t know.” In other words, as a cannabis leader, you can’t cover exposures you don’t know about. Therefore, Identifying your risks is step one, and this is a big one. 

Now is the time to put it all down on paper — every risk and area of exposure you can think of. Every business faces different threats, even within the same industry. While it may seem pessimistic to spell out every single risk you can think of, you must understand how and where you’re exposed to deal with it. 

Be honest and calm here — naming risks doesn’t invoke them, so don’t leave anything out. You can start with the big or small risks — whatever gets the ideas flowing. 

If you need help figuring out where to start, consult an expert. This could be a risk modeling software that uses simulations, flow charts, and mapping to spell out your risks at your own pace. Or this may be a person, a risk specialist with cannabis insurance expertise. The people on your team can also be resourceful; accountants, financial advisors, lawyers, and insurance brokers can all be valuable sources of information.  

It also helps to identify the risks your company is already dealing with. An area of exposure doesn’t have to be earth-shattering to be a problem; what are your most common losses? You can also survey your employees or customers for insights.  

2. Analysis

Step two in building a risk management plan is analysis or assessment. Once you’ve identified your exposures, you must analyze them to see how much risk they present. Or, once you know where you can get hit, you need to figure out how bad it will hurt. 

This stage can feel overwhelming because no one wants to play out every worst-case scenario they can imagine. But doing so sets you up for success if you use this information to cover your exposures. 

Think of the worst-case scenario for every risk you identified; what kind of damage would it cause? Would you lose money, customers, employees, or all three? How long would it take you to recover, financially and reputationally? Using actuarial tables can be helpful here for a fresh and analytically accurate perspective. 

3. Evaluation

Once you know where you’re exposed and how badly it would hurt to experience a specific loss, it’s time to take action. In the evaluation stage, you decide if each risk is acceptable. Some small threats can be efficiently dealt with, while others are catastrophic. What risks fall under which category is up to you. 

Put another way; this is the stage where you decide how to deal with your risks through the lens of likelihood and consequences. If a risk is unlikely with minor effects, you may simply leave it alone. But a risk with a high probability or significant consequences warrants treatment. Using your management team is essential to get different perspectives on different risks. 

This stage is where you plan to cover your exposures. This could look like purchasing a cannabis insurance policy to give you a safety net, developing a crisis management plan, changing processes to avoid certain risks, or developing a recovery plan.  

4. Tracking

Tracking your risks is a vital part of the risk management plan. As mentioned above, this is a living document, so it needs to be updated as things change. Once you establish your risk management plan, track your risks and exposures. Note which risks become a reality and how your business recovers from them. This data is helpful long-term for consistently reassessing risks and identifying any weak points in your plan. 

While dealing with risk is unpleasant, it can also be informative. With risk tracking, you can clearly see which risks can be avoided. Maybe your team needs more training, an internal process needs tweaking, or there’s an oversight in daily operations. Or perhaps a risk pans out because of an industry shift or a regulation change, and you need to pivot or add a new cannabis insurance policy 

Risk tracking helps businesses work smarter, not harder.

5. Treatment

Risk treatment is the most enjoyable stage of the risk management process because it’s the actionable step. Here is where you’ll take action to cover your exposures.

Treatment can look like adjusting an internal policy or removing a product from sale — it depends on your decision during the evaluation phase. 

Cannabis insurance policies are one of the best ways to manage risks and sleep well with a safety net. Whether you need a theft policy, general liability, or something as specific as director’s and officer’s insurance, working with a cannabis insurance expert can help you cover your exposures and set your company up for success in the long haul. 


Protecting your cannabis company can seem confusing; however, we’re a full-service insurance brokerage working with carriers worldwide to offer you the best coverage possible. We’re here to help! Please reach out to us today by emailing [email protected] or calling 646-854-1093 for a customized letter of commitment or learning more about your cannabis insurance options.

Related Insights