Top Risks for Companies in Cannabis Industry

Although cannabis is a quickly changing industry, laws frequently conflict at the federal and state levels and alter virtually daily. Even without sustaining career advancement goals, keeping up with the expanding industry demand is difficult.

FREMONT, CA: Anyone out there beginning a cannabis business is aware that they must develop a comprehensive cannabis risk management plan to effectively manage their many risks. To begin with, marijuana is still prohibited both federally and in several states. Its intricate supply chain necessitates the use of cutting-edge seed-to-sale tracking technologies. It requires a large workforce, including growers, budtenders, and investors. It's also mostly a cash company because banks, which are backed by the federal government, risk difficulty engaging with cannabis entrepreneurs.

Although many aspects of the cannabis industry are similar to other industries, most notably agricultural businesses like vineyards that produce wine, the way cannabis is regulated is as new, unique, and constantly evolving that many conventional insurers are waiting to see how much risk there is before committing to the risks associated with insuring cannabis businesses.

Due to cannabis's recent legal challenges and emergence into the global market, standard risk assessment techniques used by insurance providers to determine the appropriate level of protection for a business are inapplicable. While most industries have simplified risk assessment tools for evaluating and calculating risk, there are no standardised, widely accepted cannabis risk management tools.

Another factor risk assessment that is difficult for cannabis businesses has less to do with the cannabis sector and more to do with the way insurance operates. Most banks won't operate with cannabis companies because it's technically a Federal crime to do so, except for some highly progressive and risk-taking banks in states where cannabis has been legal for a long time. Insurance companies heavily rely on the banking sector. Considering this, it can be challenging, if not impossible, for cannabis businesses to obtain the types of risk-management tools that are typical in other industries, such as credit cards, bankruptcy law protection, and even federal patents and trademarks, which are significant risk hedges.

Three Major Risks Cannabis Businesses Experience

• Adjusting to Compliance Regulations

Legal compliance is challenging for cannabis businesses to maintain because it differs from state to state and the laws themselves change regularly. One can have to pay a lot of money in fines if state laws are discovered to be broken. Cannabis businesses must deal with these risks in addition to those that other businesses, particularly those in the agricultural sector, face, such as product liability, general liability, cyber liability, and crop loss.

 • Tampering with Products

This might occur at any point in the supply chain. Cannabis companies that sell harmful products may be held responsible for harm and damages.

• Employee Theft

The employees run the cash registers, have quick access to the product, and are well knowledgeable about how the business operates. For cannabis firms, preventing insider theft is crucial.