Business Law and Mitigating Risk Essay – The Executive Biking Shop
Business Law and Mitigating Risk Essay – The Executive Biking Shop
Table of Contents
Introduction. 3
Section 1: Risk Audit and Mitigation. 4
Commercial risk factors I have taken up to this point 4
The Executive Biking Shop. 4
Products Sold and Other Business Considerations according to the Law.. 9
The Legal Structure of My Business. 12
The Legal Agreements Required. 13
Intellectual Property. 13
Consideration of Operating Internationally. 14
Section 2: Response to Commercial Scenario. 14
References. 17
BEMM386 Business Law and Mitigating Risk
The Executive Biking Shop
Superior Sporting Bikes, Quality Bicycles, Gear, Repair, and Consultation from the Best Experts
Introduction
According to Thomson Reuters (2022), due to recent high-profile corporate bankruptcies, failures, and scandals, the corporate world in the UK (United Kingdom) nowadays has to face a stronger corporate governance demand and a stricter regulations regime. As such, any type of business in the UK including business start-ups should strictly embrace best business law practices and incorporate an effective risk management strategy to mitigating their risks. Moreover, Thomson Reuters (2022) notes that all businesses including business startups should also have an in-depth comprehension of business law and commercial risk related to their own business contexts. Most importantly, the market, creditors, suppliers, insurers, investors, and shareholders will mostly view a particular business as risky when it fails to implement effective strategies to monitor risks. Hence, businesses should understand the various legal risk categories, including tax, product liability, media, labour, intellectual property, insurance, health and safety, environmental, data protection, crime, corporate governance, contract, competition and compliance, and bankruptcy and insolvency (Allianz Insurance PLC, 2022) Business Law and Mitigating Risk Essay – The Executive Biking Shop. Other business risks in reference to Allianz Insurance PLC (2022) include pandemic outbreak, cyber incidents, business interruption, changes in regulation and legislation, market developments, climate change, new technologies, fire and explosions, and loss of brand value or reputation. Notably, it is also paramount for businesses in the UK including business startups to comply with the stipulated laws and regulations in their operations to avoid any litigations that might adversely affect their business brand and reputation (GOV. UK., 2022). This module assessment will discuss a risk audit and legal mitigation for the Executive Biking Shop business startup, as well as provide a comprehensive response to a commercial scenario.
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Section 1: Risk Audit and Mitigation
Commercial risk factors I have taken up to this point
The Executive Biking Shop
In particular, the Executive Biking Shop is a business startup in the UK that was started 6 months ago and its operations are gradually growing despite facing some common challenges that many businesses encounter in the UK. In principle, during its inception, I had to comply with all the stipulated legal requirements for starting a business in the UK with the assistance of a legal consultant who happens to be a reputable UK lawyer. Some of these legal requirements I had to comply with included adhering to the UK business rules and regulations, utilising the GOV.UK, registering the business, acquiring a license for the business, getting insured, and getting legal assistance (Andrews, 2022). Other legal requirements included complying with the equal opportunities provision, complying with data laws, checking the Employees’ Right to Work, performing a DBS Check for all my new employees, and sending written statements of employment. Furthermore, other legal requirements included adhering to the Health & Safety provision, complying with the National Minimum Wage, naming my business, selecting my business’s legal status, and acquiring a license for my business under sole partnership (UK Insurance Limited, 2022). Other legal requirements included registering and reporting to the HMRC (HM Revenue and Customs), as well as complying with the Pensions provision (Allianz Insurance PLC., 2022). Subsequently, I also had to seek the necessary legal requirements from my university to operate the business within its premise since it was supposed to be based within the university campus.
On the other hand, I also had to consider different commercial risk factors for my business, including tax, product liability, media, labour, intellectual property, insurance, health and safety, and environmental (Net Lawman, 2020). Other commercial risk factors I considered included data protection, crime, corporate governance, contract, competition and compliance, bankruptcy and insolvency, fraud, loss of brand value or reputation, fires and explosions, new technologies, climate change, market developments, and changes in regulation and legislation. Others included business interruption, cyber incidents, pandemic outbreak, security risk, strategic risk, reputation risk, liability risk, and financial risk (Addison & Khan Solicitors, 2022).
In particular, I had to consider financial risk since I fully understand that it is the biggest risk that many small businesses encounter in their operations (Allianz Insurance PLC., 2022). I also knew that financial risk entails other commercial risk factors, including cash flow issues, economic shocks, economic conditions, and the future and current economic climate (GOV. UK., 2022a). Hence, I had to undertake legal risk mitigation measures through ensuring that I hired the services of a friend who is a renowned financial consultant in the UK. Ideally, I must note that I am lucky since this good friend of mine promised to always provide me with valuable financial advice at no cost due to our family ties and close relationship. Thus, it was paramount for me to invest in a financial hedge through having a financial emergency fund where I invested some money for any financial risks that might occur during my business operations (Helen, 2019).
In practice, I also had to consider strategic risk as a commercial risk factor because I had not developed and implemented any formalised decision-making processes since the business is a sole-proprietorship where I am the ultimate boss. I also understand that strategic risk entails undertaking key concepts, including establishing major strategies for each of my business’s business cycle stage because the challenges are different (Harris, 2020). Moreover, in strategic risk, I had to decide about my business’s marketing strategy, sales strategy, target market, ideal business structure, shifting external environment, competitors, and technology shift. Hence, I invest heavily on research and planning to mitigate this strategic risk through conducting research-based on my competitors and industry trend (Andrews, 2022).
In the same breath, I also had to consider reputation risk since it is among the most frequently overlooked business risks. Notably, I had to consider reputation risk because I fully understand that the reputation of any business is its most paramount valuable asset since startups such as the Executive Biking Shop had to build a good reputation. Thus, a good reputation significantly enables businesses and business startups to grow effectively especially in this digital era of using technology and social media. It is imperative to note that in this digital era, it is gradually becoming both harder and easier to manage the reputation of a particular business. Hence, I had to ensure that I capitalise on this digital era to conduct my marketing and sales activities, as well as real-time customer interactions using different social media platforms, such as Twitter, Facebook, WhatsApp, and Instagram among others. In particular, my legal mitigation measures for tackling the reputation risk included respond to clients’ issues and complaints with empathy, always showing gratitude, and encouraging feedback, both negative and positive. I also ensured that I established a customer relationship department specifically to handle customer service on a real-time basis to continue building my business’s reputation effectively. I also developed and implemented a social media policy, outlining how all my business’s employees should portray the company and interact with customers. I also undertook a customer service training sessions for all my employees and have ensured that they undertake continuous training sessions to enable them become abreast with the latest customer service trends.
In principle, I also considered liability risk because many small business startups are most vulnerable due to their small sizes. As such, in liability risk, I understood that different damages, including contractual obligations failure, property damage, or customer or employee injuries could lead to costly fines and lawsuits for my business. I also understood that my business did not have adequate resources to compensate effectively for any damages without adversely affecting the cash flow of my business. Notably, the legal mitigation I undertook for this liability risk included investing in appropriate legal advice from my lawyer, developing best HR (Human Resources) and safety practices, drafting legally binding employment contracts, and investing in appropriate insurance coverages (Addison & Khan Solicitors, 2022).
On the other hand, I also considered business interruption risk since I was fully aware that my business could be disrupted without warning and at any time especially during the current COVID-19 pandemic. I also understand that various risks could result in business interruption risk, including natural disasters and calamities, severe damage to equipment or inventory, supply chain risks, and business continuity plans. Notably, to handle this business interruption risk, the legal mitigation measures I undertook included implementing effective continuity plans, establishing a crisis committee, and developing a business policy, which greatly ensures that it retains the business reputation and customers (Helen, 2019).
In practice, I also considered security risk for my business, including cyber risk, data penalties, fines, and breaches, as well as IT (Information Technology) failure. I understood that cyber risk primarily referred to the threat of reputational damage, disruption, or financial loss to a business because of various failures from its IT systems (FSB, 2020). Notably, IT was and has been the backbone of my business, meaning that implementing appropriate legal mitigations was the only option. It was also paramount for me to note that my business’s employees would also engage in cyber risk since they would be privy to my clients’ data. Hence, some legal mitigation measures I undertook included conducting background checks on all my employees, according to the DBS Check, as well as implementing awareness and training programmes (Thomson Reuters, 2022a) Business Law and Mitigating Risk Essay – The Executive Biking Shop. Other legal mitigations included incorporating vigorous and effective security breach reporting processes, using strong password manager tools and passwords, continuous updates of the IT systems, installing strong firewalls, and conducting awareness and training programmes. I also installed the latest Risk Management Information System to greatly assist in managing and mitigating any risks (Green, 2021).
On the other hand, I also considered intellectual property risk to enforce and safeguard the business’s intellectual property rights. Notably, this included registering the different forms of my business’s IP (intellectual property) rights according to the UK laws, namely Copyright, Designs, Patents, and Trade Marks with the IPO (Intellectual Property Office). I also undertook Employer’s Liability Insurance to safeguard my business from any employee claims following an illness or accident suffered due to working for my business (Burges Salmon, 2021).
Moreover, I also described my business according to the law where I stated that the Executive Biking Shop will offer superior quality sporting bikes and bicycles, gear, repair, and consultation to its customers and it consists of experts that have vast bicycle racing experience. The campus market is the niche for the shop since it wants to take advantage of cycling which has become the most economical and healthiest mode of transportation. Ideally, the shop targets the university students because there is a high turnover because learning is an ongoing process whereby students graduate, and others are admitted. Additionally, the shop also targets the university’s employees that prefer biking to report to work Business Law and Mitigating Risk Essay – The Executive Biking Shop.
Products Sold and Other Business Considerations according to the Law
Bicycles: The Executive Biking Shop sells predominantly new sporting bikes and bicycles particularly the sporting bikes and the mountain bicycle style since the people in the region prefer them because they are faster. Subsequently, the retro-cruiser is the second dominant product that the shop sells. The third dominant product includes racing/touring/sport road bikes that individuals fancy for their leisure time. In addition, the shop also sells some used bicycles specifically as a trade-in service for customers that would want to buy new bicycles.
Accessories: The shop offers a huge variety of accessories such as comfortable seats, cargo racks, fenders, computer speedometers, locks, and helmets. Other accessories sold are auto roof rack systems, bicycle storage racks, children trailers and seats, messenger/back packs bags/panniers, water bottles, helmets, and headlights.
Clothing: The shop rotates its clothing line depending on the prevailing season. For instance, in autumn, the shop stocks Gore-Tex and jackets. In winter, the shop offers shoe covers, gloves, insulated pants and jerseys, helmet liners and covers. In spring, the shop starts to display racing shorts and summer jerseys.
Spare Parts: Spare parts refer to materials or parts that are vital to the basic bicycle functioning. In principle, the installation of these parts is done during service although there is an additional charge that is beyond the required service fee.
Description of my Business Venture
The business is called Executive Biking Shop, and it started six months ago as a business venture because the business owner is a bicycle-cycling enthusiast. He wanted to introduce sporting bikes and bicycles as a mode of transportation to the university student population. The shop has received an overwhelming response, and the owner wants to expand the business to meet the customer’s high demand. The business is a sole proprietorship, and the owner is called Michael Jones, a Fourth-year student. To date, the business has achieved tremendous accomplishments such as the owner has been voted the best campus entrepreneur and its profits has doubled since its inception.
Description of Product/Service
Executive Biking Shop sells various products, which include sporting bikes, mountain bicycles, retro-cruiser, racing/touring/sport road bicycles, and a variety of accessories, clothing, and spare parts. The shop also provides consultancy services to its customers especially when they would want to pursue cycling as a competitive sport because it employs individuals that have vast experiencing in cycling. These products offer different features such as the latest mountain bike that has gears for varied speeds, safety helmets that prevent injury, and some bikes have a motor engine that enables a customer to accelerate speed. The business offers the best solution to the university fraternity through the provision of bicycles as the most reliable, economical, fast, and healthiest mode of transportation. The pricing of the products and services are pocket-friendly because they the shop acknowledges that most students are not financially empowered and will not afford exorbitant prices.
Marketing Plan
The primary market for Executive Biking Shop is the student population at the university because their growth/turnover is approximately 30% annually. The secondary market for the shop consists of the university staff and faculty while its tertiary market comprises of the surrounding community within the university. Currently, the shop enjoys a monopoly since no other full-service bicycle shop is focused on these products and services. The shop plans on marketing and promoting its products and services to the university population and the surrounding community through brochures, as well as online marketing.
Industry
The industry segments for the business are transportation and recreation. The industry condition for these two industry segments is expanding because many people recognize that cycling is economical and healthy. In addition, lack of parking space for cars at the University is another factor that drives the shop’s local market and bicycle transportation has proven to be space and time efficient, as well as economical.
Customers
The customers for the shop include the student population, as well as the university staff and faculty, as well as the surrounding community within the university. One section of the customers is price constrained while the other section prefers the latest sporting bikes and bicycles, the number of gears, and frame style. The student population consists of youth aged between 18-28 years while the university staff and faculty comprise of older people aged 29-50 years. These customers want a mode of transport that is fast, economical, and time efficient. They also recognize that cycling is a form of exercise activity that keeps the body fit and healthy. Business Law and Mitigating Risk Essay – The Executive Biking Shop The shop’s products and services satisfy customer needs effectively.
Competition, Advertising, and Promotion
Presently, the shop enjoys a monopoly because there is no other business within the University or the surrounding community that offers similar products and services. The shop intends to advertise and promote its products and services through brochures and online marketing particularly on social media platforms such as Facebook, Instagram, and Twitter.
Location
The shop is located at the main entrance to the University, which is important because every person entering and leaving the university can strategically see the shop. Notably, this entrance is also located on the road that leads to the surrounding community where other people can see the shop.
Suppliers
The Executive Biking Shop sources its bicycles and other spare parts from the sole distributor of bicycles in the UK that are imported from various countries globally. The shop ensures that the quality of its products is superior and durable.
Management
Since this is a sole proprietorship business, there are two levels of management, which are the business owner and the employees. The business thrives on ensuring that the employees perform their duties independently although the owner only supervises and guides them. The shop owner also has other business interests in real estates, which provide additional financial resources.
Financial Plan
The turnover for the last six months when the business was incepted has doubled to nearly £100,000, and it was to expand its operations to meet the increasing customer demands. Hence, it requires £100,000 for this expansion, the business owner already has £60,000, and an additional capital of £40,000 is needed. This funding will enable the shop to meet its financial projections and have an extra £5,000 for emergency purposes. It seeks to secure the £40,000 from a financial institution through providing various securities to act as collateral for the funding.
The Legal Structure of My Business
The legal structure of my business included registering it as a sole proprietorship, such as checking my suitability as a sole proprietor, selecting my business name, checking the records I needed to keep, and registering for tax (GOV. UK., 2022). In principle, since it is a sole proprietorship business, there are two levels of management, which are the business owner and the employees. The business thrives on ensuring that the employees perform their duties independently although the owner only supervises and guides them. Moreover, the owner is in charge of the overall day-to-day operations and the business consists of three major departments. These three departments include the sales and marketing department, the customer relationships department, and the operations department. It is worth noting that each of these three departments is headed by a supervisor reporting directly to the owner. Thus, the management of the business comprises of the owner and the three supervisors Business Law and Mitigating Risk Essay – The Executive Biking Shop.
The Legal Agreements Required
The legal agreements required for my business include selecting my business’s unique name, selecting my business’s legal status with the Companies House, registering as a sole proprietor, and registering with HMRC. Other legal agreements include a legal business contract with my University, VAT (Value Added Tax) registration, Employer’s Liability Insurance, and other insurance covers, such as Business Interruption, Cyber Cover, Product Liability, Fires and Explosions, and Fraud and Theft. Others include Employment Opportunities agreement, Data Laws agreement, written statements of employment, Health & Safety, National Minimum Wage, Pensions agreement, Intellectual Property agreements, contractual agreements with my suppliers, tenancy agreements, HMRC papers, and financial agreements.
Intellectual Property
In particular, as noted above, intellectual property is paramount to my business since it enforces and safeguards the business’s intellectual property rights. Notably, this includes registering the different forms of my business’s IP (intellectual property) rights according to the UK laws, namely Copyright, Designs, Patents, and Trade Marks with the IPO (Intellectual Property Office). Intellectual property also ensures that the business is protected from other businesses that would attempt to steal the business’s idea and online activities (Burges Salmon, 2021).
Consideration of Operating Internationally
Importantly, my business has plans to expand its operations internationally, although this is contained in its long-term business plan objectives. Thus, since my business is a startup with 6 months in operation in my university campus, it will gradually expand to other local cities within the UK. Hence, my business will undertake thorough viability research and due diligence to ascertain whether it is viable to open additional branches. Moreover, after this local expansion, my business will eventually consider operating internationally to other countries. Notably, this will also include conducting viability research studies and due diligence, as well as considering the necessary regulations and laws for globalisation Business Law and Mitigating Risk Essay – The Executive Biking Shop.
Section 2: Response to Commercial Scenario
In reference to the commercial scenario provided, the following is the heads of agreement in reference to CFI Education Inc. (2022):
Heads of Agreement
Party Details:
Party A: The Good Bake
Party B: White Noise
Transaction Details:
Project: Agreement to a Formal Supply of Goods Contract
Costs: Both parties will incur their own costs as per a later agreement
Terms & Conditions:
Condition 1: The Good Bake shall produce and make available a minimum of 30 units per day to White Noise exclusively.
Condition 2: Delivery to 5 x White Noise premises each day by 6.30am. Timing to be of essence.
Condition 3: Term. The Good Bake will be subject to a minimum contract term of 12 months.
Responsibilities of Parties:
The Good Bake will be responsible for ensuring that it supplies its products according to a later agreement.
White Noise will be responsible for ensuring that it complies with a later agreement, including its terms and conditions.
Signature The Good Bake: Signature White Noise:
In reference to the above Heads of Agreement, Condition 1 was reached upon analysing different major risk factors, such as The Good Bake’s capacity to produce and make the available minimum of 30 units per day to White Noise exclusively. Notably, some other risk factors considered included the cost of opening new units to achieve the required supply required, additional employees’ costs, and other expenses. Moreover, Condition 2 was reached upon analysing The Good Bake’s capacity to transport and delivery the required supply at that particular time without failure. Thus, it was agreed upon that a distribution company would be contracted to undertake this particular condition and the costs involved. Condition 3 was reached upon analysing different major risks, including the overall costs involved in the entire contract against the minimum contract term of 12 months. The entire contract costs include expanding the production capacity by hiring 4 more employees and a regulatory expert, contracting a distribution company, and new commercial kitchens Business Law and Mitigating Risk Essay – The Executive Biking Shop.
On the other hand, according to White Noise proposed commercial terms, it was in the best interest of The Good Bake to disagree with some of its commercial terms. For instance, the commercial term regarding “No minimum order quantity from White Noise” would put The Good Bake at a higher risk of producing the minimum 30 units per day. Thus, White Noise should commit itself to a minimum order quantity since The Good Bake was undertaking a huge investment. The other commercials terms, including termination and unit prices were found to put The Good Bake at higher risks since both parties should reserve the right to terminate the contract. The Good Bake is also not obliged to deliver its secret recipe and process to White Noise under any circumstances.
4. References
Addison & Khan Solicitors. (2022). What are the Legal Requirements for Starting A Small Business in the UK? https://www.addisonkhansolicitors.co.uk/what-are-the-legal-requirements-for-starting-a-small-business-in-the-uk/
Allianz Insurance PLC. (2022). The top ten risks for UK businesses in 2021. https://www.allianz.co.uk/news-and-insight/insight-and-expertise/the-top-ten-risks-for-uk-businesses-in-2021.html
Andrews, H. (2022). The Legal Requirements to Start a Small Business in the UK Explained. https://articles.bplans.com/legal-requirements-uk-small-business/
Burges Salmon. (2021). A guide to intellectual property rights in the UK. https://www.burges-salmon.com/news-and-insight/legal-updates/a-guide-to-intellectual-property-rights-in-the-uk#:~:text=Unregistered%20rights%3A%20Unlike%20trade%20marks,be%20written%20down%20or%20recorded.
CFI Education Inc. (2022). Heads of Agreement. https://corporatefinanceinstitute.com/resources/knowledge/deals/heads-of-agreement/
FSB. (2020). What legal documentation does my small business need? https://www.fsb.org.uk/resources-page/what-legal-documentation-does-my-small-business-need.html
GOV. UK. (2022). Set up a business. https://www.gov.uk/set-up-business
GOV. UK. (2022a). Set up as self-employed (a ‘sole trader’): step by step. https://www.gov.uk/set-up-self-employed
Green, N. (2021). Small business compliance UK – what you need to know. https://www.unbiased.co.uk/life/small-business/small-business-compliance-uk-what-you-need-to-know
Harris, S. K. (2020). Legal aspects of starting a small business. Don’t make these common mistakes. https://www.accountsandlegal.co.uk/legal-advice/legal-aspects-of-starting-a-small-business
Helen, H. (2019). What are the legal requirements for starting a small business in the UK? https://citrushr.com/blog/hr-management/legal-requirements-for-starting-a-small-business-uk/
Net Lawman. (2020). How to work out which documents your start-up needs. https://www.netlawman.co.uk/ia/legal-documents-start-ups-need
Thomson Reuters. (2022). Managing risk across your company. https://uk.practicallaw.thomsonreuters.com/7-606-4285?transitionType=Default&contextData=%28sc.Default%29
Thomson Reuters. (2022a). Doing Business in the UK (England and Wales): Overview. https://uk.practicallaw.thomsonreuters.com/5-500-5090?transitionType=Default&contextData=(sc.Default)&firstPage=true
UK Insurance Limited. (2022). 10 important legal documents for small businesses. https://www.directlineforbusiness.co.uk/small-business-insurance/knowledge-centre/running-your-business/legal-documents-for-small-businesses Business Law and Mitigating Risk Essay – The Executive Biking Shop
