Cannabis Risk Management: Not Quite Business As Usual

The cannabis industry is stronger today than it has ever been. Aware of that strength, it is easy to forget the industry’s limitations, risks, and continued political struggle. The industry as a whole, and each individual within it, manage risks daily, whether we realize we are or not.

Every day, at every cannabusiness, we break the law in civil disobedience. Coming to work is a political act with risks. The question is how much risk each of us is willing to take and how we manage the risk we do take.

In December 2015, two fomer executives of Minnesota’s Medical Solutions, an affiliate of Vireo Health of New York, transported approximately $500,000 of cannabis products across state lines to help set up their opperations in the Empire State. In nearly any other industry, their actions would not be significant; but it was an enormous risk for a cannabis company.  Both executives ultimately lost their jobs and now face criminal prosecution.

Their story highlights two crutial risk management strategies every cannabis executive should consider: the first is to educate every employee about the multi-layered regulatory environment in order to avoid unnecessary risk, and the second is active political engagement to help shape those laws and regulations for to eliminate as much risk as possible for the industry and the public.

Employee Education:

Cannabis regulation is sometimes very vague, and other times incredibly specific. Certain practices common in other industries might be prohibited and uncommon practices might be required. To protect the business, every employee of a cannabis company should at least have a basic understanding of how the regulations work and how to get more information when necessary.

Federal law prohibits all cannabis activities, but the Cole Memo advises US Attornies not to criminally charge medical cannabis businesses that are licensed by state agencies unless they violate the eight federal drug war priorities:

  • No drug sales to minors
  • No drug money flowing to gangs, cartels, or criminal enterprises
  • No transporting drugs across state lines
  • No using a regulated cannabis business as a cover for producing or selling other illegal drugs
  • No violence or firearms in or around state licensed drug buisinesses
  • No drugged driving or other public health threats
  • No using federal land to grow, process, or sell cannabis
  • No consuming cannabis on federal land

The Vireo Health executives violated the Cole Memo. That made them ripe to be made a public example by either state or federal law enforcement. The risks they took to save the business could have killed it.

State and local regulaitons also apply, but are different in each location. These regulations can range from environmental, water rights, county or city zoning ordinances, and many more.

Beware of scams, but never ignore governmental agencies, even the obscure ones. If you are unsure about which laws and regulations apply to your opperations, consult a local cannabis attorney to avoid fines, sunk costs, delays, and even criminal prosecution.

Political Engagement:

From a political standpoint, cannabis is still very young. Even the earliest states to legalize are still actively tweaking their laws (e.g., Washington, California, New York, etc.). Every cannabis business should invest in policy activism to shape those laws for the interests of all cannabis stakeholders. Anti-cannabis activists want to define how we are regulated, for our own sake we must drive that conversation.

The two easiest ways to become politically active to protect your business is to contact your elected officials and support industry lobbiests at both the state and federal levels.

There are many active and successful cannabis lobbying groups to choose from and each have different focuses and missions. Do your research, find those groups you believe in, and help drive national cannabis policy forward.

There are, of course, many other risk management strategies to help protect your business. A good offensive risk management strategy is always best, and even the best plans need to be updated regularly. Consult your management team and experts to ensure that your strategy is working.