Top 10 Threats to Small Businesses—Part 2
In our last post, we outlined some of the potential threats to small businesses. In order to develop a plan to manage and minimize risk, it is important to first know what those risks are. Some small business threats may be obvious such as theft, vandalism or fire hazards. Other risks are not so readily visible, such as the possibility of work injuries, data breaches or other legal risks.
Part 2 of our Top 10 threats to small businesses outlines five more threats you need to be aware of as you build your business and create a plan to protect it.
6. Managing Electronic Data and Computer Resources
Small businesses often lack a formal IT department or even rudimentary internet security measures, which leaves them vulnerable to unscrupulous cybercriminals searching for an easy target. With an estimated liability of more than $200 per compromised record (multiplied by hundreds or thousands of customer records), the cost of a single data breach incident can be devastating for a small business. If your business stores customer records electronically, it is crucial that you have robust security measures in place. In addition to taking preventative measure to reduce Internet-based exposures, specialized technology coverage, such as Cyber Liability Insurance, can help protect your business against damage from cyber attacks, data breaches and other Internet-based exposures.
7. Environmental Exposures
Think of a business with significant environmental exposures. What comes to mind? Most people think of a large manufacturing, mining or petroleum operation, but these are not the only industries at risk for environmental liability losses. It is important to perform a comprehensive risk analysis to determine your own level of exposure. Keep in mind that because most commercial insurance policies contain pollution exclusions, unless you carry Environmental Insurance, you may be uninsured against significant environmental loss exposures.
8. Employment Practices
From the moment you begin the pre-hiring process until the final goodbyes at the exit interview, you are at risk for a lawsuit. In fact, three out of five employers will be sued by a prospective, current or former employee while they are in business. Although many lawsuits are groundless, defending against them is costly and time-consuming. Your business should take a hard look at whether it can afford to defend itself against accusations of wrongful employment practices. If not, there is an insurance solution called Employment Practices Liability that will protect your company against wrongful termination, discrimination (age, sex, race, disability, etc.) or sexual harassment lawsuits.
When first starting out, many new business owners simply don’t have the time or expertise to adequately evaluate each clause in everything they’re signing. This oversight, however, can create major problems down the road. In many cases, small businesses become saddled with large additional risks, accepted via risk transfer from savvy suppliers or customers. While it’s tempting to shave costs by skimping on legal fees, making sure your business isn’t accepting additional and unnecessary risk can save you a lot of money over the long haul, both in legal costs and in insurance coverages.
10. Manage Your Supply Chain
Do you rely on one or more third-party suppliers to produce certain components used in your products? If you do, a disaster that interrupts your supplier’s regular business operations could have a crippling effect on your production abilities. Although you should always try to minimize potential liability through contingency planning and other risk management techniques, as supply chains grow across the globe, sometimes there is little you can do about the exposures faced by your suppliers. In a perfect world you could simply avoid doing business with companies that present numerous risks or that are unwilling to conform to your standards, but pricing constraints and niche markets limit the number of potential suppliers to choose from. Supply chain insurance is meant to cover losses you incur as a result of an interruption to your supply chain. Such coverage allows you to work confidently with suppliers who face exposures beyond your control.
Insurance is a key component of any comprehensive risk management plan, but successful risk management also involves prevention, training and contingency planning. Contact Roper Insurance & Financial Services at (303) 721-1145 or by clicking the Contact Us button above to learn more about the tools and resources we can offer to help you manage risks, control workers’ compensation costs, advance safety and boost employee morale.