September 10th, 2019
If your business were to burn down tomorrow, would you have a plan?
Commercial risk management is a strategy that organizations use to secure their assets, minimize liabilities, and protect the cash flow of their organization.
Although essential to your business plan, developing a risk management strategy isn't quick or straightforward. Managing commercial risk is infinitely complicated. There are no clear right or wrong answers to the dangers that you might discover. It requires significant work, and you will confront your worst fears as a business owner.
Your planning will pay off, though.
A good risk management plan will increase your business's stability and give you the tools to succeed in a marketplace that your competitors can't.
Your business most likely has a significant amount of assets. These assets could range from construction equipment, real estate, specialized computer equipment, or intellectual property.
No matter the asset - your business wouldn't be the same without it.
If you can't or don't want to run your business without those assets, do you have a plan in place to replace them? Do you have an agreed-upon AND written out plan to live without the assets? If you replaced it, would you want identical assets or would you want something different? Would you like someone else to take on that risk (i.e. insurance)?
These are all questions you need to answer in your risk management plan for every significant asset that the business owns or uses.
No two business owners have the same tolerance for risk. Some owners want every asset to be protected through insurance, whereas some owners might wish to self-insure the bulk of their property.
Either way, have a plan in place and be ready to execute.
Exposure to liability risks is the most critical part of any risk management plan. It is essential because there is virtually no way to predict the cost of a liability lawsuit or an accident, especially for a small business.
There are even liability exposures for events that you don't even contribute to - often referred to as frivolous lawsuits.
The uncertainty and the vast range of loss that liability risks cause are undoubtedly uncomfortable for business owners.
Employee injury or safety risks
Auto accident liability
Data & cyber liability risks
Faulty product/workmanship liability
People and organizations you work with aren't the only liability risk, though! Your business has to protect itself from governmental and regulatory risks too.
A manufacturer releases chemicals into the ground and the EPA is called for an environmental assessment
OSHA cites a contractor for unsafe working conditions
An EEOC claim is filed by one of your employees
Your building is not ADA compliant, and a civil rights violation is filed
HIPAA violation due to a data breach
Most businesses have some unavoidable form of governmental risk. Having a risk management plan in place to deal with these risks and the fines associated with government regulation is key to your businesses' survivability.
FEMA released in their publication "Make Your Business Resilient" -
"Roughly 40 to 60 percent of small businesses never reopen their doors following a disaster... and following a disaster, 90% of smaller companies fail within a year unless they can resume operations within 5 days."
That is a shocking statistic, and one that now small business owner should ignore. Do you have a plan to resume operations in 5 days? Do you have a risk management plan to protect your business from the loss of income & services due to a disaster?
Make a plan for these risks and know how you'll respond to a disaster. Do not be one of the 40-60% of business that fail due to lack of preparedness.
Automobile liability risks are one of the leading causes of loss for any business. Not only is the frequency of automobile accidents increasing, but the accidents are also getting worse. This broader epidemic could certainly harm your business and pose a considerable liability threat.
Install a telematics system - Telematic systems are devices that are installed in company vehicles to track location, speed, braking intensity, acceleration, and general driving characteristics of your employees.
A telematics system allows you to proactively monitor and locate high-risk drivers that increase your business liability. It also increases employee awareness of risky driving behaviors.
In the publication "Telematics Devices Prompt Changes in Driving Behavior" by the Insurance Research Council -
"More than half (56 percent) of the drivers participating in an Insurance Research Council (IRC) public opinion survey have made changes in how they drive since installing a telematics device provided by their insurance company in their primary vehicle. *Thirty-six percent of respondents said they have made small changes in how they drive and 18 percent said they have made significant changes."
Implement a cell phone use policy - Distracted driving is becoming the leading factor of auto accidents and is cited to be 6 times more likely to cause an accident than drunk driving.
Contact us for an example of a commercial cell phone policy for your business vehicles.
"Numerous studies have examined the effectiveness of injury and illness prevention programs at both the establishment and corporate levels" - OSHA
Having injured employees can be devastating to your business. Not only can it result in numerous lawsuits and workers compensation premium increases, but it can also leave you without a critical team member.
Implement safety training procedures and enforcement - Implementing proper safety training and procedures not only educates your employees on how to protect themselves, but also encourages a culture of safety awareness within your team.
Invest in quality safety equipment - Having the best and most reliable safety equipment for your business will significantly reduce the risk of injury.
Ensuring that your scaffolding is sound and sufficient to carry the weight.
Make sure you have fall protection on all your heavy equipment.
Secure hardhats for every job-site employee.
Although not comprehensive, these are all examples of positive employee injury risk management.
Data breach and cyber crimes are an emerging risk to every business in the US. The frequency of attacks are increasing and also becoming more costly for organizations.
Turn on two-factor authentication when available - Two-factor (2FA) authentication is a way to verify the authenticity of a user by combining something an employee knows (like a password) with something they have (like a cell phone - e.g. receiving a code via text). This makes it much harder for a hacker to impersonate one of your employees because they would have to possess the physical device receiving the code AND know the password.
Encrypt mobile devices - 12% of data breaches are due to stolen or lost mobile devices. It is essential to encrypt devices, so if a hacker were to have access, the data would be useless.
Having a commercial risk management plan is critical to your business. The work you put in to crafting and maintaining a plan will continue to pay off long after the ink dries.
Contact us if you want to get started on your business risk management plan
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