There are no guarantees in business. You have a product, capital, and a workforce. You must use all those assets to establish a market and earn a revenue that keeps your company going. A lack of demand, a flaw in your product, a failure in organizational or business strategy are not the only risks to your company. The very existence of your company as a legal entity makes it a target of government at local, state, and federal levels, non-governmental organizations, shareholders, private citizens, and competitors. Your company is also subject to the same winds of chance and misfortune that befall every other organization, and you must be ready for it.
Your first move should be to introduce a risk management strategy. This is essential because people are more likely than not to sue your company over the smallest infraction. Courts and juries are often sympathetic to claimants, especially if the latter is an ordinary person or family. You will inevitably be seen as the bad guy who is out to crush the hopes and dreams of people who are weak and defenseless.
This David versus Goliath ascription aside, organizations are held to high standards, as they should be. Companies are entrusted with enormous amounts of resources and are given tremendous leeway to market their products; they ought to act in a safe and responsible manner. And it is a fact that, given the proliferation of such information on the Internet, people know the legal avenues available to them if they have been wronged by a corporation.
Why You Need Insurance
Commercial insurance is one of the most effective risk management tools. No matter the size of your company, you are probably unable to sustain a large legal judgment against you. Taking out various forms of commercial insurance can help you mitigate such a loss so that you can stay solvent and in business.
Identifying Risk
Before taking out insurance, you should identify the risks to your organization. Doing so will help you develop an integrated prevention plan and to improve your business operations. Here are some tips on how to identify risk:
1. Look at the big picture
You should begin this process by carrying out a high-level analysis. What are the most obvious things that can go wrong? Look at the various categories, including competition, finance, safety, operations, brand management, etc., and consider the individual weakness inherent in them.
2. Be pessimistic
When conducting risk management, it is important to be as cynical and pessimistic as possible. Think about the worst thing that can be done to your company by the worst kind of person. Risk assessment is not the place for glass half-full type of thinking.
3. Conduct internal research
Bring the thoughts, opinions, and everyday experiences of your people into your assessment. The people on the frontline of your business are the ones most likely to know where things are not right and what may put the company at risk.
Indeed, you should seek employee feedback regularly. Doing so will give you insight into risks that they may encounter in day-to-day business practices. You can do this through surveys, one-to-one interviews, or focus groups.
4. Review customer complaints
You should always take customer complaints seriously; not only as a means of keeping ahead of market trends, but also as a way to stay ahead of possible safety issues. If multiple people are complaining about the same process or product feature, you should take a hard look at the issue.
5. Model your risk
You should employ simulations, role-playing, SWOT analysis, risk mapping, and other advanced methods to get a better understanding on the risks confronting your company. These often require the download or purchase of advanced software. However, such a purchase may prove a worthy investment.
Types of Commercial Insurance
There are many types of insurance that you can purchase to control and mitigate the financial fallout from an incident that adversely affects your company. Buying such insurance is one of the most important parts of establishing a sound risk management strategy. Here are some of the options available to you.
1. Commercial Property Insurance
This type of insurance covers building contents such as equipment, machinery, and inventory. It can also include business interruption insurance and crime insurance.
2. General Liability
As was stated above, you are a target. You are susceptible to liability suits and you must protect yourself financially. General liability insurance will protect you and your assets. Having this kind of insurance is especially important if you are a small business, as a lawsuit can destroy your company before it even has time to grow.
With general liability insurance you can cover your company’s medical expenses, attorney fees, damages for which you are legitimately responsible, and accidental inventory losses.
3. Business Auto Insurance
If your employees use company vehicles, you should have business auto insurance. Even the best drivers are vulnerable to other drivers who are reckless and negligent. The insurance will protect you against the financial cost of accidents and breakdowns. If your company owns a fleet of cars of trucks, they should be treated like any other asset that is, they should be covered by insurance.
4. Worker’s Comp Insurance
You make the safety and well-being of your workforce a top priority. It is nevertheless possible for a work-related accident and injury to occur. Having worker’s comp insurance will ensure that any employee injured on the job will receive fair compensation for medical bills and lost wages.
5. Commercial Umbrella Insurance
This insurance will cover protect your assets in the event of a lawsuit. Claimants often launch lawsuits against wealthy corporations not to cover the cost of an incident they hold them responsible for, but to maximize the amount of money they can get by playing the victim.
The unfortunate fact is that such schemes often work. You may be sued by a private citizen who sways a jury in their favor and receives a multi-million-dollar judgment. You must be prepared for such an event. An umbrella insurance policy goes beyond your current general liability policy. It ensures that your assets and profits are protected.
6. Performance Bond Insurance
This type of insurance protects you against undependable contractors. If you have outsourced work or hired a contractor to do a job that requires their expertise, it is an investment. The fact that you are putting an important project in the hands of a company that is not under your operational control is a risk. It is an especially high risk if the commitments you have made depend on the contractor’s completion of the job.
If the contractor is unable to complete the job, having performance bond insurance will ensure that you get compensated for the monetary loss incurred by your company. Having such insurance will ensure that you can pay your bills and hit your financial targets.
Getting the Right Insurance for your Business
Planning a risk management strategy involves the gathering of considerable amounts of data. It also demands critical and sober reflection. One of the biggest decisions you will have to make is the insurance company best suited to provide you with the service you require. You should work with a full-service insurance company. You need to work with a company that can offer you a wide range of policy options and solutions.
Webb Insurance Group is one of the most respected insurance companies in the industry. You should contact them today to discuss the risks to your company and the insurance options that can mitigate them.
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