It cannot be said often enough just how important risk management is when operating a business of any kind and any size. Although the kinds of risks a company may face are primarily dependent upon their industry, it can be safely said that no company is ever without risk of personal and/or business financial losses.
Whether your company is a relatively new startup or a business that has been in operation for several years, have you taken the time to assess the risks you are up against and measures that can be taken to mitigate potential losses? Understanding and implementing risk management measures can be the salvation of your company. Here is some of what you should know.
Begin By Defining Potential Risks
The first thing you can do in terms of risk management is to define the types of risks you may be up against. For example, a manufacturing company would probably not face the same kinds of risks as a customer-facing business. However, in the manufacturing arena, you may face risks such as defective machinery causing injuries to employees. In contrast, a retail store might face a lawsuit resulting from a customer slip and fall injury. Take the time to define the types of risks thoroughly you may be exposed to, and then you can start looking at ways to minimize those risks in the future.
Insure Against Those Risks – General Liability Vs. Professional Liability
That being said, the danger you are up against is there are financial losses in almost any scenario. As it pertains to business, the risk is generally directly related to the potential for financial compensation. Fortunately, you can insure against risks, but you first need to know if they will be covered under general liability vs. professional liability policies.
General liability covers such things as:
- Bodily injury claims.
- Property damage.
- Medical payments.
- Advertising errors.
- Reputational harm.
As for bodily injury claims, this would not refer to injuries sustained by employees. That would be covered under your state-required workers’ comp coverage. The same holds true for Med Pay insurance, which covers medical expenses incurred by clients or members of the general public.
Professional liability insurance covers the employee, director, or owner when they are held personally responsible for an injury or financial loss brought about by errors and omissions or any action of an employee that results in some kind of loss, such as clerical errors of an accounting firm causing their client to sustain significant financial losses. If you don’t already have both of these policies, the sooner you have them, the better your risk management strategy.
Plan for Those Risks as If They Are Imminent
The one last thing you can, and should always, do is to plan for your identified risks as if they will happen at some point. Have a backup plan as well. This is where you plan for the best but prepare for the worst. As cliché as that may sound, it could be the ultimate salvation of the business you built on your blood, sweat, and tears.