The Eight Most Expensive (and Avoidable) Hazards of Small Businesses

1.      Fire – Fire is still the most significant cause of business loss in the U.S., despite all the liability claims and lawsuits we hear about every day.

  • One company eliminated coffee service to save money, causing many employees used their own coffee makers under their desks. Yes, a fire did occur!
  • How do you keep clutter – in the office and work areas – under control?

  • Where do your employees go to smoke?
  • How many fire extinguishers do you have? Have they been inspected? Have you ever used one? Do you know if it will work?

  • How many plugs go to one outlet? Who looks out for frayed wires? How do you make sure appliances get turned off?

  • Statistics prove central station smoke and fire alarms are effective.

2.      Employee problems – A discrimination or wrongful termination case now costs up to $250,000 to litigate. If you lose, you also pay damages and their legal costs.

  • Last year age discrimination suits alone were up 14%.
  • When was the last time your employee policies and handbooks were updated? State and federal regulations change all the time.

  • How about your policies regarding harassment and discrimination? Are they posted for all to see?

  • Do employees know that you might review their email and Internet use? Do they know what you consider appropriate work-time phone use? What about cell phones and driving?

  • What expertise do you use for hiring, reference checking, and terminations?

3.      Scams, fraud – Scams are increasingly creative, and employee stealing or fraud – the crime we never talk about – is at epidemic proportions in small businesses.

  • Recently a Santa Rosa business owner discovered their bookkeeper of two years had embezzled over $75,000.
  • When did you last talk with employees involved in purchasing about the latest scams and how to keep your guard up?

  • Have you delegated your accounting and check signing? Are they performed by different people? 

  • Are you still personally involved in bank reconciliations? What systems have you put in place?

4.      Archiving & Backups – You must be able to prove your loss in any insurance claim, and of course be able to contact customers and employees if something goes wrong. Reconstructing this information from scratch is very expensive.

  • A pharmacy chain wasn’t testing backups and lost three months of prescription records when a file was deleted. Manual reconstruction from paper records took weeks and cost $300,000.
  • We all have complete faith in our backups … right?

  • When was the last time you actually tested a backup – on another machine outside the office – to see if it actually worked?

  • It’s 11:00 pm –do you know where your backup is? Offsite?

  • How about important paper documents (like liability insurance policies)? Are they in secure off-site storage?

5.      Privacy – Privacy (to avoid identity theft among other things) is a very high consumer priority and new laws are popping up all over to protect it.

  • CA law SB-1386requires “expedient” notification to all affected persons if computer security has been (or may have been)breached.
  • How do you protect your files and information (paper and computer)?

  • What do you tell people who give you personal information about what you are going to do withit?

  • What prepared messages are available for employees or customers if your data is compromised?Fast, accurate breach response is a survival tool.

6.      Lawsuits – Lawsuits cost much more than money: your time and distraction from the business can be significant and your reputation may be irretrievable.

  • A new lawsuit is filed in the U.S. every 30 seconds. Predatory litigation now finds easy targets in an ever-increasing number of products, services, people, and mid-size companies costing up to $40 billion per year.
  • What precautions can you take to prevent suits from clients? Your landlord? Visitors?

  • Can you be sued for what your employees do while traveling on business?

  • What quality control systems do you have?  Do you use automatic questionnaires to find out how clients feel about your service?

  • How do you ensure complaints get to the right person for fast and fair resolution? These proactive steps prevent many lawsuits.

7.      Contracts – Contracts have invaded almost every aspect of our lives where a handshake used to suffice.  We don’t read them as we should,and often don’t understand the fine print.

  • Contractual responsibilities trump common law most of the time, and there is only one chance to be in control … before you sign!
  • Who has authority to sign contracts in your business? When was the last time you consulted a lawyer about terms you didn’t understand?

  • What risks can you legitimately transfer to others?
  • Do you regularly send contracts to your insurance broker for advice? And do you know where, andhow, your coverage applies to contracts?

8.      Insurance Gaps – Misunderstandings and lack of attention to certain details create uncovered losses and claim difficulties at just the wrong times.

  • A company purchased “cheap” insurance and their insurer went bankrupt after a $1 million claim was filed. The CA Guarantee Fund paid only $500,000 and the insured had to pay the rest themselves with no recourse.
  • Do you know the differencebetween personal and business insurance? Between general and professional (errors& omissions) liability?

  • Do you have one insurance broker, or several? Or none? You can gain significant expertise, andsavings, with all your coverage in one place.

  • Have you assessed your Internet and professional liability exposures?

  • Have you read your lease? Are you sure you are complying with all its insurance requirements?

  • Do you know what to do when there’s a loss? What not to do?

  • Have you considered an independent risk and insurance advisor to coordinate all your risks and coverages?

If you have comments, questions or more complex circumstances, I’d be pleased to hear from you. Click reply, orgive me a call – charles@risksmartsolutions.com | 510-685-3883. 

There’s never a charge for brainstorming!

By |2018-12-11T16:18:58+00:00December 11th, 2018|Uncategorized|0 Comments

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