Risk & Business Magazine General Insurance Services Fall 2019 | Page 28

SMALL BUSINESS THREATS
O
ptimism is the fuel that drives
the entrepreneurial spirit,
so it isn’t surprising that
most small business owners
consider themselves optimists.
Too much optimism, however, can get
a small business owner into trouble. A
business plan built solely on the “best-case
scenario” is like a house of cards: one gust
of wind—or fire or wrongful termination
lawsuit—and the entire business can come
crashing down. That’s why smart business
owners temper their innate optimism with
a healthy dose of reality. In other words,
they learn to manage risk.
The first step in implementing a
comprehensive risk management plan is
identifying potential risks. To help you get
started, we have provided a list of the top
10 threats facing small business owners.
As you read through the list, consider the
unique risks facing your business and ask
yourself whether those risks are being
managed effectively:
1. PROTECTING YOUR PROPERTY
The
Top 10
THREATS
To Small
Businesses
28
Property holdings are often a small
business owner’s largest asset. Therefore,
for the long-term security of your small
business, it is vital that you evaluate
potential threats to your property and
develop a plan to manage those threats.
Begin by taking a complete inventory of
all your assets to determine how a loss
might affect your business and how much
coverage you need. Property coverage can
come in many forms to suit your specific
needs, but a typical policy will provide the
replacement cost value for your building
and the actual cash value for your business
property.
You have a lot weighing on your budget
already, but don’t make the mistake of
planning for the “best-case scenario” when
it comes to your property coverage. Leaving
your small business underinsured is a risk
too great to take.
2. BUSINESS INTERRUPTION
The US Department of Labor estimates
that more than 40 percent of businesses
never reopen following a disaster such as
a fire or flood. Is your business prepared to
weather the storm if disaster strikes? If a
fire causes your facility to be temporarily
unusable, what would you do? Ideally,
you would move to a temporary location
while your permanent place of business is
being repaired, but traditional Property
Insurance does not cover this move or
the loss of income while the permanent
business location is being repaired. Ill-
prepared businesses are often forced to
completely shut down operations during
repair, which can do irreparable damage to
their brand and leave employees without
work for extended periods of time.
To mitigate this risk, consider adding
Business Interruption coverage to your
Property Insurance policy. This invaluable,
though often overlooked, coverage
safeguards your business by covering
operating expenses and lost income while
your permanent business location is being
repaired. This will allow you to maintain
payroll and, if needed, reallocate current
employees to help with the cleanup effort.
3. LIABILITY LOSSES
No matter how well you plan, running
a small business can be fraught with
unexpected surprises. The only way to
completely avoid liability is to shutter
your business. Smart business owners
do the next best thing: protect their
assets by carrying adequate Commercial
General Liability (CGL) Insurance
coverage. CGL policies provide coverage
for claims of bodily injury or other physical
injury, personal injury (libel or slander),
advertising injury, and property damage
as a result of your products, premises, or
operations. A CGL policy with adequate
coverage limits enables you to continue
normal operations while dealing with
real or fraudulent claims of negligence or
wrongdoing, and also provides coverage for
the cost of defending and settling claims.
4. KEY PERSON LOSSES
Many small businesses are built around the
talents and expertise of a few individuals.
If an employee crucial to the functioning
of your business departs unexpectedly
due to death or injury, would day-to-day
operations continue as usual or would
disorder and uncertainty ensue? Would
you be able to maintain your current level
of performance and revenue stream? How
would you cover for the financial loss
of the employee or pay for a temporary