Whether you’re in the process of starting a new business or building upon an existing one, you are going to face risks. When it comes to dealing with employees, customers, clients, government regulators, and the world, there are simply too many factors to guarantee that everything is going to run smoothly all the time.
Mistakes and hiccups are inevitable, and in the business world, those errors can lead to lawsuits, reputational damage, and other dire consequences. Learning to assess and handle risk are assets for every business—including these five oft-overlooked categories of risk.
1. The risk of smart leadership
Leading a company involves making difficult, sometimes risky decisions. Businesses will sometimes overlook these risks, but CEOs and other executives won’t. Indeed, if you are looking for an executive to take a leadership role within your company, don’t expect to land someone good unless you agree to insulate that person from risks.
D&O insurance, or directors’ and officers’ coverage, is essential here. This type of coverage will allow your executives, stakeholders, and board members to make the tough calls necessary to run a business, all without putting their private finances at risk. D&O insurance covers claims and lawsuits that relate to breach of contract, breach of fiduciary duty, breach of legal compliance, and more.
2. Workplace safety
It seems crazy: how could any business today operate without proper workplace safety measures in place? However, the fact is that new businesses especially often skimp on safety. For instance, a cash-strapped startup might be tempted to cut costs by skipping the safety audit or buying cheap or used equipment.
In this case, cutting corners will only come back to hurt you in the future. Workplace safety should be a central part of your focus, not only to avoid lawsuits from your employees, but also to maximise productivity and efficiency. You should also consider workers’ compensation insurance—even if your business is not legally required to carry it.
3. Personal liability
No business is too small to face a liability lawsuit. No business is too safe to confront a liability lawsuit. No business has good enough relationships with clients or customers to guarantee that a liability lawsuit will never happen. The fact is that every business faces liability risks, and if your company is accused of personally, professionally, or physically injuring someone, that accusation could be ruinous without the right protections in place. Perhaps someone slips, falls, and hurts themselves on your premises.
Maybe your product malfunctions and injures a few of your customers, or you are accused of slandering someone’s name and reputation. Even if the claims are bogus, lawsuits against your business will cost money to defend, hurt your branding, and pull your focus away from where it truly belongs. No business is immune to these liability risks, hence the need for every company to carry general liability insurance coverage.
4. Bad employees
Businesses often start off with very small inner circles of leaders and personnel. As an entrepreneur, you probably only put your faith in people close to you, people you know and trust on every level. Eventually, though, you will need to grow your workforce, and that means hiring people you don’t know as well. Good hires will allow your business to thrive, bringing ideas, innovations, and hard work into the fold.
Bad hires could lead to anything from productivity losses to legal risks. Say an employee harasses another team member, discriminates, or sues you for wrongful termination. Your human resources are arguably the least predictable part of your business, which means they present the largest array of risks. Tightening up your hiring process—with more thorough interviews, skills tests, a good employee handbook, and background checks—will help you filter out the bad seeds. However, you should also have the proper coverage in place with the more specialized employment practices liability.
5. Cyber attacks
Data breaches have become common in the business world over the past several years. Target, Equifax, Yahoo, Adobe, eBay, and AOL are just a few of the companies that have been victims of these hacks. There are several things you can do to keep your business safe from these threats.
Investing in strong cybersecurity safeguards and training your employees to recognize and avoid risks are both essential steps for any modern business. However, you also need a contingency plan in case a breach does happen. Cyber-attacks can compromise your company’s trade secrets, the personal data of your clients and customers, and more. Such losses can hurt your business considerably, but having a cyber insurance policy in place will at least mitigate the impact.
As you can see, the business world is a risky place. However, by being vigilant about hiring the right people, training your employees thoroughly, protecting your company with the right insurance policies, and never cutting corners, you should be able to minimize risk within your own business. After all, the companies that end up weathering lawsuits, liability claims, and other speed bumps aren’t the ones that got lucky, but the ones that foresaw disaster and took steps to minimize the blows.
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