Author Archives: lonnieinsurancespecialist

4 Risk Management Challenges for Small Businesses

Risk events can come in many different shapes and sizes, but regardless of your profession, risk management is something that can give you the edge over potentially damaging risks. For Small Businesses, there are several reasons why Enterprise Risk Management should be implemented. These reasons range from legal obligations to budgetary requirements and below, we highlight four of the foremost reasons for introducing Enterprise Risk Management to your Business.Risk management flow chart on paper

Market Risks

In large companies, market risk covers the risk that the value of the company’s assets will decrease due to a change in the value of external factors. Changes in interest rates, foreign exchange rates and commodity prices can all negatively impact on a company’s assets. Similarly, changing economic and environmental factors can negatively impact on the productivity of small businesses.

By monitoring market influences and assessing other external influences that could impinge on the company’s market presence, you can protect against market risks and ensure the productivity of the business. For small businesses, accounting for market risks can help ensure projected growth patterns and prosperity. By formulating an enterprise risk management plan, employers can effectively address and mitigate unfavourable market forces.

Operational Risks

Operational risk represents the risk of loss from failed internal processes. These risks can arise out of everything from poor or inadequate employee practices to hardware malfunction.  While operational risk is relevant to all categories of profession, many small businesses often overlook or underestimate the possibility of operational risk-related events damaging their business. Operational risks such as internal and external fraud, employment practices, business continuity processes can all negatively affect the overall business process of a small enterprise.

Through in-depth analysis, the identification, measurement, monitoring and managing of operational risk, small businesses can ensure the security and efficiency of the operating process. This involves having well-defined and organized roles, segregating duties and responsibilities, and implementing management review mechanisms that will allow employers to account for operational risks and ensure they don’t threaten the business.

Reputational Risks

Reputation is one of a business’ most important assets, particularly if they operate globally. That said, reputation is everything for small enterprises and start-ups as it represents the extent to which the company is meeting the expectations of its stakeholders, and this can often prove a determining factor in whether or not a small business can take off. While reputation is one of the most important assets of the business, reputational risks are indelibly difficult to protect against. Factors such as negative publicity, whether accurate or not, can compromise the business’ reputation capital while marketing channels such as social media can carry a lot of risk potential.

By defining how you want your business to be perceived, you can begin to clearly identify what risks could negatively impact on the company’s public image. Outlining an enterprise risk management strategy can greatly help a small business to actively monitor the effects of operational incidents on reputation capital and the public perception of the business. This involves an assessment of relationships with consumers, partners and the media as well as assessing the functionality of the business in terms of commitment and quality processes.

Emerging Risks

Emerging risk accounts for any new risk that is in the process of being quantified and understood. Emerging risks have the potential to substantially impact on a business or insurance policy and significantly damage the company’s reputation, reach and overall process. Emerging risks can infiltrate any part of your business or personal life and have a huge impact, and unfortunately, as there tends not to be any resolute method of predicting and protecting against emerging risks, they are considered some of the most potentially damaging risks that businesses face.

Typical emerging risks include Cyber Risks and Social Media Risks, both of which can be reduced greatly through a comprehensive risk management plan, but other emerging risks such as changing economic factors and wholly unpredictable risks like natural disasters can have devastating consequences for unprepared businesses.

Enterprise Risk Management is all about predicting, preparing for and protecting against the occurrence of a risk event. Each of the risks discussed in this post carry the potential to inflict serious damage on a company’s reputation and overall business process. However, if a small business incorporates each of the aforementioned risks into their overall Enterprise Risk Management plan, they can significantly protect themselves against the possibility of a risk event occurring and devastating the business.

Ensure your Risk Management Strategy is up to scratch with a free risk assessment.

 

Lonnie Meadows is a risk advisor for NewFirst Insurors. Lonnie specializes in developing commercial risk management plans for small to mid-sized businesses and focuses on leadership and management relationships to improve his clients’ overall operations.

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Risk Management: Predicting the Unpredictable

Michelle Symonds of TechRepublic UK recently argued that risk management fails to effectively address ‘real’ project risks, which she calls ‘the unknown unknowns.’ In her article, Michelle questions the value of Strategic Risk Management within the business, asking whether risk planning and management really serves a practical purpose, or “is it simply designed to provide a get-out when problems start to occur, or an explanation of why the budget is over-running?”Risk management flow chart on paper

While Michelle makes some compelling points about the attitude of Businesses when it comes to managing Risks – such as her argument that many Businesses often fail to differentiate between some risk factors, instead implementing plans that are ‘little more than a standard template that lists the same risk factors for every project,’ one of the biggest mistakes a company can make in Strategic Risk Management – her argument that Risk Management does not serve a purpose is very much up for debate, particularly in an ever-developing Industrial world that has seen the role of Risk Management within the Business do nothing but grow.

She may be correct in outlining the failure of Standard Risk Management to fully account for unpredictable risks however, if implemented properly a successful Risk Management Strategy will help mitigate the possibility of a loss when the unexpected comes around.

Risk Management: A Definition

Douglas Hubbard, author of the book: “The Failure of Risk Management: Why it’s broke and how to fix it,” defines risk management as “the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events.” When it comes to unpredictable risks, Hubbard’s indication that ‘control’ is one of the key aspects of Risk Management gives us a clear projection of how the ‘unknown unknowns’ should be treated. After all, Risk Management is about managing Risks, not necessarily preventing them. Taking this into consideration, it is inherently possible to control the unknown unknowns as they come, and here are some suggestions on how you can amend your policy to do so.

Stress-tests

Stress-testing is becoming an increasingly popular trend in large Businesses across the US. This involves deliberately setting up a situation that tests employees’ ability to handle the pressure of a risk occurrence, which in this case could be an unpredictable risk like a weather-related risk event. By carrying out stress-testing, you will be able to evaluate your employee response to situations that may occur but cannot be predicted. This will help you address vulnerabilities and ratify your policy accordingly.

Eliminate fear

Fear is one of the most important factors to consider when it comes to assessing risk. While fear can help you keep on your toes, it is important not to let it hinder performance and the overall business process. Fear of the unpredictable will automatically cause a focus on potential negativity, but if you are to shift this focus to a more positive outlook, you can account for the ‘unknown unknowns’ in a manner which lends itself to success.

Unpredicted risk events will occur, often on a daily basis, in different forms and on different scales. However, with continuity in your Risk Management Strategy,  you account for these risks as they come and ultimately protect the long term future of your business.

Risk Management can be a difficult topic to understand. If you need anything cleared up, then speak to one of our experts for free.

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Manufacturers – Protect Your Organization When Discontinuing Operations

Selling part of your business or discontinuing a product line is a complex process. However, you are not free from liability or risk once the process is complete. If your goods are still sued after you exit the market, you are still liable for any potential personal injury or property damage resulting from those products.

When choosing to discontinue operations, many companies make the mistake of not purchasing insurance coverage to protect against defense and indemnity expenses that accrue after the business closed or product line is obsolete. As a result, they are left vulnerable to a potential lawsuit.

Organizations that discontinue operations and consequently layoff employees also face personnel issues and legal hurdles. To avoid complex legal headaches, business owners must be knowledgeable of their compliance obligations.

Product Liability

Once a product becomes available to the public, its makers become liable, even when the company is sold, merges with another organization or when the product is no longer produced. You are liable for any product you manufactured that is currently or was once on the market, regardless of the current state of your business operations.

Purchasing an insurance policy that protects against risks when discontinuing business operations is a must, as CGL policies do not cover injuries or damage that occurs after the business is sold or closed. Business owners should take the necessary precautions to protect themselves by purchasing a Discontinued Operations Insurance policy and by adhering to the following recommendations:

  • Get to know industry standards and applicable legal requirements. Before leaving your business or ceasing operations, determine how you must legally do so. For instance, you must give notice to creditors, the specifics of which vary by jurisdiction.
  • Devise a run-off business infrastructure. By doing so, you can handle future claims that result from incidents that occurred before the business closed. It is wise to devise risk management solutions in anticipation of a problem; you will already have remedies in place. Also, if defendants have difficulty locating you, this may be seen as an evasion of responsibility and could result in punitive damage for bad faith conduct. A run-off plan will mitigate those risks. It is also smart to let customers know why you are closing your doors or discontinuing a product line.
  • Create an infrastructure based on your needs. The creation and design of your company’s infrastructure will depend on how the business is shut down. Also, companies operating in highly regulated fields will have more obligations and the structure must accommodate losses far beyond when the business is closed. While creating an infrastructure, consider hiring a consultant who can provide guidance concerning future claims. You may also benefit from the expertise of loss auditors, legal counsel and product liability experts.
  • Provide guidance to those who remain. If you are only closing part of your business or discontinuing a product line, run-off your responsibilities before doing so. Provide legal advice, risk management and commercial guidance.
  • Maintain solid business records. Document when and where products were manufactured and to whom and when these products were sold. Your organization should also document the product development process, quality control measures, testing procedures, vendor lists and supplier lists. If you sell your business, keep all of the records from that transaction.
  • Create problem resolution systems. This may include consumer hotlines, complaint reporting procedures, incident forms, etc. Also determine why merchandise was returned to your company to potentially identify any potential product defects.

Personnel Liability

In addition to the concerns about product and consumer liability, there are also employee liability issues that must addressed when discontinuing operations, specifically with regard to layoffs and terminations. While this may be a trying time for your organization, it will be significantly worse if a terminated employee files a lawsuit against the company, so it is best to be prepared.

The following are safeguards to consider when conducting layoffs in conjunction with discontinuing operations at your business:

  1. When employees are let go, ask them to sign a waiver promising not to sue (known as a separation agreement). Be mindful of the Older Workers Benefit Protection Act of 1990 (OWBPA), which mandates that workers over age 40 have a minimum of 21 days to sign the release and another seven days to change their decision after they do so. If you pressure workers to sign before this time, you are at risk of a lawsuit. Under OWBPA, you must also provide 45 days to sign a waiver for multiple workers being laid off at the same time.
  2. Consider the Worker Adjustment and Retraining Notification (WARN) Act, which requires companies in certain circumstances to give employees notice before a layoff. More information is available at http://www.doleta.gov/layoff/warn.cfm.
  3. Offer severance packages based on the employees’ titles and lengths of service, as opposed to offering a universal package for all employees being laid off.
  4. Do not blame employees for things that they did not do or make false accusations as a way to justify a layoff.
  5. Conduct layoffs within a short period of time.
  6. If you must discontinue operations for financial reasons, high-ranking employees should also take some cuts as well. This shows remaining employees that everyone is making sacrifices for the company.
  7. Provide job counseling, resume writing guidance and job searching assistance to employees being let go.

Discontinuing your business’s operations presents may liability issues with regard to your products, services and employees. To learn more about the insurance solutions designed to mitigate those risks, contact us today.

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Heat Related Illness: Stay Cool When Working in the Heat

If your job requires you to spend time working outside, it is important to take the weather into account for safety purposes. When it is hot outside, your body temperature can rise to dangerous levels. Normally your body cools itself through sweating, but in hot weather, sweating is not enough and the result can be a heat illness.

Staying Cool

Follow the suggestions below to stay cool when working in hot weather:

  • Wear loose, light-colored clothing and some type of hat.
  • Adapt to working in hot conditions gradually, especially if you must do any strenuous physical work.
  • Take breaks indoors or in the shade when possible.
  • Avoid overexerting yourself during peak temperature periods (midday).
  • Drink liquids frequently, even if you don’t feel thirsty – at least eight ounces every 20 to 30 minutes. Choose water, fruit juice or sports drinks and stay away from liquids containing caffeine, which can dehydrate you.

Recognizing the Symptoms

There are three forms of heat illness, each with its own distinct symptoms:

  • Heat Cramps – severe muscle spasms in the back, stomach, arms and legs, which are attributed to the loss of body salt and water during periods of heavy perspiration
  • Heat Exhaustion – heavy sweating, cool or pale skin, nausea, headache, weakness, vomiting and fast pulse
  • Heat Stroke – high body temperature, sweating stops, red and often dry skin, rapid breathing and pulse, headache, nausea, vomiting, diarrhea, seizures, confusion or unconsciousness

Providing Treatment

It is essential to treat heat illness as soon as possible. If you are feeling any of the above symptoms, inform a co-worker and ask for help. If you suspect that a fellow worker has a heat condition, follow these first-aid tips:

  • Heat Cramps – Move the victim to a cooler area and allow them to drink approximately six ounces of water every 15 minutes. Follow up with a medical examination.
  • Heat Exhaustion – Move the victim to a cooler area and keep them lying down with their legs slightly elevated. Cool their body by fanning and applying cool, wet towels. If conscious, allow the victim to drink approximately six ounces of water every 15 minutes. Follow up with a medical examination.
  • Heat Stroke – You or a bystander should immediately call an ambulance. Meanwhile, move the victim to a cooler area, remove their outer clothing, immerse them in cool water or apply cool, wet towels or cloths to the body. Do NOT give them liquids. If medical help is delayed, call the hospital for further instructions while waiting. Heat stroke is life-threatening, so it’s important to move quickly!

Safety Reminder

The risk of heat illness increases with age, poor diet, being overweight, insufficient liquid intake, poor physical condition and/or when taking medication. Never take salt tablets without your doctor’s approval.

Be aware of weather conditions when you will be working outside so that you can be prepared with appropriate clothing and beverages. If you are working outside and start to feel any adverse symptoms, inform your supervisor and take a break.

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Smartphones and Distracted Driving

Integrated smartphone technology will soon become “all but standard” on new car and truck models, with nearly 100 million vehicles featuring the smartphone technology by 2016, according to a report by Juniper Research. The technology will integrate a driver’s smartphone with a vehicle’s computer and navigational systems, enabling the vehicle to send and receive data via the Internet.

That data could prove invaluable to employers, who could use the information to increase fleet efficiency, comply with regulations and monitor driver behavior.

The technology does not come without risks, however. Some analysts worry that the integrated smartphone technology could increase distracted driving, which is already a major safety concern for employers.

Motor vehicle crashes are the leading cause of worker fatalities, and distracted driving dramatically increases the risk of such crashes. It is important to address the issue of distracted driving with employees who drive as a part of their job.

April is National Distracted Month. Check with your insurance advisor for more information you can use to help your drivers be safe on the roads, focusing more on the task at hand rather than the technology IN their hands.

Newfirst Insurors can help with drafting a safe driving policy and developing training for your company that includes guidelines on distractions and cell phone use.

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It Only Takes 3 Seconds….

Interruptions or distractions—even those lasting less than three seconds—are costing businesses a lot in lost productivity and in some cases, fatal errors. A recent study from Michigan State University found that interruptions of only 2.8 seconds doubled the likelihood that an employee would make an error.

Distractions take on many forms, from technology distractions (text messages, email alerts and phone calls) to interruptions from other co-workers and background noise. Some psychologists say it takes approximately 10 to 20 times the length of the distraction for an employee to recover and resume what he or she was doing.

While lost productivity affects the company’s bottom line, in some industries—especially those with safety-critical risks—distractions can cause work errors that put the health and safety of the worker and others at risk.

Eliminating workplace distractions or interruptions is no easy task. Consider limiting distractions by:

  • Enforcing a mobile device policy limiting when employees can use devices, and scheduling adequate breaks where employees can use their phones and devices
  • Training employees on the best times to ask their co-workers non-urgent, job-related questions
  • Optimizing work areas to minimize the possibility of interruptions and distractions

For a mobile device policy and related materials, contact Texas Associates Insurors today.

 

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