Small Business Risk Management: Top 3 Threats to Small Business Owner
Running a business is complicated and there are many threats facing small business owners, but there are also some simple strategies they can take to identify and manage key risks.
Optimism 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 small business can come crashing down. That’s why smart small 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 for your business is identifying potential risks. There are a number of risk, but here are 3 we believe are a small business owners top 3 threats,
1. Protecting Your Small Business Property
Property like inventory, raw materials etc. 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. Commercial Property Insurance coverage can come in many forms to suit your specific needs, but a typical policy will provide the replacement cost value for your building, selling price for your stock and the actual cash value for your “other” business property like equipment, furniture etc.
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 uninsured or underinsured is a risk too great to take.
2. Business Interruption For Your Small Business
Is your business prepared to weather the storm if disaster strikes? If a fire, flood or tornado causes the your location 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 some commercial property insurance policies do not cover the costs of such a 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, business owners consider adding Business Interruption coverage to their Commercial Property Insurance policy. This invaluable, though often overlooked, coverage safeguards your business by covering operating expenses and lost income while the permanent business location is being repaired.
3. Liability Losses Facing Your Small Business
No matter how well you plan, running a small business can be fraught with unexpected surprises. However, smart small business owners 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.
Insurance is a key component of any comprehensive risk management plan, but successful risk management also involves risk identification, prevention, training and contingency planning. Contact ALIGNED Insurance today to learn more about the tools and resources for your small business that we can offer to help you manage risks, advance safety and boost employee morale.
|ALIGNED Across Canada 100% Canadian owned, ALIGNED is a premiere insurance brokerage that serves more than 1,400 clients across the country. ALIGNED’s offices in Toronto, Calgary and Vancouver are supported by a national operations centre in Cambridge, Ontario. Uniquely within the industry, ALIGNED creates, negotiates and delivers the best business insurance and risk management strategies/solutions to organizations like yours.