A comprehensive strategy for risk management for small businesses is an essential element of sound and prudent business practice.
Precautions against traditional threats such as fire and flood must, of course, be included. But it’s also vital to consider less obvious risks such as litigation. And unfortunately, these are rapidly increasing and evolving in response to technological advances and social trends.
Here are just a few of the important developments that we’ve noticed, and of which business owners need to be aware.
Cyber, Data and Privacy
Cyber liability is one of the fastest-growing areas of insurance and new types of litigation claims are likewise increasing in frequency.
As a single but important example, contractual changes mean that businesses accepting payments by Visa or Mastercard are now at greater risk of liability for fraud and data breaches if they fail to make use of the latest EMV (chip and pin) technology.
Smaller firms may lack the resources to dedicate specific staff to the management of cyber risk. But there is a great deal that can be done with the help of software providers and third-party contractors to protect against hackers and malware/ransomware attacks.
Appropriate precautions will do much to reduce the risk of litigation, but it’s also vital to have the right insurance coverage in place. In this rapidly changing environment, general policy wordings may quickly become obsolete. It’s therefore essential that you consult with your insurance adviser to ensure that the specific needs of your business are being met.
Social Media and Copyright Risk Management for Small Businesses
The increasing use of social media as a communications and marketing tool has created a whole new field of potential liability and litigation.
The misuse of corporate social media platforms by staff may have reputational consequences. But from the point of view of financial risk, alleged breaches of copyright are likely to be far more serious.
It’s now extremely easy to cut, copy, paste and share content of all kinds online. Unfortunately, it’s often far less easy to understand the different legal protections that may apply to this content when used on your own company website, in promotional literature or in online advertising material.
The terms and conditions on which use may be permitted are often contained in lengthy legal documents of bewildering complexity. And while the consequence of an unintended breach may sometimes be no more than a “cease and desist” notice, copyright owners are becoming increasingly aggressive in claiming large damages as a deterrent to others.
Speculative or outright false claims of ownership are also not uncommon, and may be expensive to defend even if entirely baseless.
The thorough monitoring and training of staff who may be engaged in this kind of work is therefore very important. But the right kind of copyright litigation and legal expenses coverage is also essential.
Flexible Working and Vicarious Liability
Insuring against vicarious liability for the actions of their employees has long been a necessity for businesses.
But the rise of telecommuting, remote working and the gig economy have introduced a whole new level of complexity to the problem of getting the right insurance coverage.
Flexible working may have advantages for both parties. But the question of exactly who is or is not an employee, and the legal rights and responsibilities that follow, is no longer straightforward.
The loss or misuse of confidential company data by an employee operating from a separate location, not under direct supervision, is a particular concern. And the issue of when such a person can be deemed to be “at work”, irrespective of normal working hours, is likely to be a rich source of litigation.
So the advice of both an employment attorney and insurance expert is highly advisable for businesses that wish to offer flexible working.
The #metoo Movement
The rapid rise of the so-called “#metoo movement” since 2017 has also been responsible for a significant increase in workplace litigation.
Staff are now far more aware of their potential remedies for sexual harassment, discrimination or bullying, and high profile cases have encouraged large financial claims.
Risk management for small businesses in this context requires both thorough staff training and constant vigilance in the creation of an appropriate workplace culture.
But carefully worded employment practices liability and legal expenses insurance policies are also essential.
Talk to the Experts
Staying one step ahead of all these changes can be tough for any business – particularly for smaller companies that don’t have in-house risk management for small businesses expertise.
Traditional liability insurance, moreover, is unlikely to provide coverage for every new situation that may arise.
The answer is to work with an independent broker that will take the time to understand the particular needs of your business and includes risk management for small businesses advice as part of a comprehensive and cost-effective insurance solution.
So for an initial exploration of the way in which the new litigation environment may affect your business, why not call us today on 805-564-7645 or send us a message here.