Driven by the pandemic and an entrepreneurial spirit, new small businesses are very much on the rise. In 2021, the U.S. Census Bureau reported
a record number of new business applications: close to 5.4 million, as compared to 4.3 million in 2020.
With this explosion of small enterprises comes increased risk for small business owners.
To assist new and existing clients, Coalition’s Executive Risk Assessment
intelligence helps uncover specific risks the insured may be susceptible to. With this data, brokers can best advise small business owners.
From directors & officers (D&O) lawsuits to employment practices liability (EPL) claims to regulatory issues, gathering best practices for mitigating these risks is essential for small organizations.
Mitigating the top four small business risks
While common to all organizations, issues surrounding mergers and acquisitions (M&A), hiring and retaining workforce, cybersecurity and payment delinquency are particularly acute with smaller companies.
By utilizing Coalition’s Executive Risk Assessment to gauge an organization’s specific level of risk, brokers can then offer customized coverage and advise on mitigating these challenges. Here are some best practices to solve them.
According to Coalition’s 2020 Executive Risks Report
, 55% of small businesses were involved in some form of merger and acquisition (M&A) process in the past two years.
To help clients navigate M&A issues, here are some widely-accepted best practices for avoiding liability:
When considering offers, exercise due diligence. Don’t blindly accept the first buyer that comes along; spend time to research the real value and worth of the business.
Carefully document all communication.
Make sure the full executive team is on board from day one.
Bring in experts as needed, including proper legal expertise. While this can be costly, it’s well worth it in the long run to have the proper guidance while navigating through this high-stakes process.
Make sure the company for sale has proper insurance coverage, or the purchasing business could be face other challenges down the line.
2. Hiring and firing
In SCORE’s Small Business Jobs Report
, 63.4% of owners identified finding the right talent as their number one challenge. Further, Coalition’s own research found a number of smaller companies dealing with EPL issues. As part of Coalition’s Executive Risk Assessment, issues such as diversity, work-life balance and employee benefits are addressed.
To help keep employees content, consider the following:
Diversity is an advantage. The more diverse the workforce, the more unique ideas emerge. This can lead to a noted improvement in productivity.
Incorporate work/life benefits such as unlimited paid time off, voluntary benefits, reimbursement for exercise and 401Ks. Gestures like thank you gifts can also go a long way. Happier employees means reduced risk.
Employee surveys are a useful way to figure out what employees value.
3. Cyber risk
Coalition’s 2021 Cyber Claims Insurance Report found companies with less than 250 employees saw their cyber risk increase by 57% from the first half of 2020 to 2021. Smaller companies may unknowingly cut corners when it comes to cyber protection due to fewer resources. Consequently, cyberattacks are unfortunately more common among small businesses.
Here are some cybersecurity risk management best practices:
Identify all known risks. When working with vendors, it is critical to identify any known risks upstream and downstream of the supply chain. Establish a framework for accepting, transferring, mitigating or refusing supply chain risks.
Strengthen passwords. Weak or reused passwords can present a weak link for cybercriminals to penetrate. Organizations should require stronger passwords, limit login attempts and refrain from storing and reusing passwords.
Employ multi-factor authentication. MFA is one of the best security controls that organizations can establish to safeguard against attacks.
Audit your software on a regular basis. It is very important to audit all software on the network, making sure it is up to date and not vulnerable to compromise.
4. Payment delinquency
A leading indicator of small business risk, payment delinquency can be the result of a variety of challenges facing small businesses — from cash flow to manually bill paying that leads to errors. Small business experts advise
being up front with creditors. If small businesses can explain their situation and lay out a payment plan, most vendors are willing to work something out.
Wisely choosing partners
It’s imperative for small businesses to partner with the insurance provider best suited to understand their unique risk management needs and offer the most effective strategies for mitigating those risks.
Coalition’s Executive Risk Assessment gives brokers the tools to do just that — a way to effectively identify and assess a company’s risk profile, create a customized insurance package, and help a small business reduce their risk where they are most vulnerable.
for more information on reducing your clients’ risk with Executive Risk Assessment. Visit Coalition now
to learn how to bring a new approach to executive risks.