by Walt Capell, president and owner of Workers Compensation Shop
A major part of running a successful business is effective decision making. One area where good decision making plays a large role in any business is in regards to risk management. A large part of a good risk management plan is a business owner who can determine what the businesses actual risk is and how much of a risk each element represents. There is definitely a difference between actual and perceived risk. Perceived risk is the risk someone thinks they face vs. actual risk being the risks that are faced in day to day operations.
Far too many business owners waste valuable time dealing with their perceived risks and fail to address the actual risks their business faces on a day to day basis. Once a business owner identifies what the actual risk is they can then prioritize, prevent and manage the risks their business faces.
Here are 5 elements of risk management that many small business owners struggle with:
Preparing for the loss of a key employee.
Every business has employees that are essential to how the business operates. These employees are essential to the success of your business, but depending on any one employee too much is never good for business. In order to succeed in business there must be a plan for what to do when a key employee leaves. This can be a person who simply knows the facility like the back of their hand or someone in IT who fixes every computer problem without a need for outside assistance. Having these employees is essential, but there needs to be a plan in place for the day they are not around any longer. If the employee is so important that the business would cease to exist without said employee, there are insurance policies that can help the business deal with the loss and find a replacement.
Having an appropriate Social Media Policy.
In today’s day and age most businesses find that they need to have some type of presence on social media. Along with this presence should come a formal social media policy for your company. First you should determine which sites to be on and who will have access to the accounts. You may determine that you use a professional site like LinkedIn only for HR purposes and the HR department is the only department who has access to the log in information for that site. The marketing department or your social media professional may have access to the other sites your business has an account on. Most businesses are comfortable starting with Facebook and Twitter. Most people have a personal Facebook account and that is also where the most potential customers are. Some businesses may find that other sites like YouTube, Instagram or even SnapChat might be appropriate for reaching their target audience. No matter what site you decide to have a presence on, there needs to be a documented policy for what is and what is not acceptable behavior online.
Adequate Cyber security.
In todays’ business climate cyber security is no longer just a problem for big business. Two of the largest data breaches in history, Target and Home Depot, were started by hackers who first gained access to a small businesses network. Those small businesses were vendor partners of the larger business who ultimately was breached. Even if your business does not have a website you probably store some bits of information about your customers or you use some type of electronic device to accept payments. These devices have the potential for criminals to gain access to the information inside of them and when they do your business could be liable. Properly training your employees on the cyber risks you might face is extremely important. Securing the proper insurance to protect your business in the event a breach occurs is equally important.
In most states there is a minimum amount of help you have to provide for your customers when a breach occurs. Notifying all potentially affected customers and provide credit monitoring services for one year. These types of costs can be covered if your business secures a cyber-liability or data breach policy.
Proper Classification for insurance purposes.
For purposes of workers’ compensation insurance, there are several hundred NCCI class codes. NCCI stands for the National Council on Compensation Insurance and it is the main organization that determines the risk each particular industry take son during their daily business operations. They help states determine how much risk a business takes on and what the proper rate should be for workers comp premium. Most industries have several different classification codes. Take Landscaping for instance, if your business only mows existing lawns than it is in one classification code. If a different business installs shrubs and sod it takes on a different set of risks and is in a different classification code. Another landscaping business may have its employees climb high in to trees with a chain saw. This business would be in yet another classification code. If you do not properly inform your insurance agent what exactly your business does and does not do, then you may up under or over paying your premium. These mistakes usually get fixed at the end of term audit, but it means that your business either owes much more in premium or has been paying too much throughout the year.
President and owner Walt Capell started Workers Compensation Shop in 2005. Workers Compensation Shop is a rapidly growing national insurance agency with a strong reputation for forward-thinking, out-of-the-box products and solutions for business owners. Walt would like to use his experience in insurance and as a small business owner to benefit the leaders of tomorrow.
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