By adopting risk management strategies, you can lower your premiums and increase your business operations.
Every day, small and medium-sized businesses are exposed to risks. These risks can directly affect your day-to-day operations, decrease revenue, or increase exposure. The business may experience severe consequences that can cause major interruptions.
Risks are inherent in any business model, regardless of whether it’s a new start-up or an established medium-sized company. It’s impossible to anticipate every unexpected risk. However, you can take steps to minimise these risks and protect yourself or your business against the costly and unexpected problems that could arise.
Trident Insurance understands both the risks and rewards faced by small businesses. Below is a list of top tips that can help reduce your business risk.
Risk Management Plan
The first step in risk management is to identify potential threats and then implement processes that minimise or eliminate them. A sound risk management strategy can yield the following benefits:
- Reduced downtime for the business
- Reduced chance of the business being the subject of legal action
- Reduced losses of cash and stock, etc.
- Lower insurance premiums
Each business is different, and so are the possible problems. Your broker can help you identify potential risks and develop a plan to reduce them. Here are some risks you should consider:
- Your business property is exposed to physical risks
- There are physical risks for you, your employees, and members of the public
- Risk to your reputation
- Compliance failures
- Operational problems
- Severe weather and other environmental risks
- Economic conditions
- Business interruptions
- Other financial risks
Once you have created a list of risks that are specific to your business (e.g., the physical risk of losing stock in your cool room due to a power cut), you can start to put together a plan to minimize each risk. As an example, a backup generator could be included in your cool room to provide power for any outages.
Identifying risks and how to respond to them
Undesirable events are more likely than you think. The likelihood of them happening and the potential impact on your business will vary from one business to another and from one industry to another. So, how can a business manage these risks?
- First, identify any events that could lead to a loss or disruption of the business
- These events then need to be analysed to determine the likelihood of their occurring and the severity of the outcome if they do. You can begin by categorising each event as either ‘very likely’ (or ‘very unlikely), or ‘moderately probable’ (or both). You can prioritise them by assigning a dollar value to each one (e.g., the replacement cost of a crucial piece of machinery or, in the case of bad debts, the total amount owed to customers)
- Prioritise the most probable and costly events.
- Develop procedures that are proportional to the risk your business is willing and able to take for each event. It is important to monitor the effectiveness of any procedure once it has been established.
Insurance for small businesses
As a precaution, small business insurance protects you and your company from potential risks. All small businesses can benefit from a Small Business Insurance Policy. This policy includes bundling of multiple insurance types to provide comprehensive and individualised coverage to meet your business’s needs.
Workers’ compensation insurance
Some types of insurance for businesses are mandatory. Any business that hires workers in Australia must have workers’ compensation insurance. Workers’ compensation policies will pay for medical expenses and any other costs incurred by an employee if they are injured in the line of duty. A worker’s compensation insurance policy can provide additional financial security for your company in the case of unforeseeable injuries to your employees.
Public liability insurance
Public liability insurance covers you in the event of an unforeseeable incident or accident that causes injury or damage to any member of the public, customer, or client as a result your business operations. Business owners can have peace of mind because the high costs of compensation in an unforeseeable accident could be financially crippling. If you are found guilty, your policy will cover the costs of legal defence, settlement claims, and compensation.
Indemnity insurance for professionals
Professional indemnity is designed to protect your company and you from any legal action brought against you by a client after you have provided advice or services. Negligence can lead to financial ruin. Professional indemnity insurance may be required in certain industries, such as medicine, accounting, and law. However, it is recommended for businesses that provide professional advice and services. It covers errors and omissions and provides peace of mind for business owners.
These are only a few types of insurance that small businesses often recommend. You may be able to benefit from a combination or other types, depending on your business, operations, and needs.
Make sure to document everything
It is important to keep detailed, up-to date and easy-to understand records of each business transaction. This should include sales and tax payments, operating costs, invoices sent or received, and any other business transactions. Record keeping is essential to ensure that you have a clear picture of your finances and minimise unnecessary spending.
When you hire employees, you need to show them how you keep good records and make sure that they document everything. Document management will minimise the risk of fraud, theft, and accidental financial slip-ups. It is essential that you can accurately track all financial transactions, such as where money is spent and how it is being used.
Learn about business regulations
Understanding the laws and regulations governing business in your state is important. You must ensure that you have the mandatory insurance policies in place and follow all other business regulations. These could be related to record-keeping, hiring staff, or specific laws that relate to your business type, such as food hygiene guidelines.
It can be very rewarding to own and run a small business. However, it is important to have sufficient protection to protect your business and livelihood from the unexpected. These are the steps you need to take to manage your risk in your small business. You can also speak with one of our highly qualified Trident Insurance brokers to receive personalised small-business insurance that meets your specific needs.