Small Business Risks: Potential Exposures That Could Leave Your Business Vulnerable in 2020
Policywire by AmTrust
Whether your business is brand new or a fixture in the community, here are seven potentially damaging risks to keep in mind as we continue through the many challenges of 2020.
Protect Your Organization from Small Business Risks
The types of business risks will vary per organization. Business owners should make sure they have coverage to protect their companies from a variety of risks this year, such as business interruption, cyberattacks, data privacy legislation and more.
COVID-19 Risks for Small Businesses
Businesses can typically face multiple risks throughout the year, but COVID-19 has accelerated the risks to organizations in 2020. The coronavirus pandemic currently is the number one risk for businesses. About 95% of the country was under some form of lockdown since mid-March, with governors issuing stay at home or shelter in place orders to help prevent the spread of the coronavirus. Federal and state governments have passed economic relief plans, such as the CARES Act, to assist small businesses during uncertain times.
Employees, who were able, transitioned to working remotely during the shutdowns while restaurants, retail stores, manufacturing and offices were closed. However, essential businesses like grocery stores and pharmacies remained open during the closures. Those industries that were closed are currentlyreopening under stringent guidelines. Each sector has specific requirements to protect the individuals ringing cash registers, serving customers or those heading back to their desks after working from home. Not following federal, state and local guidelines can bring a risk of COVID-19 exposure to employees and customers.
Whether caused by Mother Nature, a break in the supply chain or a cyberattack, an abrupt business stoppage can spell doom for a small business. More than 40 percent of small businesses hit by a disaster – from fires to floods – never reopen their doors, per the Federal Emergency Management Agency (FEMA). Just as dangerous, cyber intrusions such as denial of service and ransomware attacks can cost small businesses tens of thousands of dollars, sensitive data and, ultimately, their customers.
Business interruption insurance compensates you for lost income during the work stoppage, safeguarding your small business against an unexpected shutdown. To help small businesses reduce the impact of a disruptive or catastrophic event, FEMA has links to a variety of resources on its website.
From spear phishing to malware infestation, cyber and ransomware attacks present a very real threat to today's small businesses. In fact, over 40 percent of all cyberattacks target small businesses. Besides causing a major disruption, cybercrimes leave their victims with an expensive mess to clean up. For example, in 2018 the average cost of a data breach per compromised record was $148, according the Ponemon Institute.
Since data is today's commercial currency, a cybersecurity plan should be a part of your small business toolkit. Besides putting the proper safeguards in place, having cyber liability insurance will help protect your business against cyber-related risks.
Changes in Legislation and Regulation
In the past few years, our country saw the introduction of groundbreaking legislation in response to a myriad of hot-button issues, from legalized marijuana to paid leave benefits to the rights of independent contractors.
In January 2020, California enacted AB5, legislation limiting the definition of an independent contractor. Under California law, nearly all gig-economy workers – from Instagram marketers to home health care providers – are now considered employees, entitling them to the same rights and protections their traditional counterparts enjoy, including workers' compensation and health care benefits.
Only 10 states currently require paid sick leave and just five states have paid family-leave programs. To recruit and retain top talent in a tight labor market, many small businesses are enhancing their benefits offerings.
Also on the radars of small business owners is the legalization of medical marijuana. As demand for cannabis continues to grow, employers will need to stay current on evolving marijuana laws. Understanding your employees' rights and having the right employment practices liability insurance (EPLI)can help protect your company against a costly lawsuit.
A Shortage of Skilled Employees
Small businesses employ nearly half of the nation's workforce. Before the pandemic, there were not enough qualified candidates to go around and according to the NFIB's July 2018 jobs report, 37 percent of small business owners had job openings they could not fill. The construction, manufacturing and wholesale trades had the most frequent job openings, per the report. Due to the COVID-19 crisis, the job market is currently in suspension as businesses navigate how to do business in the time of a pandemic.
According to the National Safety Council, a worker is injured on the job every seven seconds. When a business loses an employee to an injury or illness, both the employee and the employer suffer. Like their larger counterparts, small businesses are responsible for indemnifying their employees who are injured or become ill at work. Having a safety-minded team and a safe work environment will significantly reduce the risk of injury and keep your workers' compensation costs in check. An experienced loss control team can help you create and implement an effective workplace safety plan that works for everyone.
From accounting and e-commerce software to e-mail marketing and customer relationship management (CRM) tools, the Internet of Things (IoT) has fueled an explosion of data and sensitive information that could fall into the hands of hackers and other cyber criminals. Because of the growing number of connected devices and the digitalization of supply chains, small businesses are more vulnerable to cyberattacks than ever. Opening the door to invasion of privacy lawsuits, cyberattacks like a data breach could do substantial damage to your business's reputation. Ongoing cybersecurity employee training, encrypting all company data and archiving (or deleting) old data are all ways to guard against costly cyber risks.
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Disclaimer: WorkersCompensation.com publishes independently generated writings from a variety of workers' compensation industry stakeholders. The opinions expressed are solely those of the author and do not necessarily reflect those of WorkersCompensation.com.