Small business owners are hard workers, with the ability to get out there and do what’s required to run a successful business. As a small business owner, you understand the importance of protecting your livelihood, your investment and your business. As much as possible, risk mitigation in small businesses requires you to prepare for the unexpected.
All business models carry risks, whether you run a brand-new start-up or a decades-old medium-sized business. It’s impossible to prevent every potential unexpected risk from occurring. However, there are steps you can take to minimise these risks and protect yourself and your business from the – often costly – unexpected problems that may occur.
Here at GSK Insurance, we understand the risks and rewards small businesses face. We’ve compiled a list of our top tips for how to reduce business risk:
1. Risk management plan
A risk management system acts as a contingency plan, and will help you not only reduce potential problems but also help you recover should they occur. Before you begin to put a risk management plan in place, it’s important to identify potential risks your business may face.
Every business is unique, and so too are the potential problems. Your insurance broker can work with you to help you identify risks and create a risk reduction management plan with them in mind. Some risks to consider include:
- Physical risks to your business property
- Physical risks to yourself, employees or members of the public
- Risk to your reputation
- Compliance failures
- Operational issues
- Environmental risks including severe weather
- Economic conditions
- Interruption to business
- Other financial risks
Once you have a list of identified risks that apply specifically to your business (for example, the physical risk of a power outage causing loss of stock in your cool rooms), you can put a plan in place to mitigate each risk. Using our cool room example, this could include a backup generator which will kick in should a power outage occur.
Make a detailed business continuity plan that outlines the course of action should any of these risks come to fruition. Your plan should be in place so that you can manage the risks if they occur. You should be thorough in your planning, and cover all bases, even if the event seems unlikely. It’s better to be over-prepared and never have to use your risk management plan than being caught unawares by an unexpected event. One of the most vital parts of a risk management plan should be an adequate insurance policy – which takes us to our next point.
2. Small business insurance
Small business insurance acts as a safeguard to protect you and your business against risks. Every small business can benefit from a small business insurance policy, including bundling several types of insurance for comprehensive and personalised coverage to suit the needs of you and your business.
Workers compensation insurance
Some forms of business insurance are mandatory. For example, workers’ compensation insurance is mandatory in Australia for any business that hires employees. In the event that an employee is injured as a result of their work activities, a worker’s compensation policy will cover their medical bills and other associated costs. Having a worker’s compensation insurance policy in place will offer additional peace of mind, knowing your business is financially covered in the event of unforeseen injury to your employees.
Public liability insurance
Public liability insurance will cover you if an accident or unforeseen incident causes damage or injury to a member of the public, a customer or client due to your business operation. Public liability insurance offers peace of mind to businesses, as the extraordinarily high cost of compensation can be crippling to a business in the event of an unpredictable accident. Your policy will generally cover the cost of legal defence, settling claims and compensation if you’re found liable.
Professional indemnity insurance
Professional indemnity aims to protect you and your company in the event that a client takes legal action against you following advice or services from you. You may be found liable for negligence, which can be financially devastating. While professional indemnity insurance is mandatory in some industries (such as medicine, accounting and law), it’s recommended for any business providing professional advice or services. It can cover accidents, omissions or errors, and offers peace of mind to business owners.
These are just a few of the types of insurance often recommended for small businesses. However, depending on your company, business operations and needs, you may benefit from a combination of these, or other types of small business insurance such as goods in transit, property cover or management liability insurance.
3. Document everything
Make sure you keep neat, up to date, easy to understand records of every business transaction. This should include sales, tax payments, operation costs, invoices sent and received, and any other business transactions. Effective record keeping will ensure you understand where your finances are going, and will help you minimise unnecessary spending.
If you hire employees, it’s important you teach them how to keep good records, and ensure they’re documenting everything. Good document keeping will minimise the risk of fraud, theft and accidental financial slip-ups. You should be able to account for all the business finances, where money is spent and where money is coming in.
4. Understand business regulations
It’s important to understand business regulations, responsibilities and laws in your state. As well as ensuring you have any mandatory insurance policies in place, you need to follow any other compulsory business regulations. These may be around record-keeping, hiring of staff, or specific laws relating to your type of business, such as food hygiene guidelines.
Owning and running a small business can be extremely rewarding – but it’s also important to ensure you have adequate protection to safeguard yourself, your business and your livelihood against the unknown. Follow these four steps to get started on risk management for your business, and speak to one of our highly qualified GSK Insurance Brokers to get personalised small business insurance tailored to your needs.