PREVENTION FIRST: SHIFTING OUR FOCUS IN BUSINESS INS.

A look at your crucial role

in helping organizations identify and manage risks

I realized that no amount of insurance could heal

a serious injury or loss of life, and there were several risks where insurance wasn’t even a solution.

By Randy Boss, CRM, MWCA, SHRM-SCP

Starting as a business insurance agent in 1977, I initially focused on selling policies to protect businesses against unforeseen events like fires, wind damage, lawsuits, and employee injuries. However, it quickly became apparent that waiting for something bad to happen was too reactive. I shifted my focus to a proactive “prevent first” approach before selling the insurance, and I’ve never looked back.

This shift in focus was a pivotal moment, as it underscored the importance of prevention over reaction. I realized that no amount of insurance could heal a serious injury or loss of life, and there were several risks where insurance wasn’t even a solution.

Many of my clients are mid-market companies without the luxury of a full-time risk manager, so they rely on me for guidance. As insurance agents, we play a crucial role in helping these businesses identify and manage risks.

Here are some common risks that mid-sized businesses often overlook and how we, as insurance agents, can help them focus on prevention first before we sell an insurance policy:

Cybersecurity risks. Mid-sized businesses often underestimate their vulnerability to cyberattacks, thinking that their size protects them. However, the potential losses from such attacks can be devastating. They frequently lack dedicated IT security resources and fail to pay attention to essential practices like regular updates and multi-factor authentication, making them soft targets.

I recently met with a manufacturer that had fallen victim to a phishing scam, losing $500,000. They thought they were paying their largest supplier but instead sent the money to an overseas account to disappear without a trace.

Their previous agent never discussed cyber risk or proper insurance. Don’t let this happen to you. Encourage clients to work with knowledgeable IT providers, train employees, and maintain comprehensive cyber insurance to safeguard their operations and reputation.

Business interruption risks. Many mid-sized companies lack comprehensive business continuity plans for disruptions like natural disasters or pandemics. They often underestimate the amount of time and money it takes to get their operations up and running again.

The story of a local metal finishing business that burned down just shy of its 60th anniversary, leaving 100 employees jobless, is a stark reminder of the need for such plans. They were underinsured for business income, and good intentions to rebuild never materialized.

When I drive by their site, the burned-out machines are a grim reminder. This underscores the need for robust continuity strategies, including risk assessments and alternative operational setups, to enhance resilience against unforeseen disruptions.

Employee-related risks. Issues like talent retention, workplace safety, rising benefit costs, and harassment can significantly impact operations. A multigenerational workforce presents unique challenges like communication issues and varying expectations.

For example, I had a manufacturing client who faced high turnover and communication breakdowns between younger and older employees. The younger employees felt undervalued, while the older employees were frustrated with the lack of respect for their experience. I encouraged them to implement mentorship programs and targeted training, significantly improving retention and workplace harmony.

Advise your clients to implement effective talent management, invest in safety protocols, explore innovative benefits, and prioritize a harassment-free workplace to foster a stable, productive environment.

Supply chain risks. Over-reliance on a few suppliers can lead to significant disruptions. I had a client who depended heavily on a single overseas supplier for key components. When a natural disaster struck the supplier’s region, it completely halted their production. This disruption caused delays, financial losses, and strained relationships with their customers.

I suggested they work to diversify their supplier base and develop contingency plans, which significantly improved their resilience to such events. Encourage your clients to diversify suppliers, conduct regular risk assessments, and develop contingency plans to protect their operations and maintain competitiveness.

Regulatory and compliance risks. Keeping up with changing regulations is crucial to avoid legal, financial, and reputational risks. I once worked with a manufacturing company that neglected to update its safety protocols to comply with new OSHA regulations. This oversight led to a severe workplace accident, resulting in significant fines and a temporary shutdown of operations.

By proactively establishing compliance teams, providing ongoing training, conducting regular audits, and engaging legal experts, you can help your clients avoid such pitfalls and ensure employee safety.

Financial risks. Excessive debt, poor cash flow management, and inadequate financial controls can jeopardize stability and growth. I recall a mid-sized retail client who expanded rapidly without proper financial planning. They took on excessive debt to open new stores, but poor cash flow management led to severe liquidity issues. Eventually, they were forced to close several locations, leading to financial losses and reputational damage.

While there’s no direct insurance solution, guide your clients to resources for strategic financial planning, staying informed about market trends and adopting prudent debt management practices to drive sustainable growth.

Intellectual property risks. Protecting innovative ideas and products is essential for maintaining a competitive edge. I had a tech startup client who developed a groundbreaking software application. They were so focused on bringing their product to market that they should have properly secured their intellectual property (IP). A competitor copied their software, leading to a costly legal battle and lost market share.

Advise your clients to implement a comprehensive IP strategy, including regular audits, proper registration, employee education, and robust cybersecurity measures to safeguard their intellectual property.

Strategic risks. Failing to adapt strategies to changing market conditions can lead to long-term challenges. Remember Blackberry? I had one and loved it, but they didn’t adapt to the market shift in 2007 when consumers preferred iPhone touchscreens. Blackberry could not change quickly enough and ultimately went out of business.

Encourage your clients to conduct regular strategy reviews, monitor industry trends, engage in scenario planning, and foster an innovation culture to enhance agility and ensure long-term success.

Crime-related risks. Neglecting physical security measures can make businesses vulnerable to theft and burglary.

I worked with a mid-sized manufacturing business in an area experiencing increased crime. They used to leave their warehouse doors open during warm weather for better airflow, but after a series of thefts, they realized they needed to improve security. They upgraded their air-conditioning system, installed a card entry system, and added better parking lot lighting and security. These measures significantly reduced their vulnerability to crime.