2021 Small Business Risks

Summary: Small businesses face a variety of risks. Learn about 2021 small business risks, including the ongoing coronavirus pandemic, cybersecurity attacks and issues with independent contractors, all of which can impact a business’s productivity, reputation and employee morale.

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 every year, including business interruption, cyberattacks, data privacy legislation and more.
 

COVID-19 Risks for Small Businesses

The coronavirus pandemic remains the number one risk for businesses. Much of the country has faced various lockdowns and restrictions since mid-March of 2020, with governors issuing orders to help prevent the spread of the virus. Federal and state governments have passed economic relief plans, such as Paycheck Protection Program loans, 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. As industries reopened under stringent guidelines, each sector followed specific requirements to protect the individuals ringing cash registers, serving customers or those heading back to their desks after working from home. Business must continue to follow federal, state and local guidelines to reduce the risk of COVID-19 exposure to employees and customers.

Business Interruption

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% 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.

Cyber Attacks

From spear phishing to malware infestation, cyber and ransomware attacks present a very real threat to today’s small businesses. In fact, over 28% of all data breaches in 2020 targeted small businesses. Besides causing a major disruption, cybercrimes leave their victims with an expensive mess to clean up. Additionally, the number of employees working remotely continues on an upward trend, especially during the COVID-19 pandemic, increasing the risk for cyber attacks.

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. 

More states requiree paid sick leave and paid family-leave programs, and many have been temporarily expanding their programs in response to the COVID-19 pandemic. Many small businesses are enhancing these types of benefit offerings to recruit and retain top talent in a tight labor market.

Understanding your employees’ rights and having the right employment practices liability insurance (EPLI) can help protect your company against a costly lawsuit.

Transitioning to a Remote Workforce

Although the COVID-19 vaccine will continue to be administered to more of the population throughout 2021 and make it safer for employees to return to an office setting, many workers report they’d prefer to work remotely indefinitely. While there are advantages to allowing employees to work from home, employers must ensure they have measures in place to maintain the safety of the organization. For instance, offering ongoing cybersecurity training for all employees, stressing the importance of using a secure Wi-Fi network, and keeping work devices like laptops and cell phones secure.

Employee Injuries

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. 

New Technologies

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.

A Strong Focus on Small Businesses

AmTrust has been a trusted partner for small businesses since 1998. Offering a suite of customized risk management solutions, we can help you build a coverage plan that best meets your business's needs. Contact us to find out more information about our small business insurance solutions.
This material is for informational purposes only and is not legal or business advice. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is appropriate or suitable for any specific business or legal purpose. Readers seeking resolution of specific questions should consult their business and/or legal advisors. Coverages may vary by location. Contact with your local RSM for more information.