Six Real Small Businesses Risks in 2019

Topics: Small Business

A slow sales month. An income tax increase. Changing vendors. While challenges like these can slow the momentum of your small business, they probably won’t bring it to a screeching halt.

small business risks 2019

Whether your business is brand new or a fixture in the community, here are six potentially damaging risks that should be on your radar as we continue to fly through 2019:

1. 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 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. Despite the risks, less than a quarter of small businesses have a standalone cyber insurance policy, per a report featured in Insurance Journal.

Safeguarding your small business against an unexpected shutdown, business interruption insurance compensates you for lost income during the work stoppage. To help small businesses reduce the impact of a disruptive or catastrophic event, FEMA has links to a variety of resources on its website.

2. Cyber Scares

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 (meaning 100 hacked files would cost $14,800 to recover/clean up). On average, it took organizations 196 days to detect a breach, per a 2018 study. Because of the steady growth of connected devices and the digitalization of supply chains, small businesses are more vulnerable to cyberattacks than ever.

An advocate for cyber safety, the National Cyber Security Alliance launched CyberSecure My Business, a national program designed specifically for small and medium-sized businesses. Because 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.

3. Changes in Legislation and Regulation

Over the past year, our country saw the introduction of groundbreaking legislation in response to a myriad of hot-button issues, from sexual harassment and legalized marijuana to paid leave benefits and the rights of independent contractors.

Last spring, California passed 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. The falling of this legal domino has prompted gig employers across the U.S. to revisit their current business models and coverage plans.

While proven to improve employee retention, paid leave has been a flashpoint for debate. As of January 2019, more than 40 state and local jurisdictions had implemented paid leave laws, with a number of others planning to introduce policies this year. Besides improving retention, paid leave reduces unplanned employee absenteeism; in 2017, the U.S. Department of Labor estimated that almost three percent of an employer’s workforce was absent on any given day.

Although paid leave programs benefit both employees and their employers, 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.

Another catalyst for change is the #MeToo movement, ignited by the news about Hollywood producer Harvey Weinstein and a number of A-list celebrities. By mid-2018, 32 states had introduced more than 125 pieces of sexual harassment legislation. That same year, the Equal Employment Opportunity Commission recovered nearly $70 million for victims of sexual harassment, up from $47.5 million in fiscal year 2017. Awareness, education, training and EPLI coverage are all valuable safeguards for your business.

4. A Shortage of Skilled Employees

Comprising 99.9 percent of the nearly 5.8 million companies in the U.S., small businesses employ nearly half of the nation’s workforce. Thanks to a thriving economy, the number of small businesses planning to create new jobs reached a 45-year high last August, per the National Federation of Independent Business (NFIB). Unfortunately, there were not enough qualified candidates to go around. 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. In 2019, the talent crunch continues.

5. 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. Read AmTrust Financial Associate Vice President Robert Schiller’s article on how to develop a successful return to work program for injured employees.

6. New Technologies

If you’re like many small business owners, you’re using technology to level the playing field between your business and your much larger competition. From accounting and e-commerce software to e-mail marketing and customer relationship management (CRM) tools, there is an array of tech-driven tools to help you market and manage your business. However, if you’re like many small business owners, the choices can be overwhelming. According to a Forbes Insights study, nearly one-third of small business owners surveyed said they were not sure which technology would be best suited for their business.
While picking the right technology can be a challenge, not understanding the technology you’ve chosen can put your business at risk. Before making any decisions, ask yourself if the new technology can be implemented seamlessly. If it doesn’t complement – or work with – your key processes, you could be in for an operations nightmare. In other words, your payment software should work with the accounting software. Your digital accounting tools should complement your CRM tools. CRM should work with marketing, and so on.

Additionally, thanks to new technology and the IoT, businesses are able to collect and store huge amounts of data. Therefore, backing up and protecting your data is paramount. Opening the door to invasion of privacy lawsuits, a a data breach could do irreparable damage to your business’s reputation. Ongoing 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

Once a small business ourselves, AmTrust understands the unique challenges they face. Through the years, we have evolved into a multinational property and casualty insurer, one that today serves over 400 classes of business.

As the nation’s number one carrier in the small workers’ comp market, AmTrust has been a trusted partner for small businesses like yours since 1998. Today, we are stronger than ever. Offering a suite of customized risk management solutions, we can help you build a coverage plan that best meets the needs of your business.

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.

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