Running a business can be both risky and rewarding but it has certainly never been more challenging than in the current economic climate. The continued scarcity of credit, cost pressures and falling demand in many markets have made these extremely tough times for any entrepreneur.

On top of this, there is the constant threat of unwanted events, such as a fire or burglary, putting your business under further financial strain at a time when you are least well equipped to deal with it.

This is why the need for and value of insurance has never been greater. It cannot find you new markets for your products or services, but will provide a financial safety net that no business can afford to be without. Having the right cover in place can make all the difference between survival and failure should the worst happen. It really is that important.

But insurance is not just about providing financial protection, important though that is. This, of course, is why firms buy cover, but insurers also offer another valuable service by helping you minimise the chances of incidents happening in the first place. No business wants to make a claim if it can avoid it and by taking steps to reduce risk you can make this less likely. Of course, not all dangers can be eliminated; no one can control the weather for example, although we all wish we could. However, many threats, such as fire and weather damage, can be proactively managed and lessened.

Identifying risks
Risk management should be an integral part of your business strategy. It makes sound commercial sense by reducing the costs that insurance does not cover, such as that of replacing staff and giving sick pay, bad publicity, inconvenience and fines. It can also make it easier to obtain insurance. Any firm with a poor risk management record will find insurance more expensive and harder to obtain.

Insurers, as experts in managing risk, can help identify the main threats to your business. This involves an assessment of the dangers your company faces, followed by the development of a strategy or programme to either eliminate or control them. Your plan should include key procedures for employees; contingency plans to minimize injury and business disruption; and a list of important contacts, such as the emergency services and your insurer. Risk management is not a one-off exercise but monitoring and reviewing the effectiveness of the risk management policy and procedures will ensure that your business is as well protected as possible. The following checklist is not exhaustive, as no two businesses are the same, but it does cover the key risks faced by most small businesses.
‘Risk management should
be an integral part of your
business strategy. It makes
sound commercial sense
by reducing the costs that
insurance does not cover

Health and safety
You are legally required to know the heath and safety risks in your workplace, and take steps to eliminate or reduce them. So you should have in place:
  • A clear statement of health and safety policy, with a senior person responsible for its implementation
  • An assessment process that identifies any significant risk, such as working from heights or with heavy machinery or dangerous equipment, and ensures effectivecontrols are in place
  • Appropriate safety information and training for staff and an accident-reporting and investigation process for the business

Firms should also bear in mind the Corporate Manslaughter and Corporate Homicide Act 2007, under which an organisation can be convicted of a criminal offence if the way in which its activities are managed has caused a person's death.

Occupational health
Even for a small business, ill-heath among employees can cost many thousands of pounds every year. Sick pay, lost productivity, replacing workers and overtime cover, rapidly mount up but rarely appear on the. balance sheet. Insurers can help create a healthier workplace through measures such as health screenings, access to occupational health nurses and stress management.

Fire threat
Insurers are reporting a rise in large-scale fire claims. This reflects the fact that fires tend to increase during a recession, so all
firms need to be especially aware of the threat. The law requires you to assess the fire risk within your premises and the precautions you have in place.

Flood damage
Firms that prepare for flooding can save up to 90% of the cost of lost stock and moveable equipment should a flood occur. In many parts of the UK, the flood risk is getting worse so it pays to take precautions. You can use the flood maps available on the Environment Agency website to find out about the chances of flooding from rivers or the sea in most areas. There is a range of flood protection products available to protect your business and limit potential damage.

Protecting against theft
It may seem obvious but you should take steps to make your premises more secure. This is mainly a question of common sense, but it is surprising how often the most basic of precautions are overlooked. So, make sure that:

  • Doors and windows are in a good condition, well fitted and secured
  • Your electronic security measures work and are inspected regularly. These may include intruder alarms, CCTV systems, and access control locks and intercoms
  • Staff understand the reasons for, and the correct operation of, your various security measures

Risk is part of everyday life for businesses, and you cannot eliminate every threat you may face. Indeed, an element of risk is often necessary to help firms grow and develop. Yet risk management is not rocket science but common sense. The key is to be aware of where the risks are and to, wherever possible, manage them to acceptable levels. In these difficult trading times, the small business with a sound risk management policy will give itself the strongest foundation from which to survive the recession and grow in the future.

For more information visit www.abi.org.uk