The 10 most critical aspects of managing risk for any small business are:
- Having adequate insurance coverage and reviewing the policy terms carefully on an annual basis to insure the scope and amount of coverage is still adequate.
- Adding a layer of limited liability by operating your company a separate business entity such as a S Corporation or Limited Liability Company.
- Having written policies and procedures that ensure that all employees are being held to the industry standards of care and ethics of their profession and reviewing these at least annually with all employees. From a risk management standpoint, it is unadvisable to have policies and procedures that set a higher standard of care than the law requires or to include unrealistic requirements that will not be implemented fully or enforced consistently.
- Having frequent employee training and opportunities for continuing education, and to document all training provided to company employees.
- Having an open door attitude that invites members of the company’s team to raise concerns about company practices without fear of retribution.
- Having effective tools for timely documentation and communications and conducting random checks to make sure this is being done by all team members.
- Not acting outside the scope one’s professional qualifications or insurance coverage. For example, your employees may be knowledgeable about legal, medical and financial matters even though they are not licensed to provide these services. It is very risky to go beyond spotting an issue and assisting a client to obtain professional advice from a lawyer, healthcare provider or financial advisor.
- Having measures for protecting the confidential information of clients.
- Properly classifying workers as employees versus independent contractors when warranted.
- Using written contracts with clients that clearly spell out the scope of services, fees and costs.
Risk Management is a subject none of us enjoy dealing with and paying for but it needs to be elevated to mandatory status. Decide today to make risk mitigation a part of your company’s healthy habits. Make sure one person is assigned the role of risk management and that these issues are closely assessed on no less than an annual basis. You don’t want to discover the extent to which you have neglected these issues when you’re talking with your lawyer about a lawsuit that has been filed against you.