SMALL BUSINESS INSURANCE & RISK MANAGEMENT GUIDE
EXPOSURES TO LOSS
Identifying exposures is a vital first step to risk management; until you know the scope of all possible losses, you won't be able to develop a realistic, cost-effective strategy for dealing with them.
It is not easy to recognize the hundreds of hazards or perils that can lead to an unexpected loss. For example, unless you've experienced a fire, you may not realize how extensive fire losses can be. Damage to the building and its contents are obvious, but you should also consider
- Smoke and water damage.
- Damage to employees' personal property and to others' property (e.g., data-processing equipment you lease or customers' property left with you for inspection or repair) left on the premises.
- The amount of business you'll lose during the time it takes to return your business to normal.
- The potential permanent loss of customers to competitors.
Begin the process of identifying exposures by taking a close look at each of your business operations and asking yourself what could cause a loss. If there are dozens of exposures you may find dozens of answers.
For each exposure you identify, ask yourself how serious is that loss. This question focuses on the possible severity of each exposure, e.g., what would that loss cost? The purpose here is not to determine the source of replacement or repair funds, but the full cost of the loss.
Many business owners use a risk analysis questionnaire or survey, available from insurance agents, as a checklist. Agents can also help analyze your situation; with their expertise and experience, you're less likely to overlook any exposures.
In general, most questionnaires and surveys address the potential for
- Property losses.
- Business interruption losses.
- Liability losses.
- Key person losses.
- Automobile losses.
- Injury to employees.
This article is reprinted by permission of the SBA and The Travelers, Hartford, Connecticut.
For more information on SBA programs go to www.sba.gov