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Governance, Risk and Compliance
Entrepreneurs at new businesses often have a number of responsibilities on their shoulders. They are charged with hiring new employees, identifying and selling their products or services to new customers, finding sources of financial backing, looking for workspaces that can accommodate their needs and many other tasks.
As such, it’s no secret that small and nascent companies often have difficulty with risk management. This is especially the case if entrepreneurs happen to be young, such as Facebook founder Mark Zuckerberg, who found his college venture blowing up into a global phenomenon within just a few years. Young people tend to be even more unaware of business risks due to their lack of experience, which can make the prospect of keeping a company safe even more complicated.
As Risk Management Monitor noted, there are a lot of obvious risks for any new enterprise and business owners may be savvy enough to mitigate them. However, there are many more that may not be immediately obvious to entrepreneurs. Unfortunately, these are the threats that may take the heaviest toll on an organization. On top of some deft risk assessment and identification programs, young business owners may also want to consider purchasing insurance as a way to mitigate damage that these unforeseen threats can cause.
Although it’s easy to perceive insurance as a cost, in reality, it’s probably one of the biggest value adds to any business. Devastating events such as natural disasters can single-handedly bring a business to its end, quickly and without any prior warning. Insurance can effectively minimize the damage cause by these unforeseen events, which in some instances can mean saving a company from having to close its doors – that’s a tremendous amount of value.
However, many small businesses and young companies are often underinsured. As NBC News notes, this is for two reasons: First, they may not have the capital to acquire all the insurance they need to cover their bases. Second, they are unaware of what they need to insure and don’t take stock of their insurance needs regularly, so their companies outgrow their coverage.
“One of the biggest lapses is in the area of business interruption insurance,” Clair Wilkinson, vice president at the Insurance Information Institute, explained to the news source. “This kind of coverage, which you might need to buy separately from a standard business insurance package, can be critical after a natural disaster, fire or power failure that shuts your business down. Business interruption insurance covers lost profits and operating expenses, such as salaries, that must still be paid even when a company can’t operate.”
For young businesses, insurance should be a crucial cornerstone in risk management programs because it brings so much to the table. Risk Management Monitor recently discussed some of the core benefits of risk management:
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