Natural Entrepreneur: Manage Your Risks, Now

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Manage Your Risks, Now

Managing risk may keep emerging firms from becoming a statistic

-- by Sandy Page, US Insurance Manchester, NH

To protect their growing businesses and to avoid becoming a statistic, emerging technology companies need protocols for managing assets, both physical and intellectual.

In a previous article, I discussed how the risks that small companies face can come in many forms, including physical events such as a fire or a natural disaster, as well as “technology malpractice.” Here's some ideas how to help protect yourself.

Protect your hardware. Don’t leave laptop computers on the back seat of the car or on top of a desk in the office, for that matter. Lock them up or take them home. One of the basic principals of insurance is to spread risk. If employees take their laptops home, they won ’t all be lost if someone breaks into the office.

Protect your data and your network. Any company connected to the Internet should have a formal security program that has been communicated to all employees. The program should include provisions for maintaining adequate backups offsite, including the backup of data every one to two days. Encryption, firewalls, virus protection and intrusion detection software are critical barriers to hackers, but are worthless if they are not updated regularly.

Develop a disaster recovery plan. Developing a comprehensive disaster recovery plan can help your company reduce the likelihood and impact of a disaster; enable it to respond quickly and effectively to an emergency to ensure the safety of employees and to contain losses; and establish contingencies to stay in business during a disaster and resume normal business operations as quickly as possible.

Use resources when engaging in a contract. Be wary of signing customers’ contracts, and avoid customizing standard contracts. Take advantage of all contract language measures that enable you to limit your liability. Make sure that all parties agree to specific expectations, promises and contingencies regarding the performance of the contract, and specify procedures for modifying it. If possible, implement smaller, shorter-term contracts. Longer contracts tend to be more complex and may change over time.

Manage quality and support of products and services. Implement quality control systems that, at a minimum, set standards for acceptable levels of reliability, performance, functionality, scalability and compatibility with integral systems.

Analyze performance complaints and contract disputes. An analysis of past claims and complaints from customers can provide a window on future litigation problems and should be used to help identify and eliminate potential problems. Determine if frequent contract delays arise because your company promises to meet unrealistic deadlines or agrees to unrealistic customer expectations.

Implement operational controls. Ask your lawyer to review advertising and marketing materials with regard to the promises explicitly made or implied to customers. Set realistic expectations and avoid boasts that are absolutes—claims of being “the best” or products that are “100 percent foolproof.” Your lawyer can also help develop sales and marketing training programs that prevent overselling. Any confusion between what a salesperson tells a customer and what the contract says may lead to a claim for misrepresentation or fraudulent inducement. Require subcontractors and vendors supplying or doing work for you to name you as an additional insured on their policies, and verify it by obtaining certificates of insurance.

FINANCIAL PROTECTION

Although prudent risk management may help contain losses and put a company back on its feet, it does not diminish the need for a comprehensive insurance portfolio. Examining the effectiveness of an emerging technology firm’s insurance portfolio in light of its current, as well as its future, vulnerabilities is critical. A thorough evaluation can reveal, for example, that insurance might be needed to pay workers compensation costs for employees not otherwise covered while working on a project overseas. An emerging technology company might also want a policy that anticipates rapid growth by automatically increasing property limits over the course of a year. Any company that does business on the Web should look for global coverage.

Insurance agents, brokers and companies that specialize in this field can help emerging technology companies reduce the potential for financial ruin by helping them to accurately develop a risk management program combined with an insurance plan that accurately reflects the vulnerabilities they face.

Sandy Page is a Senior Account Executive at USI Insurance Brokerage in Manchester, NH. Sandy can be reached via email at Sandy.Page@usi.biz
Direct phone: 603-665-6139 or 800-639-4761 Ext. 6139. www.usi.biz

Upcoming Events

Feb 21 (8-9:30a): NH Forum on the Future, NHHTC, CR Sparks, Bedford, NH

March 1 (6:30-8:30p): Women's Business Center and MicroCredit-NH Networking Event, Bank of America, Portsmouth, NH

March 6 (10a-noon): Growth Capital Resources in New Hampshire, City of Nashua, Office of Economic Development, Daniel Webster College, Nashua, NH

March 8: (12pm -1pm) Break the Rules and Close More Sales, Amoskeag Business Incubator, Manchester, NH

March 16: Peak Pitch (pitch your plan to invstors on the chairlift), Mt. Sunapee, NH ($)

March 22: Breaking Trends in Web Develoment, UVCIA, Hanover, NH ($)

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