What Is Risk Management?
Every business faces risk, but there are ways you can reduce it with risk management. This involves identifying and analyzing potential hazards to your company early on, allowing you to prepare ahead of time.
Risk management is especially important for businesses in the technology industry. For example, cyber threats are increasing as the world continues to rely more on the internet. This means tech companies have to stay on top of cyber security and prevent data breaches. Some other risks for digital professionals
Falling behind competition if they don’t innovate at a quick pace
Professional liability claims if they make mistakes or give out inaccurate advice
Lawsuits if weather or power outages cause their technology to malfunction or stop working for the customer
How Risk Management for Small Businesses Works
is easier than you may think. Start by following these steps:
Identification: Your first step is identifying risks and outlining them clearly.
Analysis: For each potential issue you’ve defined, you’ll want to understand how it can happen. During this risk assessment, you’ll also want to document the negative impact it would have on your company.
Evaluation: Once you’ve identified and analyzed risks, you can decide if your company is willing to take them.
Mitigation: Some risks may be worth taking for your business, but others you’ll want to reduce or get rid of altogether. This means you’ll want to create a plan that helps you avoid them and outlines how to handle them.
Monitoring: You should watch potential risks carefully, but also work on identifying new ones. On top of this, it’s important to update and improve your risk management plan for your company. Be sure to update your employees and shareholders when you do.
Why Risk Management is Important for Small Technology Companies
From cyber-attacks to lawsuits, your small tech business will face a variety of risks. For example, if your software company sells programs that protect your customers’ data but they fail, your client will likely file a claim against you.
Another possible threat to your business is phishing emails. These are often messages pretending to be a vendor or client that’s requesting money or payment from your company. In many cases, employees think they’re legitimate and follow through with the request. These scammers can also target your workers by phone and request money right away in real-time.
You can learn more about handling common hazards in your industry by reading through these pages:
Risks in the IT Industry
Cyber security and data breaches
are among the most common risks that tech companies face, especially those in the IT industry. Luckily, there are ways to reduce these risks. For starters, cyber insurance
helps cover costs if a breach does occur. You can also lay out a plan ahead of time for how your employees should respond to the data breach. This can help your company act immediately and efficiently if a loss does occur. You should also prioritize data protection at all times, which means updating your software and researching new threats.
On top of this, IT companies also face an increased risk of professional liability claims if they give out advice that’s incorrect or their products don’t work the way they’re supposed to. To help protect yourself, you can buy professional liability insurance
which helps pay legal fees if you’re sued for errors or omissions in services. It’s also important to give the right training and education to your employees so you can minimize potential risks and mistakes.
The IT industry is very fast paced. This means your technology company will need to continuously innovate and copyright your intellectual property
. Otherwise, you’ll fall behind your competitors. This can cause you to lose customers and revenue over time. You can also face more risk of software failures as your programs become less effective.
The best way to avoid this is to research your clients’ expectations and evolve your business practices to meet them. You can also look for new ways to improve existing products and opportunities to offer more convenience to your customers.
For even more protection, you can buy technology and professional liability
insurance. This helps you pay for damages if your tech equipment needs repairs or replacement. It also helps cover defense costs from professional liability claims.
Example of Risk Management in the IT Industry
To better understand how you can manage risk, read through this example:
Your IT company offers services that help other businesses become cloud based, meaning their files transfer onto servers that are on the internet instead of local drives or personal computers. Before you jump into this initiative, you’ll want to conduct a project risk analysis to identify potential issues that could surface during the file transfer. Your project teams should create plans to avoid these risks with steps to follow if they happen.
You’ll also want to check your insurance coverage to make sure your limit is high enough to cover them. As you do, it’s important to think about the cost effectiveness of getting insurance ahead of time. Often, claims filed after an incident are more expensive than buying the right policy beforehand.
How Business Insurance Can Protect from Risks
When it comes to risk, our Business Owners’ Policy (BOP) combines three essential coverages into one:
Commercial property insurance to help pay for the repairs or replacement of your business’ physical location, tools, computers or inventory.
General liability insurance which helps protect your company from claims of bodily injury, property damage or advertising mistakes.
Business income insurance for help replacing lost revenue if you can’t open because of damage from fire, wind or theft.
On top of these coverages you can add essential protection like:
Professional liability insurance
Data breach insurance
Workers’ compensation insurance