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issues? Small business owners wear many


hats, like CEO and CFO—one of the most important and often overlooked is Chief Risk Officer. A Travelers survey conducted at the

U.S. Chamber of Commerce America’s Small Business Summit in 2010 found that risk management ranks low among priorities facing small business owners. Owners reported prioritizing growing their businesses over protecting their businesses against insurable risk. More than half (56%) said they spend less than 10% of their time identifying and prevent- ing business and operational risk. Large companies often have employ-

ees dedicated to identifying risks and managing exposures. However, many small business owners feel they cannot af- ford the time or staff.

Why is it necessary to understand the underlying risks and potential impacts of disaster?

Understanding a potential disaster’s

impact on a business is critical because a single event could close its doors perma- nently. American Red Cross data indicates as many as 40 percent of small businesses don’t reopen after a disaster. The financial fallout can outlast the disaster itself, a warning that business owners should heed.

Proper planning for disasters is a com-

petitive advantage. With advanced plan- ning, a business owner can have opera- tions back up and running quickly, meeting the needs of customers and the community, while other business owners struggle through a recovery plan.

with Sherry Hersey, VP Marketing Development, Travelers Small Commercial

hy do most business owners not consider potential risk management

What are some of the risk management issues female business owners should be aware of?

According to The Shriver Report, a

study by Maria Shriver and the Center for American Progress, women-owned busi- nesses are growing at a rate of 23 percent, 2x faster than the growth in the total num- ber of businesses. Travelers offers advice to women en- trepreneurs on six common risks along with potential coverage to consider so that women can properly protect their busi- nesses. It’s very important to discuss in- surance needs with a qualified insurance agent who will consult and suggest cover- age solutions that meet the risk reduction needs for the business. Other coverage could be critical to the business based on the services provided to its customers.

Overlooked Risk #1: If an employee

is driving his/her own car for the benefit of the company (picking up supplies, run- ning a business-related errand for a man- ager, etc.) and gets into an accident, the business may be held financially respon- sible. Therefore, business owners should purchase specific protective coverage, typically “hired/non-owned auto liability” coverage under a Business Auto Policy or similar coverage as part of a Business Owners Policy (BOP).

Overlooked Risk #2: Be aware that

lawsuits from bodily injury and property damage are on the rise. In cases where lawsuits are more than the General Liabil- ity insurance coverage’s limits, personal assets may also be at risk. An umbrella policy may keep personal

and business assets safer and be more cost effective to minimize the risks to a busi- ness owner’s personal assets.

Overlooked Risk #3: Many business- es without business interruption insurance are forced to close their doors permanent- ly after a disaster. Even healthy business- es that do manage to reopen often end up failing, unable to recover from the finan- cial drain while business revenues stop but expenses continue. Business interrup- tion coverage generally covers business income and extra expense on an actual loss sustained basis for net income, nor- mal operating expenses, and rental ex- penses within 12 months from the date of physical loss or damage. Some business interruption policies may have time limi- tations on claim reporting so it is impor- tant to review and understand policy re- quirements.

Overlooked Risk #4: Property should

be insured for the amount it would cost to rebuild or replace, not to repurchase. Al- though property values have fallen recent- ly, the cost to rebuild or replace with the same like kind and quality construction materials have increased! Additionally, more stringent building codes and regula- tions enacted since the original date of construction may increase the cost of re- construction. A business owner may find that the cost to repair or replace may be much higher than the market value of the property, but it’s critical to insure a prop- erty to the appropriate replacement cost value. Having the property appraised if renovations or changes have been made to make sure the building is appropriately insured is also critical.

Overlooked Risk #5: Business own-

ers should consider flood coverage, even if they don’t live in a flood zone. As recent weather-related events have shown, you never know where or when a flood will occur. Most BOPs don’t cover damage


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