Small to medium-sized businesses (SMBs) face a variety of risks in their operations, even more so when they’re trying to expand. SMBs in “growth mode” may lean more on their insurance brokers during this period for advice on how to protect their growing operations.
Trevor Wall (pictured), field vice president of business insurance, sales and distribution at Travelers Canada, said SMBs may often overlook several themes when they’re trying to protect themselves. One critical area, he said, is the impact of changes in their day-to-day business.
“During significant growth, whether expanding inventory, moving into e-commerce, or venturing into international markets, (business operators) may assume these align with their expertise and underestimate the risks involved,” said Wall.
“However, these shifts often require more than routine updates to insurance policies. Businesses need to consider additional coverage to address these expanded exposures.”
Expanding is an exciting milestone for any SMB, often signalling increased demand for their product or service and new market opportunities.
However, it comes with a suite of new risks that, if not proactively managed, can jeopardize their business. Insurance plays a vital role in helping SMEs navigate this critical phase, ensuring they are protected against unforeseen challenges.
“During growth mode, making the right insurance choices is critical, not just to cover potential losses but also to proactively prevent them,” Wall told Insurance Business.
Business owners often underestimate their exposure. The most common ones that emerge during a growth period are:
Expanding into new markets or adding services might seem like natural progress for businesses, but these changes can introduce risks. For example, venturing into e-commerce may expose the business to cyber threats, while selling internationally could present compliance and logistical challenges.
Growth often means interacting with more clients, vendors, and stakeholders, increasing the potential for liability issues. Errors and omissions (E&O) claims, contract disputes, or even missteps in advertising could lead to lawsuits that strain the business financially and reputationally.
Adding employees or contractors to support growth can increase the potential for workplace injuries. Expanding operations, especially into new facilities or industries, might also create new hazards that weren’t part of the original business model.
Scaling up inventory levels or depending on new suppliers can introduce vulnerabilities, such as disruptions or damage to stock during transport.
A larger operation often means greater dependency on physical locations, suppliers, or technology systems. Natural disasters, cyberattacks, or other disruptive events could halt operations, leading to significant revenue loss.
“As companies expand, new risks often emerge that owners might not anticipate, such as the need for errors and omissions coverage, directors’ and officers’ insurance, or cyber insurance,” Wall pointed out.
Wall stressed that an insurance broker can help identify and mitigate these risks effectively for SMBs.
Beyond securing additional coverage, brokers can also provide valuable preventative risk management. They can connect businesses with risk control services to assess and mitigate new exposures, such as hazards introduced during expansion. These services might include remote assessments, best practices, and online resources, offering flexible, practical ways to reduce the likelihood of loss.
“The trusted advisor role of a broker is paramount,” Wall emphasized. “Brokers provide consultative services that clarify complex policy coverage, breaking down options from different providers and explaining how each will respond to specific scenarios.”
The Travelers Canada leader encouraged brokers to have ongoing, transparent conversations with business owners to help them fully understand their coverage and be equipped with the right protection.
“A broker’s expertise helps tailor insurance solutions to the unique risks and challenges each business faces, offering a level of protection that aligns with their specific needs,” said Wall.
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