3 Risks Keeping Small Business Owners Up at Night; Plus One They’re Missing

According to a report by The Hanover, small business owners view property damage as largest threat during the next five years. But are they overlooking cyber?

By: Emily Spennato | January 26, 2020

Businesses of any size are vulnerable to countless risks, but the ones with the most assets don’t necessarily have the most to lose.

While more money and more employees means larger risk exposure, larger businesses have more options available to protect themselves.

A rowboat and a cruise ship can cross into a storm at the same time and no matter how adequately either prepares for it, the rowboat will always have a lesser chance of surviving.

The surge of the gig economy and controversies surrounding it have caused small business entities to fasten their risk management strategies and check their protection.

According to the 2019 Small Business Risk Report, a joint survey by Forbes Insights and The Hanover Insurance Group, Inc., 52% of small business owners believe they will face a claim in the next five years. In such an evolving risk landscape, however, small business owners predict the next five years to be of similar threat to business interruption.

Here’s what claims small businesses are bracing for in the next half decade, according their owners.

1) Property Damage

Twenty-five percent of owners surveyed cited property damage as the number one threat to their business. Claims could result from robbery, fire, theft and weather damage.

The year 2018 had the highest number of natural catastrophes of any other year with more than $25 million in insured losses, according to the Insurance Information Institute. Aon reported a total of 407 natural catastrophes worldwide.

2) Employee Injury

According to the Bureau of Labor Statistics, retail surpassed manufacturing as the industry with the highest number of employee injuries. Small businesses account for 98% of the retail industry.

The injury rate was 3.5 for every 100 full-time workers. Injuries included slips and falls, struck-by incidences and instances of assault from customers or co-workers.

More than a third of injuries in the report were from overexertion and bodily reaction, such as back pain.

3) Auto Accidents

Auto insurance is the least profitable sector of the insurance industry due to its claim frequency. Despite a plethora of active insurers, auto accidents are the most dangerously perceived risk to small businesses according to owners.

With the emergence of autonomous vehicles and ride-sharing apps, not only have safety risks increased but also the emergence of the gig economy has the potential to replace over 10 million jobs.

Trends that are driving up auto accidents and commercial auto claims are distracted driving, vehicle volume and the rise of vehicle repair costs.

But What About Cyber?

Cyber has become the consistent number one threat to large commercial businesses due to the amount of value placed into the technology. Cyber attacks happen just as frequently to small businesses as they do large, without making the splashy headlines.

So are small business owners giving cyber the resources and attention it needs, or are they focused on the wrong areas?

Small business not only lack the IT resources to respond but they also suffer greater consequences after an attack. A study by The Ponemon Institute reported that 43% of cyber attacks targeted small business in 2017, and 60% of small computer companies fold within the first six months of a cyber attack.

Businesses are becoming inherently reliant on technology and the economy is reflecting that, forcing small business to perfect their operations in order to swim, or else sink. &

Emily Spennato is a former staff writer with Risk & Insurance.

Principles of Corporate Resilience

How an accelerating risk environment is raising the stakes for risk managers — and how carriers are responding.

By: Liberty Mutual Insurance | December 4, 2024

The nature of risk is evolving. It has become more volatile, interconnected, and intense, as reflected in the heightened frequency and severity of losses experienced by businesses and their insurance carrier partners.

2023 was the warmest year on record. Cybercrime is escalating at the same time that generative A.I. has begun transforming our economy. All this amidst two kinetic wars, persistent economic inflation, and rising legal system abuse.

“We’re all facing a future that is more uncertain than we have previously faced,” said Wesley Hyatt, Chief Client Officer, Global Risk Solutions, Liberty Mutual. “What I continuously learn from our clients is that they are equally focused on protecting their businesses today, and building partnerships, programs and a risk-taking culture that will endure,”.

Geopolitical, economic, and legal systems are being challenged at a rate most risk professionals haven’t seen in their lifetimes, all while we’re experiencing the impacts of climate change.

Against this backdrop, the role of today’s risk managers has shifted significantly, and it has prompted a reimagining of the way insurance carriers provide value to clients and brokers, according to Hyatt and Elizabeth Geary, President, Insurance Solutions, Global Risk Solutions, Liberty Mutual.

“Today’s risk environment demands resilience. That means anticipating, responding to, and adapting amidst rapid change,” explained Geary. “The concept of building resilience is central to the way we’re supporting clients and brokers, but it’s also foundational to how we think about evolving our own solutions and how we deliver them,” she added.

The Changing Role of Today’s Risk Managers

Wesley Hyatt, Chief Client Officer, Global Risk Solutions, Liberty Mutual

When considering today’s accelerating risk environment, organizations’ senior business leaders are looking to risk managers to take a more proactive role in shaping a resilient strategy. In this way, the practice of risk management today differs from what it has been in the past, according to Geary and Hyatt, making the role of risk managers:

More visible. The increased cost of insurance is being reflected in premiums and losses. As a result, business leaders want to know the contingency plans, projected costs, and impact on an organization’s long-term goals.

More strategic. Risk managers increasingly have a seat at the table as part of the strategic decision-making process. Their insight into the breadth of challenges a business could face, beyond traditional risk assessment and mitigation, is critical in assessing the viability and sustainability of any initiative.

More urgent. As risks evolve, the pace at which risk managers need to work has increased, partly due to the globalized nature of business and the speed of communication. The impact of shifts in trade policy or geopolitical factors demand a swift response from companies with global operations or supply chains, which comprise a vast share of contemporary businesses.

More complex. Evolving and emerging risks, along with rising costs, have prompted businesses to transform how they structure their risk management programs. This includes making trade-offs in risk retention, implementing complex tower structures, and placing a greater emphasis on business continuity, cybersecurity, quality assurance, and safety programs.

More tech driven. As the field of risk management continues to evolve, technology has become a critical tool for risk managers wanting to better understand, quantify, and monitor risk. However, as organizations expand their use of technology, cyber risks rise in tandem, further emphasizing the tech-savviness required of risk managers today.

Insurers as a Source of Support

Elizabeth Geary, President, Insurance Solutions, Global Risk Solutions, Liberty Mutual

While the role of the risk manager has changed, so has the role of the insurer — or at least it should, according to Hyatt and Geary.

“The feedback loop that allows us to make continuous improvements or adjustments to products and services has become more sensitive to the changing needs of risk managers and reflective of emerging risks. As a carrier, we need to move at a much faster pace, providing that perspective to clients and collaborating more closely than we have in the past,” explains Geary.

Echoing that sentiment, Hyatt added that “to do this effectively, we must closely understand our clients and their businesses. This means showing up and listening to their priorities and learning their tolerance for risk and the role it plays in meeting their goals.”

Together, Hyatt and Geary are prioritizing three components of what they’re calling “Corporate Resilience” to help risk managers navigate the complexities of the market: information, innovation, and collaboration.

Knowledge is power. According to Hyatt and Geary, building resilience begins with understanding the risks a business may be facing. They believe Liberty Mutual plays a foundational role in helping clients stay abreast of changing risk trends and unlocking the power of advanced data analytics to mutually benefit their businesses.

“Today’s risk managers aren’t just looking for products, services, and risk transfer, they’re looking for expertise and problem-solving. They’re seeking support in thinking through their value chain to identify risks, see around corners, and prepare,” said Hyatt.

“Clients benefit from our ability to understand their businesses at a granular level while also bringing the context of what we’re seeing from a high-level, external perspective across similar companies, in addition to the macro trends, globally,” she added.

Product innovation — a two-way street. At Liberty Mutual, client-centricity remains at the heart of its innovation strategy by cocreating solutions with its clients.

“As partners, we have a responsibility to move along with the risk and respond in a way that helps our clients and brokers, whether that’s creating new solutions or changing our existing products and services,” says Geary. Her team’s priorities in the Global Office of Underwriting include cyber, climate, energy transition, and alternative risk solutions, among others, all with a focus on offering fit-for-purpose solutions, stable capacity, and taking a long-term view.

“It’s not an ‘if we build it, they will come philosophy,’ and it doesn’t happen overnight,” explained Hyatt. Rather, she describes meaningful product innovation as the result of close and enduring partnership and deep understanding on both sides.

“It’s mutually beneficial,” said Hyatt, “and our mutual structure is a strength because it allows us to take a long-term view and affords us flexibility,” she added. “We provide the expertise and security clients need to innovate and grow their businesses. Our mutuality also means we succeed when our clients succeed.”

Partnerships that Extend Beyond RiskTransfer. With the demands on risk managers not relenting anytime soon, clients are increasingly seeking more support.

“As the way we help clients manage risk changes, our business has become less transactional. Our clients are not just transferring risk, they’re building a partnership,” explained Geary.

While industry-leading risk control capabilities, best-in-class service and superior claims handling have always differentiated Liberty Mutual, Hyatt sees clients increasingly seeking the benefits of a robust support network of other risk professionals.

In her role as Chief Client Officer, she’s deliberately incorporating community-building elements into Liberty’s programs to leverage some of those opportunities. The firm’s Corporate Resilience thought leadership series, for example, brings the risk management community together for expert panel discussions to help clients network and learn from each other. Hyatt is also helping support the firm’s public affairs initiatives, which assist clients in understanding legal system abuse and the pivotal role they play in collectively pushing for tort reform.

“Forums like these complement our client engagement strategy, which also includes local and national events, as well as relationship leads who help our largest clients access the expansive, global capabilities of Liberty Mutual that may bring value to the strategic relationship,” Hyatt explained.

These dialogues and the philosophy of continuous improvement through the power of collaboration are increasingly helping the firm drive preference with clients.

Better Together

In reflecting on her focus on building Corporate Resilience, Hyatt shared, “it’s important to keep in mind that we’re all in this together. One of the mantra’s of our leader, Neeti Bhalla Johnson, is ‘our clients’ future is our future’ and we very much believe that.” Geary and Hyatt’s hope is that their commitment to Corporate Resilience pioneers new ways to ensure that the future is bright for Liberty’s clients.

“We’re taking the current unrelenting pace and intensity of today’s industry challenges and using them as triggers for how we can home in on building success for our clients amid uncertainty and providing them with greater security,” says Geary. “All this ties directly to our mission of helping clients embrace today and confidently pursue tomorrow.”

To learn more, visit: lmi.co/corporateresilience

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.

Liberty Mutual Insurance offers a wide range of insurance products and services, including general liability, property, commercial automobile, excess casualty and workers compensation.