Risk & Insurance
There's more to managing risk than insurance
6 pillars of managing risk in a service based business

There’s not much in life that comes without risk – whether it’s starting a business, or even just crossing a road. When it comes to running your business, the biggest risk in your mind is probably not making a profit. However, events such as a client tripping over and injuring themselves while at your premises, or having legal action taken against you due to advice you provided are also incidents that can have a substantial impact on your business. While you might hold insurance to help cover you for such events, it’s also important to have a well-rounded approach to risk management to help prevent claims in the first place, or at least to minimise the impact a claim may have on your business. Here are a few boxes to tick when it comes to developing a well rounded approach to managing your risk.  
 

Administrative processes

Gaps in administrative processes and protocols can sometimes make it very easy for things to go wrong. For example, are there systems storing sensitive data which all your staff have access to, including those who don’t need it? Are your employees in the habit of actioning client requests without having written consent in writing? Having robust administrative processes in your business can help prevent claims from arising where you would otherwise need to look to your PI policy for cover. A key area to consider is the record keeping practices in your business. A well-established process of maintaining records is just as important in the digital age as it was in previous times. Sometimes simple mistakes like accidentally deleting emails can not only lead to allegations of professional negligence but can also impact your defence if a client does take legal action against you. Read our article and find out how you can enhance record keeping procedures in your business.  
 

Keeping informed

Staying up to date with legislation, and other emerging risks in your industry is another important part of managing risk adequately. This includes legislation that specifically applies to how you conduct your business, laws that regulate how you pay your employees, laws that relate to how you advertise your products, and many more. Legislations can change often, and when you run a business, not staying up to date and applying them to your business can lead to costly legal action, as well as fines from regulators.

Signing contracts

In running your business, there will be various points in time where you’ll need to sign contracts, be it with a landlord, a business client, or an employment contract. This can present a significant risk in some cases if you sign contracts where the terms put your business at a disadvantage. Therefore, before signing contracts, it’s important to have a lawyer review it to ensure you’re not signing up to any unreasonable clauses. A common clause in some contracts which may put professional service-based businesses at risk is ‘contractual liability’. If you sign a contract which extends your liability beyond what would usually apply under law and are later faced with a claim of professional negligence, your insurance may not cover the claim.  
 

Staff recruitment & training

You know your employees are one of your most important assets, but they can also be one of your biggest sources of risk. There are various steps you can take as a business owner to help prevent your employees being the reason for a negligence lawsuit, and the homework begins before you’ve even taken someone on. When hiring for a role which requires a certain qualification, it’s important to ensure the qualifications are genuine – for example, allied health professional registration can be checked on the AHPRA website. There are also other paid services you can use to verify qualifications. In addition to appropriate screening, ongoing training of employees is also essential. While you probably provide your employees with ongoing training on their roles and service anyway, it’s also important to include training on areas such as compliance, and awareness of cybercrime. For example, could your staff easily identify a phishing email? Would they update bank details advised by an email without verifying the request verbally?
 

Advertising

The way you advertise your business can also be a source of risk. When advertising your business, it can be tempting to make big claims about what your service or product can do. However, making unrealistic claims in your advertising can lead to your business being fined or result in AHPRA commencing an enquiry into your conduct. The same applies if you’re advertising offers and promotions for example, calling an offer or price that is always available a ‘special offer’ in your advertising, can lead to fines, lawsuits, or reputational damage.

 

Insurance housekeeping

As stated earlier, a key part of managing risk is of course holding insurance but remember that insurance shouldn’t be something you take out and file for the year. It’s important to ensure your insurance stays up to date with your business’s changing circumstances to ensure you continue to be covered. For example, if your business takes on a contractor, or moves premises, you will need to contact your insurance broker to let them know this as you might need to update your insurances accordingly. You can find out more about insurance housekeeping in our article.

The information provided in this article is current as at the date of publication and subject to any qualifications expressed. Whilst Aon has taken care in the production of this article and the information contained has been obtained from sources that Aon believes to be reliable, Aon does not make any representation as to the accuracy of information received from third parties and is unable to accept liability for any loss incurred by anyone who relies on it. The information contained herein is intended to provide general insurance related information only. It is not intended to be comprehensive, nor should it under any circumstances, be construed as constituting legal or professional advice. You should seek independent legal or other professional advice before acting or relying on the content of this information. Aon will not be responsible for any loss, damage, cost, or expense you or anyone else incurs in reliance on or use of any information in this article.