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Emerging Risks in Business Insurance

Organizations are constantly challenged by new risks in the business environment. Everything from climate change to geopolitical changes often has far-reaching consequences for their day-to-day operations. It’s more important than ever for company leaders to understand the impacts of these risks when it comes to insurance coverage. Businesses must also establish a robust risk management framework to help them adapt and thrive in an evolving marketplace. 

Top Risks to Businesses 

A recent PwC Pulse Survey highlighted some of the biggest challenges business leaders must face in the current environment. 

  1. Cyber Attacks

Businesses rely on technology for most day-to-day operations, leaving them vulnerable to cyberattacks. For example, if a hacker manages to steal sensitive financial information or private customer data, they could use that to either blackmail the company using ransomware or sell it on the online black market. 

Other fallout that could occur from a cyber-attack include: 

  • Business operational disruptions 
  • Reputational damage 
  • Extensive financial losses 
  • Exposure to regulatory scrutiny, fines, and penalties 
  1. Talent Acquisition and Retention

Many organizations have faced challenges in finding skilled workers to fill roles in various industries. There’s often a mismatch between the skills needed by an employer and those available in the labor market. It also costs a lot of money to onboard and train workers. 

Let’s say a company hires a new software engineer to build software they rely on to bring in new business. If that person leaves or doesn’t prove to be a good fit, the product rollout could be delayed and affect the organization’s bottom line. 

Below are some additional impacts that come with risks around talent acquisition and retention: 

  • Disrupted workflows 
  • Lower productivity 
  • Loss of knowledge 
  • Erosion of trust and confidence among employees 
  1. Supply Chain Disruptions

When the COVID-19 pandemic hit, widespread supply-chain disruptions led to higher prices because of a rise in shipping prices. Many companies didn’t survive, and the situation brought home the risks of relying on international companies to deliver products. 

If you have a Delaware company that relies on a factory in Taiwan to manufacture machine parts, what happens if the Taiwan factory shuts down because of tsunami warnings? The Delaware business may be unable to fulfill orders already placed by customers. 

Other issues that can arise because of supply chain disruptions include: 

  • Increased production costs 
  • Quality issues with substandard materials from unvetted suppliers 
  • Lower customer satisfaction 

How Business Risks Impact Insurance Coverage 

Geopolitical issues impacting supply chains include the ongoing conflict between Russia and Ukraine and attacks on ships traveling through the Red Sea. Companies can lose a lot if they fall victim to a cyber-attack that results in a data breach or ransomware hijacking. IBM’s Data Breach Report states that data theft cost businesses an average of $4.45 million globally in 2023. U.S. companies lost even more at $9.48 million. 

Hiring the wrong person can impact a company’s productivity and reputation. If that person makes mistakes that harm an organization’s image, the business must spend time and money repairing the damage. If that former employee decides to sue, the company must spend resources combating the lawsuit and the resulting headlines. 

Mitigation Strategies for Companies 

Let’s explore some strategies companies can pursue to manage the above risks. 

Cyber Attacks 

Businesses looking to lower their risk of a cyber attack should invest in strategies like regular cybersecurity assessments and vulnerability scans. It’s also a good idea to purchase cyber insurance policies that cover a wide range of incidents: 

  • Data breaches 
  • Business interruptions 
  • Ransomware attacks 
  • Legal penalties 

Talent Acquisition and Retention 

Employee benefits insurance helps with the cost of offering benefits packages designed to attract top. It helps companies manage costs while ensuring employees always have access to essentials like health insurance. Other options to explore include: 

  • Employee Practices Liability Insurance (EPLI) — Protects businesses against employment-related claims such as discrimination, wrongful termination, or retaliation. 
  • Directors and Officers (D&O) Insurance — Lawsuits related to disputes with executives or mismanagement allegations pose significant risks. Consider protecting your company by purchasing a D&O policy to cover the legal expenses related to these types of suits. 

Supply Chain 

Purchasing business interruption insurance protects companies from income losses and expenses tied to business operation disruptions caused by supply chain issues, including: 

  • Natural disasters 
  • Supplier bankruptcy 
  • Transportation delays 

Other options to explore for additional supply chain protections include: 

  • Cargo insurance — Protects against losses to in-transit goods. 
  • Trade credit insurance — Reimburses businesses for losses resulting from insolvent suppliers. 
  • Political risk insurance — Keeps you protected against losses occurring because of geopolitical tensions, trade disputes, or regulatory changes in overseas markets. 

 Grand Mutual offers many options for companies facing emerging risks. Contact one of our representatives today to learn more. 

Have questions? Our team at GMIS is here to help.

At Grand Mutual Insurance Services, we are committed to providing you with the most up to date information on the insurance market. Reach out to GMIS today for personalized guidance, and maximize advantages for growth and success:

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