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Home Based Businesses
1. Risk Management
Risk
Management is the identification and minimization of the potential causes
of loss to your business. There are four basic steps to reduce the chance
your business will suffer a setback from a loss.
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Step 1 - Assess Exposures
As the owner you are in the best position to know
the loss potential of your business. Essentially, you are asking
yourself what could go wrong? Best of all it costs you nothing to do!
Several questions you should ask are:
- How
hard would it be to obtain replacements?
- How
long would it take? What would it cost?
- What
would the result of those delays be?
- Would
your clients still be there or would they find your competitors in
the interim?
- What
would you do for income?
- How
attractive is your stock to thieves? How secure are your
premises?
- How
much of a fire hazard do your commodities, premises or operations
present?
- What
are the liability hazards of your products or what could go wrong
with your work?
- Does
your lease impose specific responsibilities upon you? Have you
met those requirements?
- What
would the likely outcome be of any of the above?
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Step
2 - Minimize Loss Potential
Once
you have assessed the exposures you are in a better position to minimize
them. Often simply taking the time to review how a potential loss could
occur provides the solution of how to minimize it. Police, firefighters
and insurers do a great job after the fact. Your role should be
preventative.
- Develop
an action plan for restoration in advance. It does not have to be an
elaborate manual. Simple forethought will do. Where will you
operate? How will you get critical equipment?
Collect together important contacts, suppliers, telephone
numbers and other data
- Maintain
off-site information backup. A relative or friend would be happy to
keep a computer disk for you. Update it regularly! It will not do
well to lose all your critical restoration information in case of a
fire. Worse to realize the backup data on the disk you left with
Uncle Joe is two years old.
- Reduce
or eliminate fire hazards and install smoke detectors and fire
extinguishers.
- Upgrade
premises security -- dead-bolt locks, window bars, lighting and
alarm systems.
- Consult
with your local police departments. Most have individuals assigned
to assist with your loss prevention measures.
- Review
your operations with your insurance broker. They have access to
insurance company personnel trained to assess your exposures and
provide suggestions.
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Step
3 - Self Insure
Assume
as much of the loss as you comfortably can. Insurance companies
provide discounts for the use of larger deductibles. Choose as
large a deductible your business can comfortably afford. Limiting
the number of small claims you submit helps to keep your premiums low.
Select only the degree of coverage you truly need.
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Step
4 - Insurance
With
the assistance of a knowledgeable broker, select the insurance products
tailored to meet your needs. Purchase sufficient coverage to meet your
insurance needs.
>>
Move Onto Step 2 - Choosing A Broker
>>
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