NFIB

The rewards of expanding your small business — whether internationally or into cyber-space — can be great. However, it's essential to carefully identify and manage the risks involved before you wade into unfamiliar waters. 

Managing risk in a growing small business was the topic of the June 17 Summit breakout session "Business Insurance: What’s At Risk?" Panelists from AIG Insurance and NFIB Member Benefits addressed small-business owners about reducing the special types of risk involved in doing business overseas and on the Web.

Have you ever thought about doing business globally? If you do, you won't be alone. According to the Small Business Administration and Harris Interactive, 97 percent of U.S. exporters are small and medium businesses. Small businesses that export grow 20 percent faster and are 9 percent less likely to go out of businesses. And with 95 percent of the world’s population and two-thirds of its purchasing power outside the United States, it often makes good sense for a small business to go global.

However, as your small business expands internationally, there are special risks that are not covered by domestic general liability polices, according to Colleen Donohue, of AIG Small Business. "Expansion overseas often brings inadequate coverage," she warned, detailing some examples of risks that are amplified when doing international business:

• Repatriation of assets or employees
• Threats to marine cargo
• War risks
• Financial risks related to foreign employee dishonesty, forgeries and official corruption
• Kidnapping, ransom and extortion
• Political risks such as expropriation, nationalization, embargo, contract cancellation, and selective discrimination
• Foreign travel accidents and emergency medical expenses, including emergency evacuation
• Credit risk/nonpayment

Cyber-risks
A Harris Interactive poll reports that 70 percent of small business have or will have an online presence by 2005, double the 2002 rate. Yet, as businesses expand on the Web, their risk for cyber threat grows. The economic cost of such threats is staggering: Trend Micro said viruses cost U.S. industry $55 billion in 2003.

"The Internet promises a borderless, global economic environment allowing instant communication and commerce in ways unthinkable even a few years earlier," said Ty Sagalow, executive vice president, COO of AIG eBusiness Risk Solutions. "But the openness of the Internet results in new legal liabilities as well as unprecedented vulnerability to those seeking to destroy or steal vital assets or interrupt your business."

To battle these destructive viruses and cunning hackers, Sagalow outlined four tools to insure proper management of a small business' cyber risks

1. Aware people — dedicated tech personnel and an active crisis management team in place.
2. Effective policies — including employee education and regular training.
3. Updated technology — including firewalls, anti-virus software, regular backup
4. Responsible financial management — including reserve funds and specific insurance for cyber risks

Sagalow explained that traditional insurance wouldn't cover most of the legal liability costs from cyber attacks, such as those involving destruction of data, theft of client information and denial of service. Though insurance programs for cyber risks are only four years old, he said the market is predicted to expand within four to five years.

During the session Jeff Koch, of NFIB Member Benefits, also announced a new NFIB-AIG partnership. He said that the partnership will not only extend insurance benefits, but also lend political support to NFIB members. "We can match our public policies together with our new AIG partnership and build a complete package for our members," he said.