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In This Season of Giving, SBOs Should Take Steps to Avoid Unnecessary Risk

During what is perhaps the most significant time of the year for the America’s small business community, independent store owners around the country are preparing to accommodate the demands of keen shoppers and higher traffic. With a finite amount of time and resources to maintain the business however, this focus on the conversion of interest into tangible sales, such as shipping, stocking, promotion, gift card redemptions and gift exchanges, may come at the expense of protecting property, personnel and the business itself from the heightened level of risk that comes with such high stakes and adverse weather.

SmallBizDaily spoke with Brian Kearney, Chief Underwriting Officer for Travelers Select Accounts, to learn more about where exactly these risk areas lie, as well as the best practices that small business owners can follow to limit their liability in the event of any unexpected, unwanted ‘gifts’ this holiday season.

SBD: As the holiday season approaches, what are the greatest emerging risks applicable to small business owners?

TRV: We have isolated four major risk categories that small business owners should take note of this holiday season. These include company data breaches, ineffective hiring and training practices for seasonal workers, employee and customer theft, and supply chain disruptions.

SBD: Let’s go through them one at a time. How can small businesses proactively mitigate the risk of a company data breach?

TRV: As small businesses adopt new types of technology, owners need to rethink the risk mitigation practices in place to protect employees, customers, and property.

Conducting a threat assessment of different risk scenarios is a great way to identify the nature, impact, and likelihood of each event. Such cases may range from malware infection and malicious use of the company’s financial information to unintentional actions such as an employee emailing the wrong file or misplacing company property.

A business impact analysis will also help identify and prioritize the business functions most critical to keeping company operations running, ensuring that one’s business can be restored as quickly as possible. This includes owning a network inventory to help identify the critical hardware, software, and firmware needed to continue providing goods and/or services, as well as specifying who is responsible for creating, storing, and having access to backups. Electronic data should be backed once a week, with all backups stored at a remote location that cannot be impacted by the same event. When you set up a contract with a third party, specify the level of security required and the time frame they have to deliver your backups.

Finally, small businesses should regularly test their threat assessment and business impact analysis plans to evaluate their effectiveness, periodically conducting system backup demo exercises to verify that steps can be taken smoothly and swiftly in the event of a real breach.

SBD: What are some best practices for hiring and training temporary seasonal employees during one of the busiest periods of the year?

TRV: With the National Retail Federation (NRF) expecting retailers to hire between 640,000 and 690,000 seasonal workers this holiday season, and cargo volume expected to total 18.6 million Twenty-Foot Equivalent Units (TEU) in 2016 (up 2.1 percent from last year), training employees on safety practices is one key way to reduce injuries among an influx of less experienced staff. In fact, data shows that 28 percent of employees are injured within their first year of employment. Helpful tips for safeguarding store personnel and customers include:

  • Ensuring that new hires are familiar with their surroundings and responsibilities. While they may bring a great deal of industry experience, a unique facility is still unfamiliar territory and an educational tour of the premises can help resolve this discrepancy.
  • Scan your facility each day to ensure it is safe for customers and employees. This extends to maintaining appropriately safe inventory levels, choosing smart locations for additional holiday displays that do not cover emergency exit signs or block passageways, as well as checking that extension cords are properly fitted so as not to create a potential fall or fire hazard scenario.
  • Train employees in proper lifting techniques and ladder safety. For businesses struggling to maintain safety while handling seasonal demands and onboarding seasonal hires, a couple of ways to ensure workers remain secure include considering the level of responsibility assigned to seasonal workers and pairing new workers with veteran employees until they can perform their job duties safely on their own. Another method is visibly demonstrating evidence of the company’s commitment to safety, which can be highlighted through top management’s attendance at safety meetings, thorough review of accident reports, and establishing an employee-managed safety workshop.
  • Arrange contingent worker schedules that can help ensure there is full coverage should someone call in sick or is unable to work due to adverse weather at short-notice.

SBD: With security becoming a top-of-mind issue for businesses of all sizes, what steps can employers take to reduce the dual risks of customer theft and employee theft?

TRV: To put the risk of theft into context, employee theft cost the U.S. economy approximately $18 billion in lost revenue in 2015, while customer theft or ‘shoplifting’ accounted for a $15.7 billion loss. (Source: Global Retail Theft Barometer). In some instances, theft levels rise 40 percent higher on holiday weekends than their non-holiday alternatives. Among the steps that employers can take to reduce instances of theft are:

  • Installing security cameras around the premises, to ensure that potential customers do not leverage busy traffic to take items without paying. With an estimated 725,000 plus temporary workers also expected to be hired this season, retailers on a budget might consider leasing this equipment to stay extra vigilant when protecting assets and inventory throughout the holiday season.
  • Human error can be the greatest disguise for employee theft, so taking the time to evaluate daily revenues, chase up questionable transactions, and conduct background checks on all prospective employees for any history of suspicious activity.
  • Products are stolen in transit as well as from stores and warehouses. While some businesses may contract a third-party logistics company to deliver their products, vendors can still find themselves liable to cover the cost of theft or disappearance. Businesses should ensure that they, or their logistics partner, keep all valuable items locked in loads and avoid the risk of porch-pirating by dropping items off at a safe location at a specific time, or arrange to have the customer pick items up themselves up from the nearest facility. Evolving methods of cargo theft, such as “fictitious pick-ups” where cargo thieves arrive early for a pick-up posing as a legitimate carrier should also be considered.

SBD: A business can only sell what its supply chain can deliver. During a time of extreme weather and high demand for resources, how can small business owners secure their supply chain?

TRV: The first step is creating a contingency plan to address the risk of the supply chain being interrupted. At this time of year, it pays to know how to make special arrangements to fulfill inventory needs if any point in the supply chain is interrupted.
When sourcing strategic partners for roles higher up in the supply chain (raw materials, manufacturing, etc.), start by researching the most credible certification bodies within an industry and exploring which companies meet their required standards across different sectors and geographical markets. Organizations that provide quality electronic components, for example, are often recognized by the Independent Distributors of Electronics Association (IDEA), or the Federal Defense Logistics Agency (FDLA).

It’s also crucial to look beyond which supplier offers the most cost-friendly bid and instead seek out distributors that are regarded for their consistent, robust service. Sourcing references from other companies that have worked with the seller is one means of collecting this intelligence. Also, try to understand a supplier’s track record, financial resources, customer base, and reactive tactics for limiting business disruption.

Looking beyond regulation towards specific business preferences, additional protocols that inform a company’s potential for partnership include verifying that their materials specifications match the needs of one’s business. Review a bidder’s documentation, quality control and testing procedures, as well as including a contract clause in any agreement that the provider must notify the business of any changes to product design or the supplier process in advance. Other proactive measures may include on-site inspections, independent testing, and establishing conditional agreements with similar suppliers in a different geographical region.