Four out of five experts agree, risk management is vital for businesses in a “down” economy.

how bad things are

There’s a lot of talk these days about how important risk management (specifically, maintaining adequate insurance coverage) is in our “new economic reality”.  In a “Your Money” column in the New York Times, the wealthy (or formerly wealthy?) seeking to protect their housing assets are advised that “in the current economic environment, the most important piece may be an umbrella policy to cover the people who work for you.  If the guy fixing your roof slips off or your nanny falls into your pool, the potential loss of wealth could be far greater than anything the stock market takes away.”   The insurance industry also advises small businesses not to skimp on coverage, and the newly unemployed who are starting home businesses are warned to consider the insurance coverage they will need in additional to their personal home and automobile insurance policies.   (Insurance Industry Advises Small Businesses Not to Skimp on Coverage)  Marsh, the humongous (that’s a technical legal term) international insurance broker, has issued a study on the need for businesses to manage risk in order to survive the recession.  (Marsh Issues Study on Managing Risk to Survive Current Recession)   And as the Insurance Journal understates:  “The current financial crisis affects almost every aspect of our business life.  That includes insurance.  Businesses need to be wise consumers and aware of the legal issues covered by their coverages.”  (Insurance in Times of Financial Crisis)  (Note:  This article also discusses an important type of business insurance, Employment Practice Liability Insurance or EPLI, which many small business owners neglect to carry but, in my opinion, should, given the burgeoning number of employment practices administrative actions and complaints, which will continue to increase as unemployment rises.) 

Looks like my niche law practice has “morphed” from dry and nerdy to cutting edge, seemingly overnight.  Of course, legal risk management has always been important for individuals, businesses and non-profit organizations.  What has changed is this.  In the current economic climate, when having to pay out of pocket for an uncovered claim, legal defense costs or a settlement or judgment may mean the difference between economic survival or failure, what has always been important has now become necessary and imperative.  But it’s not all about survival.  Effectively managing risk now will better position any business owner or business organization for greater success when the economy turns around.

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