An economic downturn can be a turbulent time for businesses in every sector. Sinking revenues and economic uncertainty can increase the chances of litigation, and even companies that successfully weather economic downturns relatively unscathed can still face specific long-term uninsured risks. For this reason, we have compiled these tips to effectively manage your company’s exposures as it adapts to economic downturns.
Supply Chain Dependency
It’s no secret that in times of economic downturn, cutting costs is a necessity. However, it is important to remember that the financial security of your business can hinge on that of your partners, vendors and suppliers.
In a tough economic climate, do not rely on the insurance coverage of your business partners to protect your assets or protect against third-party liability claims. Any member of the supply chain can be held responsible for its counterparts’ torts. A distributor, for example, may be liable for a claim filed against its manufacturer when it goes out of business.
Therefore, in order to protect your company, it is a wise long-term investment to expand your coverage limits. While it may be tempting to cut costs by limiting coverage, this decision could expose you to severe liabilities due to your supplier’s shortcomings. If you currently deal with foreign manufacturers or if you’re considering outsourcing for the first time, talk to Robertson Insurance & Risk Management about covering the associated risks.
Rely on Solid Contracts
In times of economic change, it is more important than ever to ensure your protection through thorough, seamless contracts. They should clearly outline both parties’ obligations and discuss dispute resolution policies to avoid messy and expensive disagreements. An indemnity term can be included in contracts with foreign suppliers in which the supplier consents to the jurisdiction of U.S. courts and indemnifies its sellers here in the event a claim involving one of its products. Remember, however, that this contractual indemnity is only as valuable as the manufacturer’s ability to pay.
It is never a good business decision to sign into a contract hastily, but especially in difficult economic times, be sure to explore all the risks and legal ramifications. Small companies who partner with larger companies are often strong-armed into making decisions with which they are not completely comfortable.
Changing to Survive
For many businesses, change is an intelligent way of reacting to an economic crisis. It allows you to explore new customer bases and offer additional products or services. While expanding in either of these ways can revolutionize your business and keep you afloat in tough times, it could also expose you to additional liability you had not dealt with before.
When you begin to step into new lines of products or services, you will inevitably face a learning curve, which puts you at a larger risk of facing product liability claims. You may want to consider purchasing additional lines of coverage to protect yourself, as your surplus lines insurance policy may only cover claims arising from one particular product.
However, shifting or expanding your customer base may open you up to class action lawsuits. New markets may react differently to product failure. Thus, it is vital to be covered for potential liabilities resulting from a change in your business. Contact us today to assess exposures that could be associated with your business plan.
Robertson Insurance & Risk Management are here to help!
We understand that insurance is purchased to prepare you for the worst case scenario. You can rest assured that we will develop a risk program that meets your specific needs. By offering and making use of proven insurance and risk management methods, we can provide solutions that not only protect against loss but also help to avoid or lower the risk of having certain losses occur in the first place. Give us a call at 717-625-3770