As a financial institution, your customers trust you with their money. And, whether you provide checking or savings accounts, loans, or cash and wire transfers, there are a number of risks associated with your operations that you may not have considered. The list below provides an overview of common financial intuition exposures, helping you identify potential blind spots in your risk management and insurance programs.
For financial institutions, property exposures can come from a variety of sources, including equipment failures, natural disasters, customers, employees and other third parties. When discussing property exposures, fire damage is of particular concern, and financial institutions face an elevated level of risk due to electrical wiring for computers, printers and other office equipment. What’s more, HVAC system failures and flooding can lead to major water damage, not only to your building, but to critical equipment and records as well.
Because financial institutions are constantly handling money and often have high amounts of cash on hand, managing crime exposures can be a challenge. What’s more, the administrative burden of auditing your books can leave you exposed to embezzlement and a variety of other scams. While direct theft of money and securities through hold-up robberies can occur without warning, employee dishonesty can be just as concerning. In a matter of seconds, dishonest employees can steal cash directly or illegally wire it to themselves. More troubling still, employees may take advantage of their access to sensitive customer information, which could harm your reputation and lead to expensive legal proceedings.
Because of the high number of individuals entering and exiting the business, premises liability exposures for financial institutions are significant. What’s more, when injuries occur at your business, you could be held responsible. Accidents related to slips, trips, falls and unauthorized access to your building are common and major sources of concern. Something as simple as a wet floor or an uneven surface can lead to costly insurance claims following an incident. In addition, because financial institutions handle high amounts of money, the threat of armed robberies and workplace violence is ever present.
Lawsuits involving directors and officers can be financially devastating for both an organization and its leadership. What's more, D&O liability can come from many sources, and claims can arise without warning. Financial institutions are especially at risk, and senior leaders could be sued should your organization mismanage advisory services, estate handling, employee pension funds or other financial activities.
Financial institutions are one of the most common targets for cyber criminals, as these businesses often store sensitive customer data (e.g., names, addresses and credit card information). In addition, employees who are improperly trained on computer and data safety could put your organization at risk for ransomware, viruses, phishing scams and malware. Just one attack can leave you exposed to reputational harm, litigation and data breach notification costs, and potential compliance fines.
Continuity is critical in business, and there are few things more important than continuous revenue and cash flow, particularly for small to medium-sized organizations. In fact, just one brief business interruption can be incredibly costly for an organization, often leading to serious reputational damages or long-term closures. Common interruptions for financial institutions can include natural disasters, fires, leaks, cyber security events and vandalism.
You may not realize it, but inland marine exposures for financial institutions are vast. In fact, any property that’s unique or valuable, in transit, in your temporary care, stored at fixed (but movable) locations or used to transfer information represent an exposure. Following an incident that leads to property damage, potential losses for your business include accounts receivable, computer equipment, and key business data and records.
Anytime one of your employees is injured on the job, your business could be subject to expensive workers’ compensation claims. Common sources of on-the-job accidents for financial institutions include slips, trips, falls, musculoskeletal injuries caused by repetitive tasks, sprains and strains. Normal, everyday tasks related to moving files and other daily tasks can lead to accidents and, in turn, increased costs for your business.
For More Information
While the proper risk management practices can reduce certain exposures, no system is 100 percent effective in ensuring an incident-free workplace. As a result, it’s all the more crucial to work with a qualified insurance broker to not only assess you exposures, but secure the appropriate coverage as well. To learn more, contact E.B. Cohen today.