Addressing risks before buying insurance often leads to a lower cost of transferring risk. One way to take advantage of underwriting expertise is to use an underwriter's questions for the business first. Here are a few common questions for small businesses (those with less than $1 million in receipts):
- What is the depth of financial auditing by outside experts?
- Internal only, or CPA Compilation, CPA Review or true CPA Audit?
- the deeper the detail, the better...if there's a latent problem
- How often are back accounts reconciled? Monthly, weekly, daily?
- Does the person reconciling the bank account also make deposits, write checks, or have other authority to transfer or make withdrawals?
- If a person making deposits and writing checks is also reconciling the bank account, this is a red flag.
- Are two signatures required for checks over a certain amount?
- If you accept physical checks or cash, are these recorded / logged immediately upon receipt? How frequently are logs reconciled?
To address today's growing threat of electronic theft:
- Do all wire transfers require dual authorization?
- Is password control and other system access controlled or overseen by owners?
- Is your IT partner, network administrator performing background checks on all employees with access to proprietary information? Are you?
For companies using valuable physical assets in the supply chain, segregation of authority is a known risk reduction strategy. So for example:
- How often is a physical inventory performed? Should be at least annually.
- Is inventory control computerized, such that management can reconcile procurement with use? Is what you're buying being used in your projects only, or could it be used in an employee's moonlighting project as well?
Get a general overview of fidelity bonds here.
For more understanding of how risk control ahead of the insurance buy can lower the overall cost of risk to your business, contact the Gordon Atlantic Insurance professionals toll free by calling 1-800-649-3252. Prefer to type versus talk? Ask your question below!
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