5 Mistakes that Elevate Risk in Your Business

When you’re the head of a small or middle sized business, you have a dozen hats to wear and never enough time to take care of everything. These 5 mistakes that elevate risk in your business can be avoided.  Learn these 5 tips and keep your company, employees, partner and clients safe.

It’s inevitable that some things will slip through the cracks.

1) Not Conducting Background Checks


To some people, this may seem obvious.

Before you bring someone on-board, make sure they are who they say they are.

Unfortunately, there are a staggering amount of employers who think that they don’t need to run a background check. They liked the person who showed up at the interview and will hire them without hesitation.

How could this possibly be dangerous?

Conducting a background check gives insight into the applicant’s behavior and patterns.

We had a client that hired a nice young woman based on her experience as a CPA. Come tax season, she stole the social security numbers of all the employees. Then she used them to commit tax fraud and collect their returns.

When our client ran a background on her, they found several counts of theft, harassment and arson.

Even if there aren’t any white collar crimes to report, there might be other things lurking in the shadows.

A DUI, for example, is no laughing matter.

Having a charge on your record displays a pretension for irresponsibility. If they’re not wise enough to not drink and drive, how do you think they’ll act within your company?

What about assault and battery charges?

During the interview, the prospective employee might seem charming and be a perfect fit. Then you find out, a month or two down the line, that they have problems handling their anger. They could potentially take out their issues on your employees.

People like that have a record of patterned behavior.

Solution: Check out their background before giving them a job offer. You might be surprised by what you find.


2) Blind Trust with your IT Personnel

Since we are in the digital age, most everything a business does occurs over the web.

You’ve put the necessary precautions in place – installing anti-virus software on your main computer and hired an IT staff to handle everything else.

You’re set, right?

Not necessarily.

Just because you’re working with an IT company doesn’t mean they automatically know how to protect your business.

A good IT firm will have recommendations about security protocols to put into place as soon as you sign up with them. These protocols that protect you, your employees, your customers and your vendors from having their information stolen or corrupted.

Unfortunately, just putting the protocols into place doesn’t inherently stop the bad guys from getting into the system.

Security measures have to constantly be updated, monitored and tested in order to really protect you.

An anti-virus program from 2010 will not stand a chance against a virus or malware software from 2016.

You have to remember that a cyber-attack is always around the corner and can happen anytime, anywhere and to any company.

Just ask Target, Sony, GoDaddy, Staples, Anthem Insurance, and Experian about cyber crime.

These are big name companies with a lot of money to put into cyber defense. Yet, they were hit hard and suffered massively when attacked.

If these massive corporations can be knocked down by a hacker, it would be even easier for a small business to be broken into.

Solution: Ask your IT people what they’re doing to protect you and your company from these threats.


3) Lack of Education About Workers’ Compensation

One of the banes of owning a business is when an employee gets injured on the clock.

According to the US Department of Labor, every year in California, 9,000 to 11,000 employees file for workers comp.

In 2015, this amounted to $438,000,000 in compensation and medical bills paid for by business owners.

The odds of encountering a claim skyrocket if you operate any type of business that deals with heavy machinery, transportation and construction.

In order to protect yourself and properly care for your employees, education is key.

They need to know what to do if they are injured and you need to make sure everything is filed correctly. A workers’ comp claim can take years to settle or close.

The only way to speed up the process is to be as compliant as possible. Make sure that the employee fills out the right paperwork and  is seeking out medical attention.

If you suspect fraud, however, talk with your business insurance provider. They will probably send out an investigator to look into it. Depending on what you find, the claim might continue or be closed based on the evidence.

Still, you don’t want to have to rely on catching the employee somewhere down the line.

Educate your employees on the consequences they face if they file a fraudulent claim.
Solution: Take every workers’ comp claim seriously and make sure your employees know how a claim can affect the overall bottom line.


4) Failure to Preserve Electronically Stored Information (ESI)

Not only do you have to worry about threats from the outside world, but also inside your own company.

Imagine this scenario: You’ve have a poorly performing employee who needs to be cut from payroll. They’re enraged and can’t believe you’re firing them.

They leave and you continue finding someone to replace them.

Unbeknownst to you, the employee can access work email and other cloud services via their personal cellphone. And even though the employee is no longer at the office, they can still get their hands on sensitive information.

Because you don’t know they have this access, you turn over their computer to the employee who replaces them.

Now, let’s say that the former employee wants to trade the information they have about your company with your competitor so they can get a new job.

You find out about this later and file a lawsuit against the former employee for corporate espionage.

During the course of the lawsuit, you need to prove the former employee’s guilt because the information they gave to the competitor was only on their computer.

You might find this difficult to prove, because the new employee has the computer with all the information on it.

Unknowingly, you just ruined your case. Or, at the very least, jeopardized your chances of winning.

By not immediately locking out the terminated employee from all access to the company, you’ve exposed yourself to risk.

Solution: Preserving electronic data is really as simple as swapping out an old hard drive for a new one.

The next step is to change passwords on email addresses and other places of logging in. This creates a barricade that, while not impenetrable, can help protect you from harm.


5) Not Really Knowing Your Supply Chain

Any time you bring in a third party to support your business, you’re putting yourself at risk.

Once you expand your business outside of the corporate office, you’re putting the fate of your company into others’ hands.

Sometimes, you find out after the fact that the people you do business with aren’t as reliable as they seem.

Take a look at these causes and effects that impact business owners’ every day.

Delays in Production:

Cause: Unstable suppliers who can’t meet your needs

They could be too slow at producing the final product or they’re not checking the product as it passes through various layers of production. This can lead to a defected product at the end, needing to be thrown away and start over.

Effect: Upsets purchasing managers, distributors and customers. Lag time on deliveries causes delays in revenues.

Solution: Work with the manufacturer to make sure the best processes are in place to make the product.

Keep an open flow of communication so they let you know when they run out of material or have broken machinery.

Delays can happen. Knowing about them as they arise gives you breathing room to plan around them.

Counterfeiting & Diversion:

Cause: Rogue distributors & manufacturers exploit your IP & Brand.

Effect: Upsets authorized distributors and consumers leading to brand erosion, customer confusion and loss of profits.

Solution: Conduct frequent audits on your manufacturers. If they aren’t compliant, don’t work with them.

IP & Trade Secret Leaks

Cause: Failure to protect your tangible and intangible IP.

Just because your office is secure doesn’t mean your manufacturer’s office is. Their computer systems can be broken into and your company information could be leaked to a competitor or counterfeiter.

Effect: Patent designs and secure information can get into the hands of counterfeiters. They can distribute low-quality products that look just like yours.

Solution: Ensure your manufacturers have up-to-date security protocols in place. Encourage them to work with an IT company that can protect their business from attack.


Hopefully this helped you understand how protect yourself internally, in the cyber world, and from white collar sharks.

If you put up the right defenses, it will show others that you’re serious about your business. It will show hackers that you’re not one to mess with and to go pick on someone else.

But most of all, put the right procedures in place so you can focus on what matters: expansion, revenue, and being the best in your industry.