Risk Exposures for Retail Operations

Published On: March 4th, 2019Categories: Commercial Insurance

For many, operating a retail storefront is an exciting and rewarding experience. For some, opening a retail store is a dream; for others, it is a prudent business opportunity, while others open with a combination of the two. While it is easy to focus efforts on managing the store’s day-to-day operations, many business owners are not present to important exposures that need to be addressed to keep the business moving as planned.

While the type of store you manage does make a difference, there are several risk exposures to consider. These include exposures like product liability, general liability, business continuity, property damage, and merchandise damage.  We have put together a shortlist of exposures for you to consider.

Property Exposures

Your building, signage, merchandise, and equipment are all areas in which your business has invested. If an incident occurs to this or other property, it can greatly impact your business’s long-term chance of surviving and thriving. Both natural and intentional sources can bring about property exposures, including extreme weather, customers’ and employees’ actions, and straight up vandalism to your property.

Equipment Breakdown Exposure

“But I am not manufacturing anything. How can I have equipment breakdown exposure?” Great question. For many retail operations, the primary equipment concern is related to equipment to help service customers – like a point of sale system being taken out by a power outage. Things like this could cause interruptions in business or even have them shut down for a prolonged period. Equipment like the owner’s computer, HVAC systems, mechanical/electrical systems all has a chance of breaking down.

Crime Exposure

We often think about theft (product or money) and crime as the same thing, but there are other crime-related exposures and scams that retail businesses need to consider as well. Retail money fraud is a significant concern; checkout fraud (swapping bar codes on products), returning stolen items for cash or store credit, and online scams are all exposures your retail business faces.

Premises Liability Exposure

Trips, slips, and falls are all significant concerns for retail operations. Many individuals are walking in, out, and throughout your store throughout the day. When injuries occur in your business, you could be held responsible. Wet floors, uneven floors, unexpected steps, and other small items can lead to big claims.

Product Liability Exposure

Did you know that if the products you sell harm a customer in any way, that they can sue your business? This leads to costly legal fees and settlements. Depending on the severity of the issue, costs can easily climb into 6-figures. You can do everything in your power to protect your business, but mishaps happen, and it is impossible to safeguard from all potential product hazards.

Business Interruption Exposure

What would happen to your cash flow if your business could not operate for a prolonged period? Natural disasters, fires, product recalls, cyber breach shutdowns, staff shortage, or supplier issues are potential reasons for a retail operation to be unwillingly closed. Business interruption, or business continuity, is a big exposure that can lead to an unfortunate end to retail businesses’ dreams being fulfilled.

Cyber Risk Exposure

Retail businesses are known as targets for cybercrime. Retail operations process a high volume of debit and credit card information. Depending on the business’s nature, it is common for retail operations to keep personal data on clients. The biggest cyber threat is still human error, and it can be challenging to take the time to train all staff on computer and data safety properly. This exposes your operation to ransomware, viruses, phishing scams, and malware.

Employee Liability Exposure

Retail operations are known for slightly higher turnover than in other industries—each new hire and additional departure increase the employer’s employee liability risk. Employers are also required to create safe working environments for their employees. It is challenging to control who comes into the store in a retail environment and how those patrons act. An employee that goes through a distressing event due to a client or co-worker adds to the overall employee liability risk.

Automobile Exposure

Some retail operations require employees to operate a vehicle on behalf of the business. This may include local delivery of goods, delivery to shipping locations, local deposit and banking, marketing material pick-up and delivery, and many other business-related uses. While this is important for operations, improper use of a vehicle does lead to accidents and insurance claims.

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