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Risk Management Bulletin
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What is a Continuity of Operations Plan
Is your small business prepared if a natural disaster, equipment malfunction or other unforeseen event disrupts daily operation? A Continuity of Operation Plan or COOP analyzes your business, identifies critical resources, personnel and weaknesses, and outlines a contingency plan. You need a COOP to protect your business's future, and these tips help you create one today.
Do a Business Impact Analysis
When creating a COOP, start by doing a Business Impact Analysis (BIA). It removes all the layers in your business until you only have the absolute necessities required for your company to continue operating. Consider your personnel, finances, operations, ordering and distribution as you do the BIA.
Assess the Risks
After you identify your company's BIA, make a list of risks, threats and hazards your business faces. Those risks will be unique to your area and could include natural disasters like tornadoes, hurricanes or floods, equipment malfunctions, data breaches or illnesses of key employees.
With your list of risks, you can create contingency plans that account for the worst-case scenarios and ensure your business can remain operational. As an example, let's say you rely on two key pieces of heavy equipment that sit outside. Plan to store those machines in an alternative location nearby during hurricane season so that they're protected and available to you if bad weather strikes.
Plan for Resiliency
The most successful businesses are resilient in the face of adversity. Your business can be, too, as you prepare for potential risks, threats and disasters, but resilience requires planning. Depending on your BIA, you may need to take these steps as you prepare for anything.
Cross-train employees to cover necessary duties if your key people are unable to come to work.
Decentralize operations of key tasks to ensure at least parts of your business are up and running when disaster strikes.
Have another location on-call in case you can't access your building.
Back up critical data at least once a day to prevent loss.
Store records online or in a separate location to decrease the risk of a data breach.
Know how to reach key employees and customers any time day or night.
Protect your equipment or prepare back-up equipment if yours is damaged or inaccessible.
Open a financial account with emergency money to cover operations in the event you cannot access your regular accounts.
Your Continuity of Operations Plan can keep your business operational in the face of disasters and emergencies. When preparing your COOP, talk to your insurance agent. He or she can help you write a comprehensive list of threats and risks, assist you in creating a plan that addresses those issues and increase your business's likelihood of surviving adversity.
HMS Insurance Associates, Inc.
Fire Extinguisher Safety
Every small business needs to be equipped with functioning fire extinguishers. Local and city codes and your insurance company mandate specific requirements, and here a few of the guidelines you'll need to know as you practice fire extinguish safety.
Ensure Extinguisher Accessibility
During a fire, you don't want to have to search for the fire extinguisher behind a pile of boxes or in a closet. Mount it somewhere that's easily accessible but does not hinder anyone from exiting the building. Also, if the fire extinguisher weighs less than 40 pounds, mount it on a permanent structure that's three to five feet off the floor.
Use the Correct Size and Type
The fire load of your business determines how many fire extinguishers you need and what size they are. As an example, a retail space with less than 3,000 square feet of space may need only one 5-pound extinguisher, but if candles or pool chemicals are sold in that space, two extinguishers located at opposite ends of the building may be required.
Test Extinguishers Regularly
Like most things in your office, fire extinguishers do wear out even if they're not used. Follow this testing schedule to ensure your extinguishers are ready to go when you need them.
Six years after your dry chemical fire extinguisher is manufactured, it must undergo routine maintenance. The handle, stem, internal parts and chemicals are removed and the cylinder is pressure tested and inspected for wear, tear, damage and defects. The extinguisher is then reassembled, charged and tested to ensure it doesn't leak. A new inspection tag is attached if the extinguisher passes all these tests.
Twelve years after the manufacturer's date, perform a hydrostatic test on your extinguisher. It receives a hydrostatic test sticker or stamp if it is serviceable.
You'll also want to perform monthly checks on your extinguisher. Be sure the extinguisher hasn't been tampered with, vandalized or damaged and check for missing parts and improper pressure. The supervisor or designated employee who does these monthly checks should initial the inspection tag to verify that the extinguisher is ready for use.
Provide Proof of Inspection
The fire extinguishers in your business much be inspected annually by a licensed technician. During the inspection, the technician will verify that the extinguisher is undamaged and not discharged, is the correct pressure, has a debris-free hose and is properly mounted. Each extinguisher that passes inspection receives a tag that's punched with the inspection month and year.
The fire extinguishers in your building could save lives. Follow these safety tips to ensure your extinguishers are ready for action. You can also ask your insurance agent or building inspector for additional safety tips.
HMS Insurance Associates, Inc.
How Much Should You Save In An Emergency Fund
As a small business owner, you always look for ways to improve your company's bottom line. Sometimes, you may be so focused on helping the business succeed that you forget your own needs. Be prepared for unexpected financial challenges, give your family peace of mind and reduce stress when you save an emergency fund. It's an important part of your financial portfolio.
What is an Emergency Fund?
Your biggest client sells the company and stops placing orders.
Your husband discovers termites in the basement.
Your son needs oral surgery that's not covered by insurance.
These emergencies are a few examples of unexpected expenses that affect your finances. You could withdraw from your 401(k) or IRA, take out a loan or borrow from your business, but those steps cause severe penalties both now and in the future. With an emergency fund, you can weather these challenges with little ill effects.
How Much Should you Save in an Emergency Fund?
Everyone's needs are different. Use these guidelines as a starting point for deciding how much money your emergency fund should have.
At minimum, save three months of living expenses. These expenses include your mortgage, utilities, insurance, food, entertainment, debt repayment, school tuition, clothing and other daily living expenses. As an example, you should save $9,000 if your monthly living expenses total $3,000.
If you have dependents, including a spouse, children or aging parents, save six months of living expenses. This figure protects your loved ones and accommodates the higher cost of living you may incur.
If you're a high wage earner or concerned even a little bit about your business's financial future, save 12 months of living expenses. This figure is significant, but it gives you peace of mind in case something goes wrong.
Where Should you Invest Your Emergency Fund?
Because you need your emergency funds accessible, don't invest them in an account that will penalize you for withdrawing from it. Instead, consider a short-term certificate of deposit or a regular savings account at an online bank. Shop around to find the best interest rate.
How Can you Boost Emergency Fund Savings?
It can be intimidating to save thousands of dollars in an emergency fund, but you can do it one dollar at a time. Start saving money automatically from every paycheck. You can also give up a coffee or two each week and look for other ways to cut expenses. Consider selling unused items as you build your emergency fund, too.
Saving an emergency fund gives you a cushion in case something happens to your business or at home. For more details about how much you should save, talk to your financial advisor or accountant.
HMS Insurance Associates, Inc.
Should You Offer Employee Tuition Reimbursement
Employee retention boosts your business's revenue, productivity and morale. One way you can retain employees is by offering a tuition reimbursement program that allows your team members to finish their degrees or learn new skills. Discover more about tuition reimbursement programs as you decide whether or not to include this valuable addition in your employee benefit package.
What Types of Tuition Reimbursement Programs are Available?
There are multiple tuition reimbursement programs, but they all fall into two basic types: prepaid and traditional.
The prepaid method requires you to pay the school for courses your employees take. Because payment is due before the class is finished, you could potentially lose money if your employee quits or fails the class.
The traditional method allows you to create guidelines your enrolled employees must follow. Those guidelines may require employees to earn passing grades and complete courses within a certain time frame. Employees pay for the classes out of their pocket and sign a written agreement stating that they will comply with the requirements before you reimburse them for the classes they take.
How to Establish a Tuition Reimbursement Program
Before you announce your intentions to start a tuition reimbursement program, outline the rules so your employees can understand the program and their obligations.
Determine any employee qualifications for the program
Indicate how long a person must be employed before they become eligible for tuition reimbursement
Specify the amount of time an employee must remain with your company after they earn a degree
Decide if employees can attend online or campus-based schools and whether they can go full-time or part-time
Set a yearly cap
Outline expected grade requirements
Note the documentation required to show program requirement completion
Create a monitoring system that verifies that employees meet program requirements
The Benefits of Tuition Reimbursement Programs
If you decide to offer tuition reimbursement, make sure it's beneficial for you and employees. Ideally, you should gain more knowledgeable and skilled employees, and the employees should receive a free education that enables them to be more productive and earn more money.
The Tax Advantages of Tuition Reimbursement
Tuition reimbursement programs can provide you with a tax break. To be eligible, meet one of two IRS methods.
Submit a formal plan in writing.
It defines employee eligibility, includes a financial cap on your participation (normally $5,250) and is free from all forms of discrimination.
Implement a working condition fringe benefit.
No written plan is required, you don't have to cap benefits and you can pick and choose employees to participate in the program.
A tuition reimbursement program can help you attract and retain quality employees. Consider implementing one for your company. For more details, talk with your accountant or financial advisor.
HMS Insurance Associates, Inc.
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