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Archive for month: September, 2013

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Business Trends that Drive the Need for Technology E&O

In the world of technology, it’s always a given that things can go wrong. Unintended errors may occur because of software programming or performance issues or any other aspect of providing a technology product or service. When this results in customers experiencing a financial loss, they make take legal action to be compensated. In order to provide a level of protection against this type of risk, a Technology Errors and Omissions liability policy is needed.

This type of insurance coverage could include costs associated with a legal defense for accusations made against a technology company. It could cover court costs and subsequent judgments against a company, up to the limits of the insurance policy. Each technology errors and omissions insurance policy is different in scope. You will need to work directly with a professional risk advisor to ensure that the policy you are considering matches the exposures that are unique to your firm.

Business Trends that Drive the Need for Technology E&O Coverage

We have observed a number of notable changes driving the need for Technology Errors and Omissions coverages. They include the fact that more business contracts now require evidence of E&O coverage, which naturally will increase the size of business contracts and the amount of time and attention you need to devote to them.

What Can Technology Firms Do to Mitigate their Exposures?

There are several ways to mitigate exposures to electronic disputes. Chief among them is a legal review of all purchase orders, contracts and license and service agreements. You will need to review limitations of your liability in all documents, as well as any warranty disclaimers in your contracts. It’s also prudent to review severability clauses, indemnification procedures and arbitration provisions.

But Our Commercial General Liability Policy Will Cover Technology Exposures – Right?

Wrong. Some technology firms assume that their Commercial General Liability policy will respond to claims arising from programming errors or software failures. It is unlikely that a Commercial General Liability coverage would respond to a technology related claim. Firms also make the assumption that by simply purchasing any Technology Errors and Omissions insurance policy, all of their technology risks will be covered. Smart firms find a way to get educated on Technology Errors and Omissions risks and cyberliability insurance products. They will weave together their internal and external risk control measures before purchasing an insurance program for their organization.

Establishing Technology Errors and Omissions and protection against cyber-related risks is an important part of your business. Working with a TechAssure Association member can help you identify your exposures and establish a risk management program for the best protection. Please give us a call for more information.

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High Growth Firms, Board Governance and Leadership Succession

Board governance is one of the most important elements in high-growth firms. We often get a wide range of questions on managing risks in high-growth organizations. Adopting risk management best practices early in the development of an organization can put your firm on the path to accelerated growth. If done correctly, high-growth firms have the ability to continue along their successful growth path.

The issue of board governance often comes up as high-growth firms establish their risk management program. Board governance is what really keeps your business moving and growing. Therefore, you must give leadership succession a very high priority. These leaders will move your company forward or backward, depending on their skills and understanding of how your firm operates.

The best way to prepare for succession is for the board to hold several discussions every year about who the best choices for new leaders are. They need to make an effort to get to know these candidates personally and observe how they react in crisis situations. They should also create assignments that will prepare candidates for possible future roles.

Without preparation for leadership succession, board members and investors may find they lack confidence in their inside choices. In such cases, many companies will tend to fall back on outside hires. This isn’t always a good approach, because while the new hires may look good on paper, they often lack the inside knowledge of your company that is necessary for making a smooth and long-term transition. Boards should instead hold leadership succession planning meetings to keep track of candidates and their progress in gaining the needed experiences that will prepare them for their new positions.

High-growth firms should include board governance and leadership succession in their risk management planning. These long-term goals can help prevent potential serious losses resulting from a disruptive transition in leadership. For more tips and strategies on risk management planning for high growth firms, please contact one of our TechAssure Association members today.

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High Growth Firms and Risk Management

The global financial crisis has led to dramatic and ongoing changes in risk management among many technology and life science firms. As a result, most technology and life sciences business leaders face unprecedented challenges as they grow their firms from the early stage to maturity. However, we continue to witness the growing list of high-growth firms in this category and we believe they have unique insurance and risk management needs. These firms must make risk management central to their business at an earlier stage in the corporate life cycle in order to have the best chance for survival.

Rapid-growth companies aren’t afraid of taking calculated risks. They often learn how to turn risk into opportunity and find themselves doing that better than their competition. This means that before they jump into opportunities, they calculate the risks and are more aware of the potential consequences. Developing a corporate risk management approach at an earlier stage in the firm’s life cycle is crucial for ensuring the continued interest of investors and strategic partners.

A growth firm is recognized by its ability to increase its business by a significant amount very quickly, but it’s important to realize that there are challenges with such a fast increase in business. Demands for capital to increase and expand production, hire additional workers, increase locations and more are necessary to maintain high growth rates. Investors are usually asked to take a new look at a growth business and the potential it has for increased profits and cash flow.

A growth firm will experience increased market share and profits. It puts them in the position of decreasing competition. They will be able to better seek out the latest ideas and innovations in their industry. One important result is that higher skilled workers will want to be a part of a growth firm.

As a growth firm enlarges, its insurance needs will also tend to increase. It will be important to adjust insurance coverage as is necessary. Additional insurance products may be needed and adequate liability insurance needs to be in place as the company changes and grows.

Growth firms do many things to maintain their momentum. Having a risk management plan that changes with your organization is important. Contact a TechAssure Association member to learn about our special services for high growth firms.

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Top Five Causes of Data Breaches and Why Firms Should Buy Cyberliability

Because of advances in technology, companies have been able to grow and expand like never before. On the downside, cyber threats lurk around every corner, from hackers corrupting systems and networks to criminals attempting data breaches.

Because of the nature of their business, technology companies are at an increased risk to these types of threats. Here are some of the top causes of data breach and what steps you can take to ensure your company’s information is safe.

  1. Credential Theft: Hacking puts all of your sensitive information at the fingertips of individuals trying to steal your company’s most important information. In a recent study, 76% of data breaches occurred because of weak credentials. Password protection is essential to preventing hackers from entering your company’s networking systems.
  2. Application Vulnerability: Hackers use back doors and SQL injection accounts for almost half of all data breaches. Web applications are most vulnerable to this type of attack.
  3. Data on the Move: This type of breach involves stolen or lost-in-transit devices such as laptops, storage devices, hard copy reports, and hand-held devices. Securing these items during travel can help ensure that your sensitive information does not fall into the wrong hands.
  4. Insider Breach: This type of security threat involves insider attacks. Employees who can access company information can easily transfer firm financials, passwords, network and security access, etc. When employees go rogue, it is important to have a secure plan in place to prevent loss of data or worse.
  5. Employee Error: Employee negligence can inadvertently expose your firm to data breach. Some of these instances may be unpreventable, but it is important to educate your employees on how they can prevent data breach by following certain system protocols and implementing criteria each day that can help close the gap.

Maintaining a comprehensive cyberliability insurance and risk management program can ensure that your information is protected and that you will have a plan of action for managing the aftermath. Protect yourself and your firm’s credibility with an insurance policy custom tailored to your specific requirements. A TechAssure Association member can help you customize a cyberliability program around your unique risk profile. Please contact us for more information.

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Top Risks in Global Expansions

If you are a technology or life science firm considering global expansion, you need to become aware of some foreign risks that need to be managed. Tips to handling foreign risks include:

Establishing a Global Risk Management Program – Handling of foreign risks is different from the management of domestic risks. Foreign risk requires different treatment and a firm understanding of the differences in laws, business practices and procedures for handling certain risks. With an ever-increasing number of firms that are expanding their operations to include facilities on foreign soil, it is important to establish overall goals for your risk management program.

The goals for your global risk management program should include the standardization of risk management controls, and an improved ability to predict potential losses. You will also need to eliminate gaps in your insurance coverage, identify hidden costs in your insurance program and ensure that you are in strict compliance with local laws and are leveraging economies of scale in your insurance program.

Political Risks Play a Role in International Expansions – Political risk is defined as the threat of losing assets, management control, or potential earnings as a result of political action by the host country. Generally speaking, a country with a stable government poses less of a risk than one in turmoil. Specialized Political Risk insurance policies can protect against certain types of perils for companies doing business or conducting operations in foreign countries. These insurance contracts often address business exposures faced by these companies as a result of foreign governmental action. Types of exposures that can be covered under political risk policies include confiscation, expropriation, deprivation, nationalization, political violence and currency inconvertibility. They can also be customized to include export credit.

Economic Risk Come in Different Shape and Size – Economic risks speak to the chance that a host country may impose sanctions that will restrict or regulate the activities of foreign corporations. Most common among these are exchange controls, which restrict movement of foreign money out of the country, tax policies that are often used to control foreign companies by placing large taxes on their products, and price controls in which host countries establish regulations controlling the price range of a business’s goods or services.

Don’t Forget the Cultural Risk – Cultural risk can be as damaging as political or economic dangers. National cultural risk is the possibility of doing something considered unacceptable by the social culture of the host country. Business cultural risk is the threat of doing something inappropriate within the business environment as a whole. Corporate cultural risk is the risk of making a cultural error when dealing with a specific company.

Managing foreign risks can determine your level of success in the global market. The international network of professionals in TechAssure Association can help you establish a solid global risk management program. Contact us to learn more about our members.