Workforce disruptions, cyber security threats and the impacts of looming environmental, social and governance reporting standards lead the top risks that Canadian businesses are expected to face in 2023.
Yet experts say that’s just the tip of the iceberg, and it’s up to owners to dig deep into all corners of their businesses to assess and treat threats before they become catastrophic.
“As businesses grow and things evolve and we’re in this age of technology where everything moves so quickly, there are risks out there that business owners haven’t even contemplated,” says Wendy Wildeman, Calgary-based vice-president of commercial lines at Acera Insurance, formerly Rogers Insurance.
“And if you choose to put your head in the sand and not examine the potential calamities that can happen, you’re just setting yourself up for disaster.”
Wildeman, who has her Canadian Risk Management (CRM) designation, points to a number of risks that business in Calgary could face – from business interruption and employee crime to data breaches and breakdown of essential equipment.
“Cyber crime is actually the fastest emerging risk that we’ve seen,” she says. “The havoc that it can wreak on a business owner or an individual is devastating. Yet some still people have no concept of it, and it can impact everybody.”
Andrew Barker, Calgary-based managing partner at Iridium Risk Services, singles out various compliance risks as ones he’s seeing more of these days with his clients, which are largely mid-market energy slanted companies, as well as from the industrial, technology and cannabis sectors.
“Pollution liability is a big one, and very topical in Alberta. And just clean-up and remediation, in general,” says Barker, whose company’s roots stretch back to 2005. More recently, it became part of the Navacord network, one of the largest commercial brokers in Canada.
“Also, with the AER (Alberta Energy Regulator) being more aggressive, it’s top of mind for a lot of the directors and officers when we sit down to make sure that, if the worst case does happen, are they protected?”
Barker also points to operational risks as another common one his clients are looking to mitigate.
“They might have a key facility that suffers a catastrophic loss, whether it be a fire or an explosion,” he says. “Or there could be the capital breakdown. Anything that just grinds their operations to a halt.”
The cost of not managing some of these risks?
“It could range from loss of revenue to loss of life,” he says. “We’ve had several claims in our office where clients have admitted that had they not had that insurance policy place, then their companies would have gone under.”
Wildeman highlights the importance of recognizing that not all risks are considered equal.
“Even from one building to another, they’re not equal. If you’re operating out of a fire-resistant building versus a frame building, your risk of fire is much lower,” she says.
“Or it could be a transfer of risk – for example, one company has contracted out its snow removal while the other hasn’t. So, it might be exactly the same building sitting side by side. There’s still going to be some sort of difference in there.”
Barker adds that not all companies look at risk the same way, either.
“Companies that are in the same industry can have very different views on risk,” he says. “We have clients that are extremely risk averse and want to buy as much insurance as they can. Others are very tolerant to risk. They really want to just focus on those company killer type of scenarios. They’re comfortable with having skin in the game on those lower severity type of events.
“So, depending on where they fall in that spectrum, that guides our conversation of how much time we spend talking about auto liability and slips trips … versus those catastrophic fires.”
Barker’s advice for business owners looking to mitigate their risk is to be less transactional and more proactive.
“It’s easy to just fall into that trap of just having your broker go out and get you the same insurance product year after year. But you need to keep that discussion alive,” he says.
“It has to be an annual. You just need to talk these things out and reaffirm the assumptions you’ve made. Perhaps your company has grown, and you are able to take on more risk? Or contracted and you’re limited to assuming less risk?”
Adds Wildeman: “Failing to plan is planning to fail. So, if you’re going to set up a business, don’t just focus on getting that location, or getting their manufacturing line running or getting out there with some advertising. Think about what could go wrong.
“It doesn’t matter how big or small you are. You definitely need to manage your risks.”
Also, it’s important to recognize that you can’t buy insurance for every risk. Managing reputational risks, for example, traces back to having the right internal mechanisms in place to handle issues before they hit the headlines.
“When you’re talking about reputational risks, you’re talking about something that’s going to impact your brand – something that is going to show up somewhere in a negative way,” says Melanie Nicholson, principal at MLC & Co., a Calgary-based boutique public relations and communications firm that works with companies in sectors such as non-profits, construction, attractions, Indigenous products and mental health.
Nicholson notes most reputational risks trace back to something small that escalated before a company got it under control – typically, bad customer service.
“Things happen all the time. Yet when they are handled well and handled quickly, you may never hear anything about them,” he says. “At the end of the day, things happen. So, it’s not necessarily about being so terrified of risk that you don’t do anything for your brand. It’s about ensuring that you have good customer service processes in place so that your team has what they need to deal with it.”
For example, Nicholson points to the importance of things such as crisis communications strategies, key message approval structures and social media processes.
“One of the biggest stumbling blocks companies run into is their turnaround time,” she says. “They are unable to respond to something quickly because of their approval structures. So, establish some pre-approved general statements.”
As for what can happen if you don’t properly manage your reputational risks, Nicholson points to Valbella Gourmet Foods as an example of how bad it can get.
Last July, the Canmore food company found itself embroiled in controversy after the company’s president, who is also the owner’s son, penned a transphobic reply to Canmore Pride following a request for donations. In the days after the message was shared with news outlets, numerous companies cut ties with Valbella, including the Banff Centre, Sunterra, Blush Lane Organic Foods and more.
“The impacts were huge,” says Nicholson. “They lost partners, they lost stakeholders, they lost community respect, and they are back to square one.”