Financial institutions have the unique challenge of protecting and managing consumer money. Services such as checking and savings accounts, loans, and cash transfers are enormous risks for the industry. By reviewing the following eight common financial institutions exposures, you can identify potential unnoticed areas in risk management and insurance portfolios.
1. Property Exposures
Property ownership risk can originate from equipment failures, natural disasters, customers or employees. Fire damage is a primary concern for the financial industry. Electrical wiring for computers, printers and other office equipment is the greatest source of fires. A fire can also result in major water damage and loss of critical equipment and records. Additionally, the pandemic has created more risk for property owners in terms of the need to protect employees and customers. Review Safety Tips for Building Owners/Employers Amid COVID-19 for additional concerns related to COVID-19.
2. Premises Liability
Financial institutions are a high consumer traffic industry and liability concerns, including accidents related to slips, trips, falls and unauthorized building access. Financial institutions that are reopening their facilities must also include COVID-19 protection for employees and customers. Consider using this Post-Coronavirus Office Checklist as a guide when evaluating office alterations.
3. Crime Exposures
Embezzlement, scams, direct theft robberies and employee dishonesty crimes undermine public confidence and impose an enormous administrative burden. Employee dishonesty is difficult to combat as an employee can quickly steal cash directly or illegally wire it to a personal account. Still more troubling, employees have access to sensitive customer information. Misuse of this data could harm the organization’s reputation and lead to expensive litigation.
4. Cyber Criminals
A recent interview with Federal Reserve Bank Chairman Jerome Powell came with a warning for the financial industry that cyberattacks could cripple the economy greater than the 2008 recession. Storing sensitive customer data (e.g., names, addresses and credit card information) is a significant opportunity for hackers. Improperly trained employees may expose an organization to ransomware, viruses, phishing scams and malware. One attack could expose an institution to reputational harm, litigation, data breach expenses and potential compliance fines.
5. Directors & Officers (D&O)
Lawsuits implicating directors and officers may allege mismanagement of advisory services, estate handling, employee pension funds or other financial activities. The cost of defending directors and officers (D&O) claims can run well into the six figures, leaving a business financially crippled. Consider using this Directors and Officers Liability Scorecard to evaluate current claims exposures.
6. Business Interruption
Continuity is critical in business as few things are more important than uninterrupted revenue and cash flow. One brief business interruption can be incredibly costly for an organization, often leading to serious reputational damages or long-term closures. Common interruptions for financial institutions can include natural disasters, fires, leaks, cybersecurity events and vandalism.
7. Inland Marine
Any unique or valuable property transit, in temporary care, stored at fixed (but movable) locations or used to transfer information represents an exposure. An incident could lead to property damage or potential business losses in accounts receivable, computer equipment and key business data/records.
8. Workers’ Compensation
Common financial institution employee accidents include slips, trips, falls, repetitive task musculoskeletal injuries, sprains and strains. Organizations also must consider possible workers’ compensation claims related to COVID-19. Some states have created new rules regarding COVID-19 presumptions (the conditions in which an employee’s injury or illness is presumed to have happened on the job and should be compensated), increasing the likelihood of pandemic-related claims.
For More Information
Our financial institution expert advisors can provide a comprehensive review of financial institution policies, as well as an in-depth analysis of potential risks. Serving over 500 banks, we identify the entire scale of our banking clients’ exposures and provide custom options to help avoid, mitigate or transfer risk. Contact a member of our team today.