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.
Risk Considerations for Financial Institutions
Common 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. HVAC system failure and flooding result in major water damage to your building and loss of critical equipment and records.
Risk of Internal & External Crime
As financial institutions are continually handling money and have large amounts of cash on hand, managing crime exposures can be difficult. Embezzlement, scams, direct theft robberies and employee dishonesty crimes undermine public confidence and impose an enormous administrative burden. While robberies can occur without warning, employee dishonesty is difficult to combat as an employee can 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.
Accidents Create Premises Liability
Financial institutions are a high consumer traffic industry and liability concerns, including accidents related to slips, trips, falls and unauthorized building access. These injuries that occur at your financial institution can make you liable. A wet floor or uneven surface that causes an incident can influence costly insurance claims. Large amounts of money also leave financial institutions at risk of armed robberies and workplace violence.
Growing Risks for 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.
Cyberattacks & Security Concerns
As financial institutions often store sensitive customer data (e.g., names, addresses, credit card information) they are common targets for cybercriminals. 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.
Costly Business Interruptions
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.
Inland Marine Coverages
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.
Workers’ Compensation Liabilities
Common financial institution employee accidents include slips, trips, falls, repetitive task musculoskeletal injuries, sprains and strains. Even everyday tasks like moving files can lead to accidents and increase costs for your financial institution.
We’re Here to Help Financial Institutions Prevent Risks
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.