How the rise of the machines is putting small businesses at risk – and what you can do about it
Technology is all around us, and it's hard to ignore its impact on our lives. Business is without doubt one of the fields that has benefitted the most from advancements, with many areas having seen significant growth in the last few decades due to technological change.
Small businesses have arguably made the biggest gains, with a radical shift in how many of them operate. For SMEs, technology has opened up a worldwide marketplace and the opportunity to compete with much larger businesses.
But with opportunity comes risk. Technology is leaving some businesses open to new threats. We recently spoke to Amy Nesbitt, Principal Associate and qualified barrister for Professional Risks at Weightmans about how the rise of the machines is affecting Professional Indemnity Insurance claims.
She offers some great insights, advice and tips on how you can help protect your small business from a crime or a claim caused, in part, by the technology that makes running your business easier and more efficient.
Data is key, but it can also be a downfall
"Data loss can have devastating consequences for businesses, giving rise to widespread disruption and exposures to first and third party losses. Data loss typically occurs as a result of technology failures or human error. Businesses can and should mitigate the risk of data loss by investing in and implementing certain measures and processes to safeguard the data for which they are the custodian; one such step will include ensuring they provide to their workforce appropriate training and ensuring that their systems are secure."
"Data is incredibly valuable. The use of Big Data to facilitate decision making, and to predict outcomes, is becoming more prevalent particularly in the property/valuation and construction sectors. Where businesses rely on data in order to deliver a service, there can be scope for repeated errors and losses when things go wrong. For example, input errors in design and valuation data will necessarily result in output errors – and this can cost businesses and their clients huge sums."
"It is noteworthy that, since the Covid-19 government imposed restrictions during which technology was – and continues to be - the answer for many to ensure business continuity, phishing scams and ransomware attacks have been on the rise. However, it's not just big businesses or tech-heavy organisations where we're seeing an increase in tech-related insurance claims. Small food vendors and other high-street shops are experiencing an upsurge in cases of data loss from hackers accessing their systems; and claims against valuers and construction professionals resulting from errors in technology-enabled or driven processes are also on the rise."
Data theft and breaches are increasingly becoming inside jobs
According to Amy, data theft and breaches aren't always down to hackers or malicious attacks on a business: "We're seeing a greater number of claims where the principal cause of the loss is the mismanagement or the unauthorised disclosure of data by people within the business, via email for example. This is mainly done by accident and unknowingly. The number of people working from home has made this more common, as people are naturally sharing more sensitive data digitally. So there is simply more opportunity for something to go wrong."
What you can do to minimise the risk of technology doing more harm than good to your business
We asked Amy how businesses could protect themselves and what is important for business leaders and owners to be aware of: "It goes without saying that connections should always be secure and private networks used where possible, especially for handling sensitive information. But there are other, perhaps less obvious, things that employees should always be encouraged to do. Like making sure they update their machines, so software patches can be issued when security flaws are unearthed, enabling multi-factor authentication for their devices, and attending training on data security and on the importance of correct use of systems and adherence to the data-handling processes or procedures that their employer has put in place."
"I think, as a business owner or manager, you have to be really clear about security, implement appropriate procedures, and explain why it is important to anyone and everyone working for you. Communication really is key."
"Employees and officers should be trained regularly on known and likely risks associated with the increased use of technology... helping your people to spot phishing scams for example; this could just be a simple checklist that a manager can send round to make sure it is top of people's minds. It's that constant and consistent reminder of how important data security is. Maybe you could regularly allocate time within a weekly meeting to remind people about the correct procedures, subscribe to webinars or online training for employees, or simply set calendar invites to nudge people to change their passwords? These are easy things to do, which could mitigate risks."
Keeping up to speed with evolving technology and business practices
Amy says that the pace and scale at which technology-enabled working practices have been accepted and implemented in recent years, including the use of sharing platforms and freelance models, means that it's even more important than ever that businesses keep abreast of changes to the corresponding legal and regulatory landscape: "Such changes will likely impact an employer's potential exposure. Regular and transparent conversations with your insurer are also key, particularly as reliance on technology and technology-enabled working practices becomes more commonplace. Any variation to a business's model and ways of working could invalidate their insurance policy if it isn't declared. It's always best to check."
More sectors will embrace technology, but they are at no less a risk
She closed with talking about how she sees technology continuing to change business and who it will affect: "Reliance on technology in the performance of traditional professional services will continue to rise. We'll likely see a greater uptake in the freelance and gig working models, for which technology is the enabler."
She referred to the changes that we are seeing within the construction and property sectors before going to say that "Solicitors are one of the latest professions to have embraced this form of working. But any change carries risks, including data security risks, particularly given the increased use of connected devices around the home and in the workplace, and human error arising from the absence of supervision. In my view, accountants could be the next traditional profession to embrace this change, and we may see a greater uptake in the use of the freelance model and reliance on remote audits."
You can learn more about our Professional Indemnity Insurance and how it can benefit your small business here.