NU Online News Service, March 24, 12:40 p.m.EDT

Companies’ risks are increasing during the economic recovery,which means they must be vigilant in keeping down workers’compensation claims and wage and hour lawsuits, according to anindustry briefing.

While the economy is slowly recovering, companies need to beaware that their risk profiles are likely to change for the worseas business activity picks up, according to a new report, “ManagingRisk through the Economic Recovery,” from Advisen Ltd.

“Greater activity naturally means more claims,” says DavidBradford, Advisen’s executive vice president and author of thereport.

Bradford explains, “There are some complex issues driving this.Part of it is that losses increase with the growth in the economy.More trucks on the road mean more accidents, for example.”

One area seeing particular increases in the risk profile, headds, is workers’ comp. Other areas include tort liability, wageand hour litigation and regulation and lawsuits against directorsand officers—especially concerning mergers and acquisitions—whichhe says have increased during the economic recovery.

He notes, however, that companies do not need to sit idly by andwatch their risk profiles increase at this time. Rather, they needto identify the areas of heightened risks and address themproactively.

Areas identified by Advisen where critical changes to acompany’s risk profile can occur include:

• Workers’ compensation claims, which can surge as companies addless experienced workers.
• A rise in the likelihood of lawsuits caused by employeeerrors.
• Liability claims triggered by temporary workers not coveredunder most insurance policies.
• The likelihood for more companies to be charged with labor lawviolations.
• An increase in the probability that company directors will besued by shareholders as merger and acquisition activity picksup.

“Concerns about increased risk should not keep any company fromtaking full advantage of an improving economy,” Bradford says. “Onthe other hand, companies should not let growth overwhelm prudentrisk management. By understanding where within their organizationsexposures are likely to increase, business owners and managers cantake steps to keep risk in check without dampening growth.”

The report outlines how companies and their brokers can identifyareas of increased risk. It recommends steps to mitigate and manageincreased exposure to loss, including:

• Maintaining high standards when hiring new employees. Cornersshould not be cut on conducting thorough interviews, checkingreferences and where appropriate, investigating backgrounds.
• Senior management should clearly communicate that propertraining and supervision of new employees is a high priority duringa growth phase.
• Carefully evaluating policies concerning temporary workers,balancing the benefits of a flexible workforce against theliability issues temporary workers pose.
• Reassessing policies concerning independent contractors,especially considering the heightened emphasis by the Department ofLabor on properly classifying employees.