Should your 401(k) have socially responsible investment options?

The meaning of the term socially responsible investing (SRI) continues to evolve as 401(k) plan participants look to align their investment portfolio with their values. More conversations around environmental, social and governance investing (ESG) are happening. And that’s coming not just from the youngest generational demographics in the workforce but from all generations.

“Interest in ESG investing is broad,” says Jim Altman, Middle Market Pennsylvania Regional Executive at Huntington Bank. “Plan participants of all ages are asking more questions about how companies behave, their impact and their intentions.”

Smart Business spoke with Altman about socially responsible investing and what employer plan sponsors should know.

What is socially responsible investing?

SRI had typically been concerned with a couple things. One is negative screening, something that’s most common with faith-based organizations — they might decide they won’t invest in companies that deal in tobacco, alcohol or firearms, for instance. The other dealt with environmental concerns and is what most people think about when they think about SRI. But environmental concerns don’t just mean solar panels and windmills. SRI now also includes environmental, social and governance investing (ESG), which puts the focus on those elements, though each area of interest can mean something different to each investor.

What should employers know?

While some employer plan sponsors might be eager to include ESG options in the portfolio to capture the interest of socially conscientious investors, there is good reason to approach the initiative with caution. Adding ESG options to a plan could signal to some that the employer’s belief system is showing itself in that decision, and that has ramifications. Plan sponsors that constrict investments to only ESG options could find themselves the target of criticism by plan participants if the investments are seen as politicized or impinging on someone’s religious views.

The best approach is to think in terms of complementary strategies. Don’t get rid of a fund in a lineup just to add an ESG option. Instead, introduce ESGs as new offerings that complement the existing plan.

It’s also a good idea to have an open conversation among stakeholders about changes to the plan rather than leadership making the sole decisions. Be collaborative and document the process to defend the position that’s reached regarding ESGs.

How might ESG investment options affect plan performance or participation?

There tends to be a negative connotation of how ESGs affect plan performance, mainly because of embedded SRI ideas that, at their extreme, completely exclude certain industries, such as fossil fuels. Adhering to such a strict portfolio could lead to underperformance. However, as ESG ideas have progressed, it’s less about excluding industries or companies and more about considering the direction of those businesses. For example, a fossil fuel company might pump oil but its R&D for wind, solar and other sustainable sources of energy are on the cutting edge.

Participation in employer-sponsored plans hasn’t shown a dropoff when a plan lacks ESG offerings. Part of that has to do with the fact that most plan participants use the default vehicles — target-date funds for example — when they enroll in a 401(k).

How have asset managers adjusted their plan offerings to accommodate socially responsible investing?

Asset managers that sponsor 401(k) plans are becoming more ESG-minded. Some are integrating ESG options into all funds almost by default. There could soon be ESG-dedicated strategies as well as plans in which ESG options are integrated with more mainstream options. Increasingly, the demand for ESG is there from a participation standpoint, but not all asset managers have brought those options into their plans.

ESG investing is a growing and worthwhile discipline in investment management. Employers shouldn’t be afraid to tread into this area, but should do their research before acting.

Insights Banking & Finance is brought to you by Huntington Bank

COVID highlights resilience, creativity of small businesses

America’s small businesses have been particularly hard hit by COVID, the impact of which has been unprecedented in the sector. Early statistics from the National Bureau of Economic Research are showing that as many 22 percent of small businesses have closed.

“The average small business doesn’t have a rainy day fund,” says Jim Altman, Middle Market Pennsylvania Regional Executive at Huntington Bank. “They don’t have a tremendous amount of liquidity to fall back on in the event of an emergency.”

But as we enter what seems to be the final innings of the pandemic, small businesses have also proven their resilience through creative pivots and leveraging community resources. And there’s some speculation that there could be a post-COVID boost in small business creation.

Smart Business spoke with Altman about small business survival tactics and how the COVID disruption could lay the groundwork for future ventures.

How have small businesses pivoted to stay afloat?

Small businesses have had to focus on client preference in order to keep their heads above water. A good example of this has been restaurants and grocery stores offering pick-up or delivery services so that they could fulfill orders for customers concerned about in-store shopping and dining.

A lot of small businesses have looked at ways to get their message out with social media, and have leveraged digital options to keep business flowing. Restaurants, for example, have turned to their websites to highlight their offerings, and many have used smartphone apps to arrange for curbside pickup and even touchless payment.

There’s been a significant acceleration in digital migration during the pandemic by many businesses. It will be interesting to see which digital changes small businesses keep around well after the virus is contained.

What resources are available to help minority-owned businesses and startups?

A good place to start is the U.S. Small Business Administration. The federal government provides a fantastic startup process for just about any venture.

Some banks might have programs focused on minority-owned small businesses, as well as those owned by women and veterans. Those could include access to capital, and education and financial tools for small businesses and startups that could help with the creation of a business plan and generating cash flow projections.

There are also local nonprofits that can help. For example, in Pittsburgh, there is the Urban and Community Entrepreneurship Program at the University of Pittsburgh, the Center for Women’s Entrepreneur at Chatham University, the Pittsburgh Technology Council, and the African-American Chamber of Commerce of Western Pennsylvania.

What should someone looking to start a small business today consider?

Now is a good time to start a small business as long as it’s done correctly. That means taking the time to research — understand the market, demand potential, competitive landscape, and how that product or service will be delivered while COVID is still a factor. It’s also important to write a strong business plan and find the right legal and accounting advice.
Another critical component of a successful launch is funding. Entrepreneurs should take time to interview banks, and possibly look for investors or crowd funding opportunities. All of this should be done before a marketing plan is developed and the business is opened.

While the COVID crisis over the last year has made operating difficult, it’s also created opportunities. Many small businesses are getting their start during this challenging time. In some cases, people have used this disruption to consider what’s really important, what drives them, what they’re passionate about, and many will start businesses that not only fulfill them personally, but meet needs within the community that were uncovered during the pandemic. These gaps can be filled by a small business owner who can leverage the support systems throughout their community to help get that dream started and really make a difference.

INSIGHTS Banking & Finance is brought to you by Huntington Bank

Why 2021 might be the year to sell your business

The pandemic-led market disruption will require many business owners to expend a lot of time and effort to restore, resize or even reinvent their business into order to stay competitive. That’s led some to wonder whether they want to go through that — especially those who may have just righted the ship after the difficulties presented by the Great Recession. And more practically, they may be wondering if they have the capital necessary to make that transformation.

Generally, however, valuations have gone up for those companies that have been able to weather the COVID storm. Buyers are increasingly knocking on owners’ doors, offering some pretty favorable deal terms. That creates the potential for a big year for those who work smart ahead of a sale process to put their business in the best light.

“The M&A world has gotten much more competitive on the buyer side,” says Jim Altman, Middle Market Pennsylvania Regional Executive at Huntington Bank. “There are many more buyers out there than there ever have been and a lot of cash on the sidelines looking to get in on the action. Buyers are looking to invest in quality companies, and that gives sellers a lot of opportunity, and leverage, to negotiate a deal.”

Smart Business spoke with Altman about the 2021 M&A environment and why this year may (or may not) be a good year to sell a business.

How might taxes and other factors affect a sale decision this year?

There is a sense from some that there’s probably going to be some changes in the tax law in the near future. If the Biden Administration changes the capital gains rate at the highest bracket, that could affect those who are selling a business in a significant way, and that’s creating uncertainty. Sellers are able to get a very favorable capital gains treatment rate — a business sold today will often be impacted by a 20 percent tax burden. If the tax laws change in the way that some expect, the burden might be 39.6 percent. That difference is driving some owners to work to take advantage of the current tax rates to avoid what could become an additional 20 percent hit to their post-transaction gains.

There are also other factors weighing on the sale decision. Businesses are facing the possibility of a $15 an hour minimum wage, technology replacement costs, and investments to improve their digital presence. That might lead some to find a partner — possibly in the form of a financial buyer — to help offset those costs or lead a transformation.

There’s also the demographics to consider. Many business owners may be reaching a pivot point in their life where they’d rather take all or some of their chips off the table and either de-risk or move into their post-business life.

Who should not sell right now?

People who are still passionate about running their business probably shouldn’t sell. Also, companies that had an unfortunate drop in their valuation could now be in a position where the sale price is going to be affected by circumstances beyond owners’ control. In those cases, it’s likely better to weather the storm a little bit and not give up a loss in value that could be recuperated when conditions become more favorable.

What else should business owners consider ahead of a sale?

The decision to sell is both personal and opportunistic. But planning is key because there are steps any business owner can take to improve their company’s value.

Before reaching the point of fielding offers from potential buyers, business owners should get help from experienced M&A advisers who can make important improvements that better position the business for a sale. It’s too late once buyers have been engaged, and it’s far too late after letters of intent have been signed. Very simple changes could add substantial dollars to a business sale.

Any owner considering whether or not it makes sense to sell should engage good advisers to have that conversation and evaluate the opportunity as thoroughly as possible.

Insights Banking & Finance is brought to you by Huntington Bank

The broad economic indicators to watch in 2021

This year in the U.S., stimulus-driven economic growth is the expectation. And the country will get a better view of what that stimulus will look like once the new presidential administration gives its fiscal outline.

Still, there are many other indicators businesses should consider as they try to regain their footing and make plans for the new year. But which are the indicators to watch, and how much reliance should businesses place on them?

Smart Business spoke with Jim Altman, Middle Market Pennsylvania Regional Executive at Huntington Bank, about the outlook for the 2021 economy and what businesses should consider to determine where, when and how to move forward.

What are the broader economic indicators to watch?

The Institute for Supply Management, which surveys both manufacturing purchasing managers and services purchasing managers, offers a sense of how it sees business in the coming six to 12 months. Those indicators are largely strong at the moment, especially on the goods side.

This recession has been different from past recessions because it’s impacted the services sector, which has never really been impacted by a recession before. There are mixed indicators coming out of the services sector, largely because the full impact of the vaccine has yet to be realized.

Goods, while not as big as services in the U.S. economy, are doing very well. But whether that positive momentum stays this year is unclear — the signals are mixed. For example, housing prices may moderate some this year. Last year was good for sellers, but there’s a chance this year will be a little bit better for buyers.

Employment is also offering very mixed signals. There is still a great deal of stress in the employment market around services. The goods market is, however, stronger at the moment in this regard.

The most likely reason the indicators are mixed is because all of the outcomes are predicated on the outcome of the virus versus the vaccine — whether or not we will be able to get the virus under control enough this year to give consumers and businesses the confidence needed for the economy to grow.

How much emphasis should businesses put on broad economic indicators when planning?

This past year was really about top-down economic guidance from the federal level. Now, more companies are giving their guidance on how they view their business moving forward through the still-disrupted economy. As earnings season plays out, publicly traded companies will give their own guidance, which will provide a more company-specific forecast. This should be helpful because it will result in more micro guidance versus the macro guidance the U.S. was largely working from last year.

The economic guidance from the federal level this past year really didn’t see the goods sector recovering as much as it did, which likely caused more pessimism in the economy than was warranted. Now there’s the risk that forecasts about the economic performance of the economy once fully open again will be too positive.

What conversations should companies have with their bankers now?

There have been so many never-before-seen circumstances this past year. The U.S. has never been through government-mandated shutdowns. Services have never been severely impacted by a recession. And there’s never been this much fiscal spending from central banks to support the economy this quickly, and it’s continuing to come in. This is uncharted territory. However, we’re on the other side of this recession. It’s not clear what the economy will look like with such pressure on small businesses. Companies will need to be vigilant about how they look at their balance sheets, as well as how they handle some of the other indirect pressures that will impact businesses both internally and externally. It’s prudent for businesses to work alongside their banker and other financial advisers to consider all the economic indicators as they plan for the year ahead.

Insights Banking & Finance is brought to you by Huntington Bank

Finding opportunities, identifying risks in global trade

There has been softness in global trade recently, for obvious reasons. U.S. exports in 2020 were down about 14 percent compared to the previous year, and imports were down about 9 percent. That broad-based contraction is going to impact all businesses and pull everybody down to a degree.

However, the exact opposite is being forecasted for 2021. The International Monetary Fund expects the global economy to grow this year by over 5 percent, which would be a significant reversal.

“We could go from a year where trade was really in the doldrums to having a record year in 2021,” says Jim Altman, Middle Market Pennsylvania Regional Executive, Huntington Bank.

That should encourage businesses that engage in cross-border trade, and those considering, to look ahead for opportunities, but also take steps to mitigate potential risks.

Smart Business spoke with Altman about the factors affecting the global trade environment, trends to watch and risks to consider in the new year.

What are the political factors affecting U.S. global trade?

Over the past few years trade tensions and the surrounding rhetoric became quite sensational. There are issues that, if resolved, would benefit the U.S. and U.S. companies. The broader impact of the trade policy coming out of the federal government, apt but applied in a less-than-ideal manner, has created challenges for U.S. companies, particularly those importing and exporting from China. It’s created an effect that everyone is going to feel.

There are some concerns but also some favorable expectations associated with the incoming administration in this regard. A continued focus on improving the U.S. position in global trade, in general, from a fairness perspective, is expected. And China is likely going to remain a focus. However, there could be a fundamental shift in how the U.S. deals with China, moving from a unilateral to a more multilateral approach. Trade alliances could be strengthened, in particular with Europe and larger trading partners in Asia, which should create opportunities for U.S. companies in those regions. That expected momentum, combined with what should be above average growth next year, could lead to a real opportunity for companies that know how to take advantage of it.

What trends are taking shape related to global trade?

COVID has definitely exposed some weaknesses in global supply chains. Because of that, two prominent trends are starting to emerge. One is near shoring and the other is ‘glocalization.’ While some high-value and critical good manufacturing is coming back onshore, the more significant trend we are seeing is near shoring of low-value manufacturing to low-cost markets closer to the U.S., such as Mexico. This helps preserve the manufacturer’s cost base while at the same time shrinking the supply chain and associated risks.

Glocalization, on the other hand, is a trend that sees companies building in countries where they sell to reduce risk and take a few links out of the supply chain. A global shift in production of this nature will likely be led by large companies, though with cascading impacts downstream. One of the most common reasons small and mid-sized companies expand globally is to follow their larger customers. This trend seems set to accelerate over the medium term.

How should U.S. businesses prepare for the coming year?

The total impact of COVID isn’t known yet and there’s going to be unexpected winners and losers. So, businesses either active in global markets or considering that activity should protect themselves through risk mitigation techniques such as letters of credit, foreign exchange hedging and credit insurance.

Seek advice from a bank that has a global network, both in terms of foreign banks and local advisers that can consult on local market practices and conditions, and diverse products that support companies that do cross-border business. Companies should also have an insurance broker skilled in cross-border risk and credit insurance. There are banks that have their own insurance arm, which can lead to a more comprehensive approach to risk management in cross-border dealings.

Insights Banking & Finance is brought to you by Huntington Bank

Recognize employees’ needs as they adjust to remote work

Businesses have been faced with monumental disruptions this year that have driven foundational changes throughout their organizations. One of the most common changes has been the shift to remote work as government-mandated shutdowns closed many common work areas. While companies largely have a handle on the technical aspects of that change — providing equipment, making the necessary IT adjustments, tweaking processes — there’s more for companies to consider.

“Employee morale and engagement are significant issues for employers right now,” says Jim Altman, Middle Market Pennsylvania Regional Executive, Huntington Bank. “Companies that take steps to check in on their workforce and, as best they can, address any issues, will be more successful down the road.”

Smart Business spoke with Altman about maintaining employee engagement as the workforce operates remote.

What are employers reporting in terms of productivity since the move to remote work?

Productivity declines haven’t seemed to be the issue so far. Instead, there are cases where people are working too much. In those cases, it’s important for leaders to help employees manage their time so they don’t burn out. Where there is fatigue, employers should consider how they can support that employee because both their safety and their health are important to their success.

Support means something different to each employee. For example, as shutdowns affect schools and daycare centers, some employees may have to make arrangements to take care of children at home. They will benefit from an employer’s understanding and flexibility.

Gaining a sensitivity to those needs can be fostered by an increase in communication. However, this is not the time to micromanage. Moving to a remote work environment shouldn’t create different expectations or require more frequent checkups. But when or if there are declines in productivity, or an employee asks for more attention, then it makes sense to increase the frequency of communication.

How can employers help employees manage stress?

Working remote requires managers to be both caring when it comes to employees and reassuring. Leadership should find opportunities to thank employees for their work or share stories about how employees have made a difference for customers. That will go a long way, showing employees that their work matters and the organization recognizes their effort.

Companies can also relieve stress by finding ways for employees to have fun while they’re apart. Talk with human resources about possible, and organizationally acceptable, ways to help people connect and take a break from work. That could mean a contest or small group teleconferences during lunch. Activities like these could help employees who are missing the camaraderie they had with colleagues in the office.

What can employers do to help new hires who are starting the job remote get acclimated?

Onboarding is another aspect of operations that has had to undergo some changes because of the pandemic. For employers that are hiring while offices are closed, it’s important to make sure employees have everything they need to do their jobs effectively from the start. That means quickly shipping them the necessary equipment and making IT available to talk them through setup so they can confidently get up and running.

It’s a good idea to assign someone to work closely with new employees during the first few days or weeks to ensure they’re getting their footing in their new roles. It will also help employees get acclimated if colleagues reach out to the new hire, introduce themselves and help them navigate the organizational structure.

Companies that haven’t done so already should adjust their onboarding practices to reflect the new realities of the job and work conditions. Review current processes and introduce any new information that should be included in virtual sessions and what can be eliminated that no longer applies. It’s an important change to make to stay competitive as the market continues to rebalance.

Insights Banking & Finance is brought to you by Huntington Bank

How the lending landscape is looking for 2021

As businesses look forward to 2021, many unknowns put their plans in a state of perpetual flux. The uncertainty impacts many areas, including the lending landscape.

“Regular and frequent financial evaluations are recommended throughout the end of the year and into 2021,” says Kurt Kappa, Chief Lending Officer at First Federal Lakewood.

In order to gain surer footing, some companies will plan to transition into new lines of business (and away from others). Executing expansion may require outside financing from lenders. Companies considering growth should keep lines of communication with lender partners open, especially as banks may increase credit scrutiny in uncertain times.

Banks want and need to understand a business’s plan for the future. If a business foresees transitioning into a new line of business, lenders want to be aware of and account for a business’s change in revenue as it pivots into new territory. Businesses planning on staying the current course need to share the rationale and forecasts with current lenders to be assured credit facilities can remain intact.

Smart Business spoke with Kappa about the lending year ahead and how companies in transition can work with their lender to keep vital financing options open.

What lending might companies need in the coming year?

More companies seem to be feeling confident about where they are and where they’re heading. Many have adjusted to the market and are seeing positive results. However, the banking industry, particularly the larger banks, are re-examining their overall market and industry exposure and may be pulling back and reassessing their credit risks. This may affect some banks’ appetites for extending credit or making loans, which could affect a company’s planned trajectory.

What funding are companies most interested in now?

Generally, a lot of companies that are looking to grow want financing to secure the funds necessary to reinvest in their companies. Some want to make capital purchases, like new equipment, now, so they can write it off during this tax year. Others may be exploring continued expansion through acquisitions, with a big push for end-of-year transactions.

Some business owners are weighing an exit. That’s typically the case where owners don’t have a succession plan, aren’t looking to grow through acquisitions and might not want the uphill battle through a challenging market. These owners are looking to exit the market now and cash in.

How might banks make lending decisions in 2021?

The pandemic has had a huge impact on all businesses around the world. Banks will want to see that businesses have a plan, preferably one that gives the bank confidence that the company can react to challenges as they arise.

Typically, banks want to see prior results and year-end finances, but there’s an understanding that those may have been disrupted by the pandemic. Financial projections are going to be key as financing decisions are made for 2021.

What conversations should businesses in transition have with their banker?

It’s really going to come down to the monthly forecasts, month-by-month cash flow projections, and profit and loss statements. It’s also about making sure the company has the right team in place to manage the transition. Sometimes, when a company pivots to something new, the expansion draws considerable attention away from the core business that made it successful. So the management team and ownership really need to work hand-in-hand to make the transition a success.

It’s going to continue to be a challenging year. Businesses should keep their bank and their advisers apprised of what’s happening in the company with forecasts and projections that show that the business is making the organizational changes needed to be successful. The chances of success increase when everyone is on the same page.

Insights Banking is brought to you by First Federal Lakewood

Automated payables platforms offer cost savings

There are popular tools available to companies to automate their payment workflows, a presumably welcome relief to many accounts payables departments. Still, companies today tend to stick with what they know, making more than half of their payments by check.

“These are physical things that need to be printed, signed and mailed,” says Jim Altman, Middle Market Pennsylvania Regional Executive at Huntington Bank. “That’s not only time consuming, but given the technology available, difficult to monitor and needlessly costly.”

Companies looking for cost and process efficiencies are moving to electronic services — integrated payables platforms, virtual credit cards — to submit and control payments.

“Integrated payables services make vendor payment delivery, settlement and reconcilement easy,” he says.

Smart Business spoke with Altman about the effect of payment automation on companies’ accounts payables departments.

How would you characterize companies’ rate of adoption of these payment automation tools?

The rate of adoption of payment automation tools has been slow to this point largely because these services aren’t core aspects of most companies’ businesses. It’s more a utilitarian necessity. Businesses prefer to focus on activities that generate revenue, so products and services such as payment automation tend to get less attention.

Payment automation tools eliminate much of the heavy lifting in the accounts payables process and create a one-stop shop that processes payments while keeping all data, regardless of payment method, in one place.

Why does there seem to be a hesitance to change?

An integrated payables platform is essentially a website with a secure login access designed specifically for vendor payments. It features a configurable workflow process to maintain separation of duties for more fraud mitigation. Reporting is available through the interface so as transactions are made, their status is updated.

Adoption rates are high with newer companies that aren’t entrenched in a way of doing things. With older companies, the challenge is really just resistance to change — they’re hesitant to take on something that seems like a project. Finance staffs are squeezed for time, so getting them to welcome a new way of doing their jobs just seems like a task they don’t have time for. Overcoming that inertia is often tough.

However, what companies don’t take into account is that the simplicity of the new system means integration can be done in a matter of days, not weeks. The interface is very straightforward and uploading payment data is simple.

How might the integration of payment automation tools affect the costs of payment workflow and security?

A paper-based check payment system has costs for senders, such as maintaining a printer with magnetic ink and its paper stock, the cost of the mailing supplies, postage, and also time.

The manual processes and workflow are, compared to digital methods, difficult to track and control. There’s often no audit trail, especially at the transaction level. With automated workflow tools, an audit trail is automatically kept for any action taken on each payment. It’s a meaningful improvement in terms of ease of use and cost of service. It frees up time for an AP staff to take on more value-added activities.

Adding to the movement toward electronic-based systems is the need to mitigate fraud. Any check that is written should be protected with Positive Pay controls, and integrated payables services automatically provide this protection. But migrating payments from check to virtual cards is really changing the security dynamic because virtual cards have little fraud exposure. These cards have a designated shelf life and dollar amount. They have security features that prevent them from being used just anywhere. As an added benefit, moving payments to virtual cards also bring rebates to a company that could outstrip the costs of the former manual process, effectively adding revenue to the AP department’s budget.

Insights Banking & Finance is brought to you by Huntington Bank

Pandemic-related threats exploit companies’ weaknesses

As if times weren’t challenging enough for businesses, companies are now dealing with pandemic-related cyber security threats. These scams are trying to take advantage of the crisis with targeted campaigns that play on people’s fear and sense of urgency, including phishing, business email compromise, spoofs of CDC emails, donation scams, and scams around personal protection equipment.

Smart Business spoke with Jim Altman, Middle Market Pennsylvania Regional Executive at Huntington Bank, about these threats and how companies can protect themselves.

What types of threats are on the rise now?

There has been an increase in business email compromise. For example, a company pays a landscaping company to take care of the property. If a scammer can get enough information about the landscaping company, they might send an email posing as the landscape company to the invoice processing folks saying that the bank account information has changed and provide them a new bank routing and account number that goes to the scammer’s account.

Ransomware has also become a greater issue for companies, but with a new twist. Scammers aren’t just holding the information hostage, they’re now using that information to extort the company by threatening to release information that could tarnish its reputation. It’s a whole second dynamic on ransomware that really revolves around a new disclosure issue. It’s a tremendous change in scammer tactics over the last six to nine months and it’s likely going to get worse.

Another new issue revolves around integrity of data. The rise of misinformation campaigns has made it difficult to discern fact from fiction. That makes it easier to put some inflammatory information out and have it get some legs. It’s something that’s expected to be much more of a concern for businesses.

What weaknesses are scammers exploiting?

Often what’s being exploited in these scams is employees. They often react too quickly and without scrutinizing the message. Prevention, then, is in large part about engaging employees early, making them aware of the threats and asking them to be diligent. Ask them to pause before responding, especially when the request is about the movement of funds.

It’s important that employees are trained to look at where messages are coming from. That means carefully looking at all the information because the difference between a legitimate message and a scam is often one letter. While a lot of the fake domain names were registered around the COVID pandemic, a growing number were registered with just a simple change — taking one ‘t’ out of ‘Pittsburgh,’ for example, to spoof legitimate company websites.

Employees should also use a two factor authentication process — something you have and something you know. Passwords are often the thing you know. Tokens, either hardware based or software based, cover the something you have. This is especially critical when it comes to requests that have to do with money. Confirm any client-requested change directly with the client by calling their contact using a number that’s on file and not by clicking on a link or calling a number that’s in the email.

How can companies protect themselves?

Protection should happen on a number of fronts. In addition to training, companies should make sure they have updated and current operating systems and applications, solid electronic payment processes and a vulnerability and patch management process that has clear policies and procedures around cybersecurity. Large companies should independently assess their security through an independent assessment. Those that are sharing data with third parties, such as in instances where certain responsibilities are being outsourced, companies should assess the security of those partners as well.

It’s also important that companies have checks and balances in all of their processes. Make sure to have segregation of duties, assign only account privileges required for employees to fully handle work tasks. Also consider cybersecurity insurance. It’s a good idea to engage professionals to really look through a policy to find out what it covers if the company is affected by ransomware.

Insights Banking & Finance is brought to you by Huntington Bank

How the pandemic has affected risk profiles

What companies seem to be learning from the disruption caused by the pandemic is there’s a really strong need to re-evaluate their insurance coverage.

“But that’s not the only piece of risk management,” says Jim Altman, Middle Market Pennsylvania Regional Executive, Huntington Bank. “It’s really about building a best-in-class risk profile that enables companies to mitigate risk in an efficient and effective way.”

Smart Business spoke with Altman about how companies should look at risk, and who they should talk to about it, to lessen their exposures during uncertain times.

Where did coverage gaps become most obvious when the pandemic hit the U.S. and how did that affect businesses?

There seemed to be a misunderstanding about what business interruption insurance would cover. This is a standard part of coverage that applies primarily to property and requires property damage, in most cases, to be triggered. With a pandemic, there was no real property damage, according to many of the insurance companies, though many claims are still being reviewed.

But there are other instances of risk being heightened as well. One of the most common is cyber exposure. Whenever there is some sort of crisis, there are likely to be bad actors. In the digital world, that could mean increases in phishing attempts that aim to get employees or customers to provide information that allows cybercriminals to hack into a company’s system or trigger a transfer of funds. That’s led to more conversations with businesses about that aspect of risk.

Directors and Officers and Employment Practices Insurance are there to mitigate liability at the executive level. This is applicable now as management is making decisions about remote work — who’s required to come into the office and who can work from home — and how those decisions can impact an individual.

How can businesses shore up their coverage and close gaps right now?

Businesses should have a conversation with their insurance broker about what their business is experiencing right now and the changes they’ve made. For example, they may have fewer employees or employees in different roles based on the business’s needs. That can create a different exposure and businesses should have a risk adviser or insurance broker who can ensure that they have the proper coverage. And then they can talk about how they expect their business to look going forward.

It’s never too early to have conversations with somebody who understands the risk marketplace. They can help companies identify steps that can be taken within those businesses to mitigate or lessen their risk.

What should businesses consider when it comes to employee benefits?

The impact that the pandemic has had on employee benefits programs, and especially on human resources policies and practices, is perhaps most profound as it directly hits at the heart of any business — the health and welfare and morale of their employees. New legislation, enacted following the forced shutdown of ‘non-essential’ businesses in many states, not only provided critically needed financial relief but introduced new regulatory guidelines on how employers must now manage their employee benefits programs and personnel issues affecting employees who have been laid off, furloughed, or who are working from home.

Beyond ‘benefits,’ employers must now consider developing a comprehensive human capital strategy that includes valuable health programs and protections that addresses the financial welfare of the workforce while delivering cost efficiency for the organization.

It’s important that companies are mindful of the pandemic and how the economic effect of it is impacting their business and their approach to management and employee benefits. Seek out advice from people who understand the unique risk exposures of a business so those can be mitigated. That could get a company through 2020 and set it up for success in 2021. That will require being proactive and having meaningful dialogue with somebody who’s willing to take the time to build a strategy that works for their business specifically.

Insights Banking & Finance is brought to you by Huntington Bank