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Must Haves

Clients' risk management departments can be sticklers for insurance.

Do your customers care what kind of insurance you have? If they're smart, they do. If they have risk management departments, they may even have specific requirements you must meet to sell to them.

Typically, risk managers insist on certain types and levels of insurance along with contingency plans for meeting commitments if things go wrong, says Valerie Walters, director of global risk management for Ciena, a fiber optic materials manufacturer in Linthicum, Maryland. "I have to be the corporate pessimist, to look at the worst-case scenario and protect my organization," she says.

Depending on your product or service, a customer may ask for evidence of general, product and professional liability (errors and omissions) insurance. If you have access to confidential information, they may ask for intellectual property insurance to cover damages if that information is stolen or used inappropriately. You may be asked for a certificate of insurance or other evidence of financial capacity, such as a letter of credit or a bond, to demonstrate ability to cover a loss.

Risk managers may also ask for proof of financial stability and viability. You need to show them you've considered your own worst-case scenarios and know how you will meet their needs even if you have problems with your own facility or suppliers.

Walters says it's a good idea to ask companies early in the sales process for details on their risk management requirements so you can address those issues immediately, especially if it means purchasing additional insurance. "We're not trying to make it hard for small suppliers," says Walters, "we're just trying to make it possible for both [customer and supplier] to do business and do it well."

Jacquelyn Lynn is a freelance business writer in Orlando, Florida.

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This article was originally published in the May 2002 print edition of Entrepreneur with the headline: Must Haves.

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