Get Our Email Newsletter

This content is made possible by our sponsors. Click here to learn more.

Risk Management: How lumber businesses can stay safe

Accidents happen. Lumber and building material businesses burn down. Cyberattacks leave business owners in financial ruin. Commercial drivers are involved in dangerous and costly collisions.

Maybe, you think, “it won’t happen to me or my business.” Maybe, you think, “there’s nothing I can do.”  But there is.

What is the key to keeping your business safe and protected from risk exposures like these? Risk management.

Fire risks, cyber threats, distracted driving, forklift safety, and more present regular challenges to businesses in this industry. An ill-prepared lumber business can experience employee or guest injuries or even fatalities as a result – not to mention losses resulting in long-term business interruption.

Fortunately, dedicated safety and risk mitigation programs can help your business operate safely. Here, we will examine some of the relevant industry risks and provide comprehensive risk management tactics to manage them.

Top Risks

Cyber

Cyber risk is growing into one of the leading risk exposures facing businesses today. Lumber and building material operations have become an increasingly online business and plenty of owners now find themselves ill equipped to manage cyber threats. Three types of risks for owners and operators to look for include those related to:

  • Malware: Malware is a frequent issue at businesses that have not recently updated their information systems. Malware includes viruses, spyware, worms and more and open an easy path for cyber criminals to steal confidential information.
  • Ransomware: Ransomware is a tactic involving malware that locks lumber businesses out of their systems until they pay off a certain ransom. Even paying off the ransom is not a guaranteed method of recovering lost data, as the criminal could hold out for greater demands.
  • Phishing: Cyber criminals often use email aliases to slowly infiltrate lumber companies by posing as staff members of vendors. Once they have discovered the company’s style of communication, they often request sensitive information from other members of the company, leading to loss of data or money.

Fortunately, there are best practices businesses can implement, including:

  • Regular training: Hold training sessions with staff at regular intervals so both new and old employees are always aware of best cybersecurity practices.
  • Enforce strong IT and security practices: Business owners should require multi-factor authentication and have strong password requirements in place.
  • Conduct cyber threat assessments: Have a trained professional thoroughly examine cybersecurity and identify any potential exposures at the business. If possible, hire a third party to do so, or work with your insurer to schedule regular assessments.

Commercial Auto

Driver safety has long been an issue in the industry and has recently been exacerbated by the hiring shortage. As of 2021, the American Trucking Association estimated a record truck driver shortage of more than 80,000 truck drivers. This lightened slightly in 2022 to 78,000 vacancies, but industry experts expect this improvement to only be temporary as we navigate an aging workforce.

With tight deadlines and continued driver shortages, business owners have had to make more risky hiring decisions. For example, we have seen several losses involving untrained or uncertified drivers. In an industry that already has an issue with distracted driving, untrained drivers have only increased business owners’ risk exposure. Drivers who have not been fully briefed on the breadth of potential problems, including cell phone usage, or eating and drinking while driving, put others and the company at risk.

Telematics is a known solution in the industry and works wonders for changing driver behaviors and curbing commercial auto losses. At Pennsylvania Lumbermens Mutual Insurance Company (PLM), we partner with several leading companies to provide resources to our insureds with telematics, such as our partnerships with Azuga and GPS Insight. Another area to consider is the usage of continuous MVR monitoring. With the concerns around hiring new drivers, it is important to go a step beyond simply pulling MVRs at one point of time to accessing real-time analysis of your drivers and receiving regular notifications for any new MVR activity.

Regular driver safety training covering the basics of distracted driving, loading and unloading risks and other major common exposures, is also essential. The combination of training and the usage of technology can help enforce a culture of safety in your operations.

Forklifts

Similar to commercial auto, untrained forklift drivers have proven to be more prone to errors. We are seeing large forklift losses, with minimum payouts reaching at least $100,000.

To improve forklift safety, again, regular training is key. Enforcing safety practices such as spotters and visibility requirements is also important. Some of the losses we have seen recently have come at businesses that opted to use their forklifts without a spotter and material stacked so high the driver could not see in front them. These drivers have then caused accidents, leading to injuries and losses. In these instances, spotters and better visibility requirements can limit exposures and increase driver safety.

Electrical

Per OSHA, the workplace saw 1,201 fatalities involving electricity from 2011 to 2021 and per the Bureau of Labor Statistics, there were 1,653 electrical fatalities in that same time period. Whether it’s faulty wiring or overloaded extension cords, we’re constantly coming across avoidable risk scenarios at lumber and building material facilities. Poor housekeeping like this can lead to serious fire risks.

Both wiring and extension cord exposures can be mitigated with regular maintenance. Staff should regularly examine wiring and business owners should minimize extension cord usage and instead use UL approved power strips.

An Industry Partner with Real Value

Of course, the lumber industry is always evolving, and it can be difficult for business owners to keep up with the latest in risk exposures and risk mitigation. This is where a specialty insurer can be incredibly valuable. Partnering with a specialty insurer, like PLM, will offer your business dedicated insights to the unique risks in the lumber niche.

PLM has been serving the industry for over 127 years and we know the challenges lumber businesses face. In addition to offering risk assessments and up-to-date risk management counsel on all these threats, we also offer customized coverage designed to protect your businesses. In the event of a loss, lumber companies partnered with PLM can rest easier knowing their damages can be limited by the range of coverages PLM provides, including property, commercial auto, cyber, business interruption coverage and more. For more information, please visit https://www.plmins.com/ or contact us at CustServ@plmins.com or 1-800-752-1895.

Registration is now open for the LBM Strategies 2024 Conference