Risk management for medtech start-ups: Launching any start-up business is a major undertaking that can take you on an exciting journey, resulting in both financial and reputational success as an entrepreneur. Start-ups and spin-outs, particularly in the science and technology sectors, are on the increase – but it’s not all plain sailing.
As with any business venture, there are risks and risk management should form part of your business plan. The fundamentals are the same for any organisation. However, risk management for companies involved with medical devices, technology and equipment is critical for success.
It doesn’t matter whether your business is creating a new app to monitor blood sugar levels, or designs artificial joints or implants, risk management is the key to mitigating financial, legal and reputational consequences.
Let’s look at the financial risks associated with medtech companies
You might think that this is obvious. If a problem arises from technology-based medical devices, treatments or diagnostic equipment, you could face a medical malpractice claim. For a medtech company, claims are likely to made directly to your business rather than an individual health professional.
But the risks go beyond this. The work and research that goes into developing your idea often involves hours and hours of computer-based work. What if an employee suffers from carpal tunnel, back or neck strain and blames this on the work they have been required to carry out for your business?
As a director of your own company, ultimately, the buck stops with you. If there’s a breach of legislation or regulations, such as GDPR, you could be held personally responsible – and financially liable.
Insurance is a vital part of risk management for the operational risks faced by medtech companies. Here are some of the insurance solutions that you should consider:
Medical malpractice insurance
Medical malpractice insurance is an industry specific type of public liability cover that provides cover for the costs involved in defending allegations and compensation claims.
Product liability insurance
Product liability insurance provides cover to protect against claims for personal injury or property/equipment damage arising from products sold by your business.
Employers’ liability insurance
It is a legal requirement to hold employers’ liability cover for any business with employees who are paid, voluntary or temporary. It covers both your legal defence costs and legal liability to pay compensation to employees injured at work.
Operational risks in the medtech world
As well as the potential financial liabilities outlined above, there are further risks that can arise pretty much anywhere within your business – and at any time.
There are of course physical risks – flood, fire and theft/vandalism and can affect any business. These not only result in damage, but could delay the development or production of your creation for a significant length of time.
Buildings and contents (property) insurance for your business can protect the physical assets and enable you to repair/replace damaged equipment. However, with the specialist nature of kit or technology you need, what happens if this has to be re-built from scratch?
Business interruption insurance can provide the financial security for your company to survive such an event. It can provide protection against loss of income after a disaster and during the recovery process.
The impact of a cyber-attack in a tech-based company can be far-reaching. It’s not just data that could be lost, but what if hackers interfered with the software you provide?
Cyber and privacy insurance tailored for digital healthcare and medtech companies can include protection against the costs of extortion, fines and penalties, and initial breach response services.
Although your team might be small, your people, especially at start-up stage, are perhaps your biggest asset.
What would happen to your business if something happened to a key employee? If you’re seeking funding, most investor companies will require you to have key person cover in place for the “brains behind the business”.
Key person cover is essentially a form of life insurance taken out on an employee upon whom an organisation is highly dependent. In the event that this person dies or is diagnosed with a critical illness, this type of policy will pay out a lump sum of cash in order to alleviate the resulting financial hardship.
When it comes to attracting and retaining the high-quality staff you need to grow your business, a comprehensive benefits package can help, giving you a competitive advantage. This might include income protection in the event of accident or illness, pension arrangements and life assurance.
Risk management as a driver for success for medtech start-ups
As an expert in your field, it’s easy to focus on your goals and the idea you’re working on – and very easy to overlook the threats that could de-rail your fledgling business.
Even if technology drives your business and you’re an expert in your field, this isn’t enough to protect against disruption such as cyber attacks, mistakes or natural disasters bringing things to a standstill.
Making sure you have a robust risk management plan in place, underpinned by the insurance cover you need for your unique business is crucial for success. Speak to an insurance adviser that understands your world for the advice you need to support the growth of your business from start-up to global operation.
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