Most privately held companies have not implemented risk management practices that provide adequate protection from exposure to lawsuits and government fines, according to Chubb's 2013 Private Company Survey.

Based on interviews from executives at 450 U.S. for-profit private companies, the study's key findings indicate that companies are relatively unprepared to handle issues involving data breaches, social media policies, and exclusionary hiring policies for those with criminal backgrounds, all of which could result in a potential liability. Results include:

• 73 percent of respondents cited using an outside service provider to administer their employee benefits plan. However, only 46 percent take measures to reduce their fiduciary liability exposure.
• 21 percent of companies use cloud providers to store and retrieve data, but only 54 percent have an incident response plan.
• 42 percent have a broad exclusionary policy against hiring employees with criminal backgrounds, which could be a violation of state law.
• 68 percent use social media, but only 12 percent are concerned that they will be sued for defamatory posts, and only 49 percent have a written social media usage policy for employees.

In the past 3 years, approximately half of the respondents experienced at least one loss event related to issues such as employment practices liability, fiduciary liability, crime, workplace violence and cyber liability.

“Many private companies have not taken the loss prevention measures and have not purchased the appropriate insurance to help insulate themselves from litigation, government fines and their related financial and reputational consequences,” said Tracey Vispoli, Chubb's senior vice president and specialty insurance global customer segments leader.