Business owners and warehouse managers grapple with a host of challenges in their quests to attain efficient, cost-effective, and safe operations.

From dealing with inventory management problems and adapting to seasonal demand to optimizing picking processes and meeting rising labour costs, these intricate ecosystems depend on multiple processes running smoothly to meet customer expectations and be profitable. 

Adhering to lean management principles and exploring the benefits of RFID asset tagging, automated goods handling, and a warehouse management system can help iron out kinks in operations and improve profitability.

A warehouse manager and employees inspecting their building and inventory.

However, handling the cost and impact of warehouse accidents and being prepared for unexpected damage and loss because of events beyond their control is one of the top challenges warehouse owners and managers face. That’s when a customized warehouse insurance policy can help a business recover quickly, whether storing goods in a warehouse you own or at a third-party location.

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Zensurance - Small Business Insurance Guide

9 Common Warehouse Risks and Hazards

A complex organizational structure like a warehouse can seem resilient and entirely reliable when everything is humming along as it should. But appearances can be deceiving, and the possibility of an accident or unexpected damage is always prevalent.

Here are nine common hazards warehouse managers typically face and how to mitigate them:

1. Slips, trips, and falls

Whether it’s an employee, business partner, or visitor to your warehouse, a sudden slip or trip and fall is among the most common accidents, and it can have costly implications. For example, a visitor to your facility that falls and fractures a wrist could sue you for third-party bodily injury.

How to reduce the risk:

  • Make good housekeeping a priority and immediately clean up any spills, clutter, or messes
  • Remove obstacles from doorways, corridors, and walkways inside and outside the warehouse
  • Clear the property’s driveway, walkways, and entrances of snow and ice throughout the winter
  • Replace burnt-out light bulbs and keep working areas and walkways well lit
  • Secure mats and carpets to the floor
  • Ensure employees wear recommended safety footwear at all times

2. Exposure to harmful substances

Storing, handling, and shipping hazardous raw materials threaten your employees, property, the environment, and the community. If such materials are stored incorrectly or improperly labelled, or if hazardous waste is not disposed of properly, people can be severely injured, and significant environmental and property damage may ensue. 

How to reduce the risk:

  • Ensure your risk management plan includes emergency procedures for evacuations and medical emergencies
  • Create a safety manual for handling hazardous materials for employees to follow
  • Have a designated area in your warehouse for dangerous materials, and ensure all items are labelled correctly
  • Keep storage areas containing hazardous materials well-ventilated, dry, and cool
  • Only use sealable, weather-proof containers to hold harmful chemicals and substances
  • Regularly inspect and document the storage and handling of hazardous materials
  • Ensure employees always wear recommended protective safety equipment and clothing when handling any toxic material

3. Falling objects

Falling objects are always a risk in any warehouse. Items stacked high on racks can quickly plummet without warning when moved or stored incorrectly, potentially causing injuries and property damage.

How to reduce the risk:

  • Don’t store heavy items on high shelves
  • Secure all items or stored goods on any elevated surface
  • Install a secure racking system
  • Train employees on recommended stacking methods and identifying unsafe storage stacking
  • Ensure employees wear safety gear, such as helmets

4. Fire

Warehouses are usually tightly packed with stored goods from floor to ceiling. That makes it easy for small fires to spread quickly and become raging infernos. As a result, any fire can inflict extensive damage to stored goods and products in your facility. Furthermore, smoke and fire damage can cause significant damage to your warehouse and the equipment in it.

How to reduce the risk:

  • Maintain good internal housekeeping and remove all clutter or obstacles, particularly near emergency exits
  • Install a 24/7 monitored fire alarm and sprinkler system, and have fire extinguishers that are easily located throughout the facility
  • Test the warehouse fire alarm system regularly
  • Do not permit smoking inside the warehouse, and only allow employees to smoke in designated areas outdoors
  • Keep electrical control panels free of debris and obstructions
  • Have a fire and evacuation plan all employees are familiar with, and ensure first-aid kits are available throughout the facility

5. Equipment failure

Think of the equipment and systems in your warehouse. From forklifts, refrigerators, and freezers to the HVAC system, you rely on expensive equipment and machinery to keep your operations running smoothly. Unfortunately, mechanical and electrical malfunctions happen frequently and can derail your warehouse’s productivity. One piece of equipment breaking down can have a domino effect on your operations.

How to reduce the risk:

  • Establish a maintenance schedule and conduct regular maintenance on all equipment, machinery, and systems, and prioritize repairs whenever necessary
  • Monitor equipment, machinery, and systems performance regularly. Investing in an equipment condition monitoring system can help prevent equipment failure
  • Train all employees on how to use and store equipment properly

6. Floods and water damage

One of, if not the biggest, risks to any commercial property is flooding caused by extreme weather or water damage from a burst pipe. The risk is much higher if your warehouse is located in a region prone to natural disasters or near a floodplain.

How to reduce the risk:

  • Install sump pumps and backup water pumps
  • Conduct flood risk assessments regularly and address identified problem areas immediately
  • Keep your stored goods and products off the floor using shelving or seal them in water-resistant containers if possible
  • Be aware of weather conditions and flood warnings in your community
  • Ensure eavestroughs and drains on the exterior of the warehouse are clear of debris and vegetation
  • Train all employees on spotting and reporting flood hazards
  • Install water-resistant doors and windows on your building

7. Theft

Warehouses are primary targets for theft and burglary, including internal theft from employees. 

How to reduce the risk:

  • Install a 24/7 monitored video surveillance and alarm system inside and outside of the building
  • Designate separate areas for receiving and transporting goods
  • Have a security fence installed around the perimeter of your property, and keep the gate closed and locked when the warehouse is closed
  • Ensure all visitors and delivery people to the facility sign a visitors’ registry and do not allow visitors or delivery people to enter the warehouse unaccompanied
  • Establish an anonymous reporting system for employees to report a coworker they suspect is stealing goods from the warehouse
  • Track and document any missing items or unexplained losses from the warehouse
  • Do a thorough background and criminal record checks on all applicants before hiring them

8. Employee injuries

Placing employee safety at the centre of your warehouse operations is vital — data from the Association of Workers’ Compensation Boards of Canada for 2019 show 925 workplace-related deaths nationwide. Your company can be held financially liable for employee injuries or fatalities.

How to reduce the risk:

  • Train all employees on recommended safety techniques for their jobs, especially when using machinery and equipment
  • Ensure employees wear required safety equipment at all times
  • Regularly conduct risk assessments of the work environment to identify and mitigate potential threats
  • Empower employees to report hazards or incidents to management
  • Allow employees to use machinery when possible to limit repetitive strain or labour-intensive tasks

9. Product damage

Product damage and inventory shrinkage due to damages or losses in your warehouse are constant threats. 

How to reduce the risk:

  • Train employees on recommended product handling techniques and hold team meetings regularly to discuss issues and challenges
  • Ensure employees always follow proper shipping, storing, and handling procedures
  • Routinely inspect shelving units and racks and the tools and machinery your employees use
  • Regularly conduct pallet inspections
  • Ensure the layout of your warehouse is optimally designed
  • Maintain documentation on damaged products to identify mitigation strategies

How Can a Warehouse Insurance Policy Protect Your Small Business?

A warehouse insurance policy can be customized to suit your business’s specific needs. A comprehensive policy typically includes the following coverages:

  • Commercial general liability (CGL) insurance: CGL covers your warehouse against the cost of third-party bodily injury or property damage claims. It may also include product liability insurance for products you sell, distribute, or manufacture.
  • Commercial property insurance: Essential for all warehouses, commercial property insurance shields a warehouse and its attached structures from the cost of damage or loss because of fire, flood, severe weather, theft, and vandalism. It may also include business interruption insurance to reimburse you for lost income if you’re forced to close the facility for repairs following an insurable loss.
  • Equipment breakdown insurance: This coverage provides financial support for machinery, equipment, and systems that break down due to an electrical surge or mechanical malfunction.
  • Cyber liability insurance: Provides funds to deal with the ramifications of a cyber-attack or data breach that exposes your customers’ sensitive information to the risk of fraud.
  • Commercial crime insurance: Commercial crime insurance covers you for the cost of internal theft, including forgery, fraud, inventory theft, and embezzlement.
  • Warehouseman’s legal liability insurance: Covers you for damages to the customer goods and materials stored in your warehouse if facing an allegation of negligence. 

Speak to a Zensurance broker about your warehouse’s challenges and how best to protect your business.

How to Get the Warehouse Insurance Coverage Your Company Needs

Regardless of the type of warehouse your business owns or the products and materials you ship, handle, and store, you should have a tailored warehouse insurance policy that adequately protects your finances, assets, and reputation.

Fill out an online application to get a free quote from Zensurance. With over 50 insurance providers in our partner network, we can get your business the coverage it needs quickly and at an affordable price.

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About the Author: Alexandria Anthony

Alexandria Anthony is the Team Lead, Property & Hospitality, at Zensurance.