Business Risks IT Freelancers Should Be Aware Of


Running your own business, particularly in the IT sector, comes with inherent risks. Legal violations, professional negligence, and cybercrime can have severe consequences that can significantly impact your business. In order to assist you in mitigating these risks, we have compiled a comprehensive article that outlines the major threats to your business. By familiarizing yourself with these risks and taking appropriate measures to address them, you can better protect your business and ensure its long-term success.

  1. Professional negligence
  2. Cybercrime
  3. Infringement of rights
Business risks for IT freelancers

Risk 1: Professional negligence

Mistakes can occur in any business, and their financial consequences can potentially jeopardize the existence of self-employed individuals in the worst-case scenario. When it comes to risk management, it is prudent to take into account even the unlikely scenarios.

Careless mistakes

The reported damage events to exali consistently highlight that expensive damages often stem from minor oversights. A notable example is an IT freelancer who incurred €14,000 in damages due to a simple miscalculation – sending 17,000 emails instead of the intended 50. Even seemingly trivial programming errors can have significant consequences. NASA’s Venus mission, for instance, suffered a significant setback due to a missing hyphen in the programming code. Similarly, the management of the McDonald’s sweepstakes app proved unexpectedly costly when a critical programming error occurred within the dedicated IT service company.

Lack of care during backup

A well-known saying in the IT sector is: “no backup, no sympathy.” It is even more frustrating when, as an IT professional, you cause a client – or even yourself – to lose important data due to the lack of a backup. The process of recovering urgently needed work documents can be expensive and time-consuming. Therefore, whether you are backing up your own data or that of your clients, we strongly recommend performing regular backups and verifying their completeness.

Violation of confidentiality

Especially in large, complex projects, you will gain extensive insights into your client’s internal company operations. When you enter into a project contract with the other party, all contract participants are obligated to refrain from disclosing any information that could harm the contractual partner if it were to become known. This subsidiary contractual obligation does not require a separate non-disclosure agreement to be legally binding. Violating this obligation exposes you to potential claims for compensation, written warnings, and even termination of the contract.

Property damage

Even outside the realm of technology, you can still make professional mistakes that may result in significant financial harm to your clients. Whether it’s misplacing a key you were entrusted with for accessing your clients’ premises or accidentally triggering the server room’s fire suppression system, the potential for property damage is often closer than one would prefer.

Legal violations, professional negligence, and cybercrime can have severe consequences that can significantly impact your business.

Risk 2: Cybercrime

Hardly any threat to companies has grown as rapidly in recent years as cybercrime. Hackers continuously develop new schemes to defraud individuals and organizations of their money and data. This makes it crucial for you, as an IT expert, to be prepared against such threats.

One of the biggest risk factors in cybersecurity is human error. Therefore, it is important to raise awareness of potential threats among your clients and within your own business. Assign clear responsibilities and provide regular training to everyone involved.

Taking the human factor into account in cybersecurity can significantly reduce the impact of certain attacks, such as social engineering, which aims to manipulate victims into divulging sensitive data. The distribution of malicious software is also a popular method for hackers to infiltrate networks, allowing them to encrypt data and demand ransom or execute malicious code that damages the system.

To mitigate these risks, ensure that you have suitable technical protection measures in place, including:

  • Virus protection and firewall
  • Regular data backups
  • Clearly defined responsibilities
  • Sensibly managed access rights
  • Up-to-date hardware and software

By implementing these measures, you can enhance your cybersecurity and protect against potential threats.

🛡 Well Insured Against Professional Risks – exali’s Professional Indemnity

With Professional Indemnity Insurance through exali, your business is protected in case of legal violations, mistakes in your work, or cyber attacks.

When a claim arises, the insurer will investigate at their own expense to determine the validity of the claims made against you and will settle them accordingly. If a claim is found to be unfounded, the insurer will defend it on your behalf.

» Find out more

Risk 3: Infringement of rights

Infringements and the subsequent warnings can be costly and stressful for self-employed individuals and freelancers. As an IT service provider, you are not exempt from these risks, both in your own business and when working for clients. Here are some of the most common infringements that can lead to a written warning:

These common infringements make up the majority of cases because almost every type of content is protected by copyright. This includes videos, images, text, and particularly important for IT professionals, programming code. What makes these infringements particularly dangerous is the real risk of unintentionally violating copyright by making the following mistakes:

Copying texts

As an IT service provider, it is important not to copy texts, such as imprint, privacy policy, general terms and conditions, from other providers, as they are also protected by copyright.

Copying images and videos

Websites often rely on visual content, but it is crucial to obtain permission from the copyright holder and attribute them as the source. Even if you make changes to an image, copyright protection still applies.

Unauthorized use of music

Adding copyrighted music to your content, such as a video on social media, without obtaining the necessary permissions is considered an infringement.

It is important to be aware of these copyright issues and ensure that you have the proper licenses and permissions to use protected content. By respecting copyright laws, you can avoid potential legal consequences and protect your business.

The best way to protect yourself from copyright infringement is to follow one principle: NEVER use someone else’s content without permission. To ensure compliance, it is advisable to use databases that clearly state the terms of use for copyrighted content and to adhere to them closely. By doing so, you can mitigate the risk of unintentionally infringing on someone’s copyright and avoid legal complications. Remember to always obtain proper permission or licenses before using copyrighted material to stay on the right side of the law.

Violations of competition law

Violations of competition law pose regular challenges for freelancers and self-employed individuals, as the complex regulations can be difficult to navigate. In addition, there are consumer and competition associations that actively issue written warnings for infringements and, in some cases, have even developed a business model around this practice. These warning agents often target violations of the law on websites, as they are relatively easy to trace. Common infringements of competition law include:

  • Incorrect/improper imprint
  • Misleading advertising, such as advertising incorrect prices for your products or services
  • Overly broad limitations of liability in the general terms and conditions (GTCs)
  • Failure to provide or incomplete labeling of advertisements

To avoid legal violations in this area, it is advisable to have your legal texts, such as imprint, privacy policy, or general terms and conditions, drafted by a lawyer. Additionally, it is crucial to stay informed about your obligations through industry-specific portals or resources. By proactively addressing these concerns, you can minimize the risk of facing legal consequences and protect your business interests.

Trademark infringement

This type of infringement can also become relevant for freelance IT professionals sooner than anticipated. While such infringements typically occur within the scope of commercial activities, it is important to note that a trademark does not necessarily have to be registered with the relevant authority. Simply using a trademark for an extended period, resulting in strong recognition among consumers, can provide common law protection. In such cases, only the owners of the trademark have the authority to issue written warnings for trademark infringement. Examples of trademark infringements include:

  • Advertising with logos or seals of approval that belong to other entities on your online presence.
  • Having a brand name that is too similar to an existing one.
  • Having a logo that closely resembles the logo of another company.

To mitigate these risks, it is crucial to only use logos and seals for which you have the proper rights. Additionally, before applying for a trademark, thorough research should be conducted to ensure that you are not infringing upon someone else’s rights. Seeking legal advice in these matters can be invaluable, as it helps ensure compliance and protect your business interests.

Violation of personal rights

As an IT service provider, it is indeed possible to infringe upon someone else’s personal rights. It is important to exercise caution when displaying pictures of employees or customers on your website. To reduce the risk of receiving a written warning, it is crucial to obtain written permission from the individuals involved before using their images. By doing so, you demonstrate your respect for personal rights and ensure compliance with legal requirements.

Data protection violations

Since its implementation in 2018, the General Data Protection Regulation (GDPR) has imposed stringent obligations on individuals working with personal data. As an IT freelancer, you not only handle sensitive data belonging to your clients but are also responsible for ensuring compliance with legal requirements for your own website, imprint, and privacy policy. This includes integrating contact forms and designing cookie banners that adhere to the GDPR’s guidelines. By prioritizing data protection and following the necessary procedures, you can establish trust with your clients and demonstrate your commitment to safeguarding personal information.

Ralph Günther

Ralph Günther from exali is considered a proven expert when it comes to risk management and Professional Indemnity Insurance for freelancers. As one of the pioneers in the online insurance business, he has been actively involved in improving insurance cover for the self-employed and freelancers and has introduced new benefit enhancements to the market. He regularly shares his knowledge with his target group as an author in relevant trade media.

By Ralph Günther

Recent Posts