It may be safe to say that nobody knows your business quite the way you do, but even with that knowledge, there might be times when you fail to examine all the risks that could come up during the span of your business operation. There are good reasons for this. First of all, nobody’s perfect and no matter how well you plan, or implement risk management strategies, it is impossible to be perfect, and keeping in mind, that the only way to avoid risk in business is to not be in business, will go a long way when it comes to planning. Implementing an effective risk management plan is not about avoiding all risks but rather preparing for them, implementing strategies that will help mitigate them, and being cognizant. Second, the world is ever changing and today’s risks might never have been thought about yesterday, so it is very important to stay abreast of the times. For example, many businesses have drones but have not thought to consider whether legal liability associated with these drones might be something that is excluded from a commercial general liability policy. Additionally, compliance issues, legal climate, public policy and jurisdictional matters can all change, sometimes overnight, and being mindful of this, and how these changes might impact your business is important.
So how does a business go about establishing an effective risk management plan? Should it consider employing a full time or part time risk manager? Or will the cost of doing so prove to be too costly, and might the business achieve better results by having a professional insurance agency and/or broker involved to pass off some of these responsibilities to save costs. Then again, will that said broker and/or insurance agent charge in fee more than an annual salary of a full time dedicated risk manager?
What about the transfer of risk? If a claim is uncovered, whose fault is it? Be mindful of the recommendations that your insurance and/or agent makes and why, and when declining certain limits and/or coverage, know that there may have been good reasons that these recommendations might have been made. So be certain to outweight the costs vs. the coverage and remember the old adage, “penny wise, pound foolish”. Insurance usually gets a bad rap by non-insurance professionals, but in my opinion, the value of having insurance in place to help mitigate catastrophic losses is priceless.
There is clearly no solution set in stone and many businesses change their course as they evolve. Some employ professionals who have insurance and/or risk management experience, while others look to educate their key personnel so that they can be armed with information and education to effectively plan.
Below are some steps that are good for businesses to keep in mind when going about setting up a risk management plan. Again, keep in mind that depending upon your business, things might be different, but the following might be a good benchmark to start with when either creating or comparing the overall risk management process.
First you need to identify risks to your business. Think about possible scenarios of what could happen if this or that happened, such as a fire, earthquake, theft, an automobile accident, employee related accident, or employees declaring unfair labor practices.
Part of this process would be to analyze your business. Consider your significant business pursuits, including your fundamental operations, personnel and anything that could possibly have an impact on them, such as accidents, power failures, natural disaster and disease, sickness or death. What plans do you have in effect if something you identify were to happen, so that your business could continue to operate without interruption? If there were an interruption, how long could your business be down for without having a severe impact, and what measures do you have in place to consider these extra expenses?
You may be wondering just how to go about assessing your risk. You might have already done an initial review when the business was first formed, and that review may or may not have been updated. Depending upon the set of circumstances, including whether you have had staff changes over the years, it may make sense to start from scratch, as opposed, to reviewing and updating what has been done in the past. Consider reviewing incidents that have happened already, some of which may have been close calls, and others that may have been written about in trade journals.
Having a clear picture of your business is what is needed to have a clear understanding of your risks. You want to be sure that you do not exercise denial as opposed to careful, mindful consideration. Consider questions including when, where, why and how things might happen. Include both internal and external considerations, such as third parties. For example, what if you are emailing an employee’s personal information including a driver’s license number, social security number, or medical information to a healthcare insurance provider. What if there is a breach at the healthcare insurance company, and the data you shared is compromised? Would your company have an exposure here? Have you considered the consequences, and would your current risk management and/or insurance coverage cover this?
Have you thought about the ‘What if?’ scenarios? What if your employee was involved in an automobile accident and caused a school bus to swerve off the road, causing injury to several children? Would you have enough insurance to defend and cover the legal liabilities you might be exposed to? How much do you think an accident like this might entail?
Sometimes one of the most effective methods to identifying risk is to effectively brainstorm with professionals you trust including those with backgrounds in accounting, insurance, and human resources experience. Nothing is impossible, and while it might not be possible to shield your business from every possible scenario that could go wrong, it is possible to have peace of mind, knowing you did all you could to consider what could happen, consulted professionals you trust, and built a solid plan that can evolve as your business grows.
When it comes to business insurance, it is a good idea to educate yourself as much as you can about various different policy types, what’s covered and what’s typically excluded, and get premium quotations from reputable insurance carriers. Consider higher and lower deductibles, various claims that might not have been paid in the past, the reasons for same, and look to build solid relationships with your carrier through your agent and or broker. Remember it’s always good to get prices before deciding not to purchase coverage, and it’s okay to ask your insurance company to help you with loss control issues by providing newsletters and/or on site inspections.