Spring is underway, even if the current forecast defies that notion. Disagreeable weather can be unpleasant at best and disastrous at worst, but there’s one particular forecast that can actually help you regain control. In business, risk management is the forecasting and evaluation of financial risks that have been prescribed with a set of mitigating procedures. Risk factors are present within and throughout any organization, you can never eliminate them, but by providing a clear and structured plan you can minimize the impact of a loss if one should occur.
Risk management can seem like a daunting undertaking, but it can have impacts on your business beyond loss-prevention, including saving resources, increasing the stability of operations and reducing liabilities. It can be as simple as asking yourself a few simple questions: ‘What can go wrong?’ ‘How can we prevent and respond to harm?’ And, ‘How will we pay for potential loss?’
Tackling these questions can help you reduce your insurance premiums, save you from paying out-of-pocket for deductibles and creates an all-around stable and safe environment for your employees. It can also mean the difference between an organization that thrives and one that fails. We at PAIB Insurance Inc. want to make sure that the former remains true just as much as you do. That’s why we’re here to provide you a step-by-step process for identifying and preparing for risks within your own organization.
You first want to start by identifying potential exposures that are unique to your organization, list your businesses’ key objectives, like practices that must be in place in order for the business to survive, and then identify associated risks. Consult other sources, ask your broker for past losses and claims, and research experiences of similar businesses or industries.
Evaluate the risks by looking at the possible number and severity of claims. Don’t get overwhelmed by this step, it is likely that you will be exposed to a multitude of risks, but the solution lies in identifying the frequency and severity of these instance. You’ll feel relieved knowing the reality of the risks by being prepared to address them. For example, a smaller home-based business is exposed to fewer risks than a larger one with multiple operations in various locations. The probability for incurring a higher number of claims is stronger for the larger business.
Among the possible exposures you’ve identified, evaluate which are most likely to cause a claim or incident. Create a risk map to help you identify which risks will have the greatest impact on your organization and require the most attention.
Examine your options. In some instances, the potential for risk of a particular activity outweighs the level of service you can deliver, in which case, consider eliminating or changing the approach to that particular activity. The latter option is commonly addressed through policies and procedures. In other instances, you can choose to accept the risk by retaining the financial impact, such as through your deductible. You can also choose to transfer the risk or financial impact of it. Insurance is an example of a form of transfer.
Now, put your efforts to work by creating a risk management plan, address your findings in real and practical terms, decide which approach creates the most effective and affordable procedure. Ensure your staff and stakeholders are informed about the plan, and make an effort to review the plan annually for any changes that may be required. Did you expand your business? Have you purchased new equipment? Did you move? Keep a record of updates and adjustments to your plan, trust us, your broker will thank you!