Risk is ever-present in your business, and it comes in many shapes and sizes. But correctly identifying and responding to its various forms can be difficult. Negative publicity is harder to quantify than the loss of vital equipment, but both pose real challenges that must be met and mitigated. To develop an effective risk management program, you need a variety of cost controls and insurance strategies in place. From minimizing exposures, to transferring risk, there are many ways to reduce your exposure and control your costs.

Exposure Identification

When developing a risk management program for your business, it is important to consider potential exposures. Partnering with an agent or entity who understands the inner workings of your business is a crucial step in solidifying a course of action, as is personal reflection. What is your greatest fear associated with your business? Will you be able to absorb that injury if it should come to pass? Would you have the cash flow or access to capital necessary to remain viable as you work to recover? You might be able to incur the cost yourself, or you might transfer it to an insurance carrier, but recognizing your exposure will dictate which solution to adopt. When assessing this, quantitative analysis can be especially useful. Inspect the hard numbers. Data on items like average costs per loss, frequency and severity ratios, Occupational Safety and Health Administration (OSHA) recordable data, and so on, can highlight your areas of greatest risk.

Risk Reduction through Control Measures

Recognizing risk exposure is one thing, but controlling it is another entirely. A staggering 75% of commercial insurance expenses are claims-driven. To reduce that risk, the savvy business person focuses on control measures. Proper safety education for your employees, as well as Pre- and post-loss procedures are fundamental aspects when developing control plans. A well-rounded, well-implemented program is necessary when confronting the litany of risks surrounding your business. Staying proactive toward risk-management empowers you and your team to effectively handle whatever comes your way.

Deciding on Risk Transfer

Some risks you’ll be able to manage in-house. Others might call for the transfer of that risk. When deciding, it is important to ask a few questions, like: What portion of exposures do I want to finance through a policy? Exactly how much risk can I afford to assume on my own? How can an insurance provider transfer risks to a third party?
When thinking about the risks you will retain and those you will transfer, considerations about your industry and cash-flow positions will play significant roles, so having a realistic understanding of each is key. This is where partnership with insurance carriers and other experts can be especially useful.

Exposure Management

Nearly one quarter of all businesses who have sustained a major catastrophe shut down within a year. While covid shone a light on how difficult things can get, it was just one of many threats to doing business. Thus, planning and developing comprehensive continuity plans are indispensable for long-term success.

There is no escaping risk, we can only minimize and mitigate it. Personal vigilance only goes so far. Only through focused strategizing and thoughtful implementation can we reduce it to a manageable part of everyday business.