Risk Management Insurance Basics
Posted: Sep 17, 2014
All businesses have sort of risk to operating. Some have a higher risk level than others. The key to making sure even the high risk companies are successful is to have good business insurance and to manage your company’s risk and maintain the viability of your business.
By taking the time to make sure you have an effective risk management policy in place, you can save money on business insurance deductibles. Not only can you save on deductibles, but you’ll create a safer, more stable environment for your customers and your employees and volunteers.
So, what exactly is an effective risk management program? As a simple definition, this type of program makes you as prepared as you can possible be for risks that you and your company may face before those losses actually occur. This type of program or plan could mean the difference between your organization thriving or failing. Every business should have a risk management program.
It’s important to document your risk management program or plan. You want to be able to prove to your insurer what you did to eliminate or reduce potential losses and manage your risk. This can be done in the form of a risk management process worksheet. This type of worksheet should include the following six steps:
- Identify the potential exposures or causes to loss.
- Evaluate the risk. This means you need to look at the number of claims that could be possible as well as the size of those claims.
- Take a look at options to find out if an activity can be avoided, prevented or transferred. Determine if the risk can be financially transferred or retained.
- Determine the option that best benefits your company. Take into consideration effectiveness and affordability.
- Put the chosen option into action. Be sure to get the required resources and make sure they’re available. All pertinent members of the business team need to be aware of which risk management option has been chosen and why. Senior management needs to know, stakeholders, staff and volunteers. Depending on the situation, customers may need to about the chosen action as well.
- Monitor the results. You need to be able to determine the effectiveness of your plan. If it’s not working at the efficiency level you thought it would be, then you need to consider updating or revamping the plan. Take into consideration what should be scrapped and what alternatives could be used instead.
Often creating what’s called a Risk Management Map can help you determine where you need to allocate your resources in order to minimize the risks against your company. Business insurance representatives also like this because it shows them that your company has a solid understanding of the risks it could face, and has taken all reasonable precautions to mitigate those risks.
Things to consider when making a Risk Management Map for your own company or for your business insurance insurer are past losses, industry experiences, potential exposures and the costs of those potential exposures.
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