By Rachel Phillips
The nature of business often requires some level of risk taking, but not all risks a business owner faces are under their control.
For example, an employee may be injured in an accident, or a security breach could result in data loss or theft. While no one can completely avoid all potential risks, partnering with a qualified insurance or risk management provider can identify where they might be vulnerable and create a plan to manage and mitigate damages.
Thomas Flynn, co-founder, president and CEO of Jaeger & Flynn, with offices inn Saratoga Springs, Clifton Park and Glens Falls, said all risk management processes follow five basic steps: Identify the risk, analyze the risk, evaluate or “rank” the risk, treatment, and monitoring the risks regularly to assess whether they’ve changed.
Flynn said risks fall into one of three categories: personal, property or liability.
Personal risks refer to risks that can affect the health or safety of an individual, such as being injured or suffering from an illness. Property risks are risks that can cause partial or total loss to property, such as theft or fire. Liability risks refer to the risks associated with being found liable to another because of negligence, reneging on contractual obligations, etc.
A good insurance policy will cover all three types, at least to some extent. As an example, auto insurance can cover the insured person’s damaged vehicle, any injuries caused, and the cost of liability that arises from the negligence of the insured because of damage to other people’s property or person.
“Each of these three types of risk break down into a number of sub-categories of specific risks and specific types of coverage, such as general liability, workers compensation, cyber liability, employment practices liability, etc. insurance,” said Flynn. “Risk is about uncertainty, and it is important to put a framework around that uncertainty.
“By identifying and managing a comprehensive list of business and project risks, the number of unpleasant surprises you experience can be reduced … Proper risk management can also help you take the ‘reasonable gambles’ every business must consider in order to seize opportunities to profit and grow.”
Tyler Terpening, CIC, CLCS, vice president of the Heritage Group, said risk management will differ not only from industry to industry, but company to company as well.
“Risk Management differs vastly between all industries, based upon exposures, risk tolerance and financial capacity of the business. “It is best to review the overall goals with the owner and management to develop the best plan of action for each organization.”
For instance, a company that employs drivers may want to implement a “no texting and driving” policy, or a “no personal use” policy for those who take home company vehicles. Such policies will help prevent claims and losses on the part of the employer, not only by making the risks of such behaviors known, but also by having consequences in place for staff who fail to abide by the regulations.
A business whose employees work solely in a brick-and-mortar location may hire a snow removal contractor during the wintertime. Not only does this help keep employees safe from accidents, but having a contract with the snow removal company can transfer the risk of potential injury, depending on the terms of the contract.
Terpening said because of the unique nature of each business and risk management requirements, the industry is always evolving.
“It is always an ongoing process that is not a one-size-fits all method,” he said.
Flynn noted that, due to the competitive nature of the current labor market, his firm has been spending more time on employee benefits and compensation planning. Additionally, the ever-growing digitalization of business has elicited another trend.
“Cyber liability insurance is rapidly evolving in today’s workplace, with the constant hacks and cyber attacks. It is important for all business owners and risk managers to review their coverage. What was offered a few years ago is not as complete as it really needs to be, and there are many options now available that do a good job at covering today’s cyber risks.”
Large businesses who have much to lose in the face of disaster, and small businesses who don’t have safety managers or risk control officers on staff, would both benefit from some form of risk management or insurance policy.
However, both Flynn and Terpening agree that all businesses, no matter their size or industry, should work with a trusted provider who can help them identify, understand, and then manage and prevent the unique risks they face.