Plan and prepare for the future of your business.
Risk management provided by Cowell James Forge Insurance Group.
Risk management is the process through which the unique risks to your business are identified and mitigated. It involves planning and strategizing for your business in the long term.
What is risk management and why is it important?
Every business has goals that are unique to its niche and scope of operation. Similarly, each company faces risks that are unique to its industry. Every risk management plan aims to achieve these goals while minimizing the potential threats to the business.
The process of risk management entails several vital elements that equip a business with the right tools to plan for the future and prepare for unfortunate circumstances. These elements include determining the potential risks that a business is likely to face, understanding and prioritizing them in terms of severity and occurrence, putting in place a plan to mitigate and reduce those risks, and reviewing this entire process often to ensure that it remains effective.
Real world examples of risk in business.
Several factors determine the risks that have the potential to impact your business. These include its location of operations, type of industry, training programs, and the number of employees, among others.
Determining some of the typical business risks associated with the industry and niche in which your company operates can help offset the process of risk management. Examples of these risks include accidental injuries, lawsuits from employees or customers, damage caused by natural disasters, and cyber hacks. Identifying the potential risk factors to your business and how they can impact your ability to reach your goals is the first step in the process of risk management.
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Every business faces risk. The level and type of risk will vary based on multiple factors including industry, size, and location, among others. Risk can never be fully eliminated, but it can be reduced.
Risk management is the practice of taking proactive steps to identify and mitigate risk. It’s a broad topic that involves many areas of a business, from personnel and technology to safety and compliance. Risk management can not only help a business identify what risks need to be insured, it can also pinpoint ways to reduce.
Staying compliant is hard. The laws for many facets of business are ever-changing. Employee handbooks can become out of date. Employment and other contracts can contain problematic language if not handled properly. Employee relations and human resources concerns can get complicated.
There are insurance coverages like employment practices liability insurance (EPLI) and directors and officers liability insurance (D&O) that can help pay for the legal costs of defending lawsuits against the business, but risk management can help shed light on areas of the business where process improvement and consistent practices could help avoid litigation.
Employees can make mistakes for a number of reasons. Sometimes, it’s simply the result of a lack of education. Some businesses may choose to skip training because they don’t have the time or resources to devote, but this can lead to mistakes and accidents.
Conducting employee training can reduce risk. For example, sexual harassment training often helps businesses avoid lawsuits. Safety training is essential to avoid workplace injuries. Many insurers will help companies provide employee training as a cost-saving measure.
The Occupational Safety and Health Administration (OSHA) sets and enforces standards aimed at ensuring the environment in which employees work is safe and healthful. Employers are required to comply with these standards and OSHA may audit workplaces to verify compliance. Employers that fail to comply can be faced with hefty fines.
Lockout/tagout, hazard communication, and powered industrial trucks standards, among others, all require specialized programs. Utilizing outside resources to create and train employees on these programs can be a cost-effective solution that ensures your business is doing everything possible to meet required standards.
If your business involves driving, you know that safety is paramount. Failure to drive safely not only endangers the lives of your employees and the general public, but it can also have costly repercussions for the business.
Increasing driver safety is a cost-effective risk management tool. Classes and seminars can be effective resources. Telematic programs allow businesses to see every move a driver makes. Driving simulators can offer hands on training for drivers of trucks, school buses, agricultural haulers, and other vehicles to prepare them for scenarios they may face out on the road.
When it comes to weather and natural disaster related losses, where your business is located impacts the kinds and level of risk it faces. Fires, hurricanes, blizzards, tornadoes, earthquakes and other events can cause major losses to your business.
While it’s impossible to control the weather, it is possible to lower the risks the weather poses. Risk management involves assessing which events are most likely and what steps a business can take to protect their building and contents, their employees, and other systems.
Technology failures can be extremely detrimental to an organization. Problems can arise from power outages or surges, cyber-attacks, or telephone and communication failures.
Understanding what risks the technology your business uses is susceptible to, the processes a tech failure could affect, and how to prevent losses from tech failures is an essential part of risk management. This can help determine the proper insurance policies that are needed, such as cyber liability, property, and business interruption coverage.
Assessing the impact and frequency of risks.
Upon identifying the risk factors for your business, they need to be ranked in terms of priority, based on the frequency in which they may occur and the potential impact that they are likely to have. Developed risk management strategies and techniques may extend further into identifying the areas of your business that require the most attention.
Determining the risk factors that are most likely to occur and those that can have the most detrimental impact helps to narrow down the top priorities and develop a customized risk management plan for your business.
Reducing and mitigating risk effectively.
Developing an effective risk management strategy is essential for ensuring the smooth running and continuity of your business. To successfully manage and minimize risks, you need to understand which risk factors to prioritize over others.
A risk management plan includes all of the risk factors that your business is likely to face and how it needs to adjust and adapt in order to prepare for those risks and prevent them. Strategies such as adjusting operations, updating equipment and technology systems, putting resources into getting employees certified, holding training sessions for your team, or changing work schedules may need to be put in place in order to mitigate and reduce the risks that your business is likely to face.
A good risk management strategy also gives you access to more helpful and higher quality data, enabling you to make better decisions and realize more profits. The strategy should be updated regularly, allowing you to make decisions based on the latest data, and anticipate any surprises.
Effective risk management planning can lead to more satisfied customers and an increased clientele. It can help your business to improve nearly every aspect of its operations, such as its finances and the development of services and products. These improvements allow your business to improve customer satisfaction, leading to more returning customers and referrals. It also gives you a large amount of information that may reveal opportunities to save money, operational inefficiencies, and a chance to avoid or deal with any risks that could compromise your company’s finances.
Reviewing and enhancing risk management strategies
Risk management is a cyclical process. Therefore, reviewing the plan that was put in place for your business is a part of ensuring that it remains effective. The timing and frequency at which you make the reviews may vary depending on the scope of your business and the specific risk factors involved. It is crucial that you focus on eliminating or transferring risk and finding the right company to help you do so.
As the world changes and your business continues to evolve, new risk factors may arise, and they need to be accounted for. The review process helps to identify these unknown risks and put in place measures to mitigate them. It also puts the business’s ability to achieve its goals into consideration while helping to implement changes that drive your business to do better.
At Cowell James Forge Insurance Group, not only do we offer several types of business insurance plans, but we also offer top-notch risk management services.
We can perform a full risk analysis of your business and determine what areas of your company need to improve or pose a threat to you or your team members.
If you are interested in how to better identify and manage business risks, contact us to help you get started on the risk management process.
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