When you have a business you face many risks and you need to protect yourself by identifying those risks and figuring out what insurance policies will protect you from possible losses. Risk management involves measuring risk and developing strategies to deal with the risk. You can manage risk by transferring it to another party (e.g. by buying an insurance policy you transfer the risk to the insurance company), reducing the negative impact of the risk or taking steps to avoid the risk.
Types of Risk
Litigation - customers suing the company for some act of negligence which caused harm to the customer or the company can be sued for fraud.
Destruction of the premises and the death of employees - loss due to fire, natural disaster, the loss of equipment or money due to thefts.
Intangible risks - such as relationship risk (e.g. you risk losing employees or clients because you have failed to collaborate effectively with them), process-engagement risk (occurs when operations being carried out at your company are not effective) and knowledge risk (caused by lack of knowledge or actions being taken based on incorrect and faulty information).
Once you have identified the risks, you will have to do source and problem analysis to figure out who or what is the source of risk. Sources can include employees being injured on the premises, employees suing you for unfair treatment or employees going on strike to demand higher pays or people who have shares in a company backing out at a crucial time. Problem analysis involves identifying problems such as the risk of litigation and deciding how you should prepare yourself to deal with and avoid such problems. Once you have analyzed the sources and problems, you need to work on reducing the degree of risk. Next, you have to decide whether you want to opt for risk retention or risk transfer (i.e. do you want to manage any losses that occur or do you want to transfer your losses to another party such as insurance company).
Risk Retention
Risk retention is a form of self insurance which you should only opt for when the probability of a risk materializing is very low and the premiums for protection are too high. For example, if there has never been a terrorist attack in your area, it makes no sense to buy expensive terrorism insurance. When the probability of a risk occurring is high, you should opt for risk transfer (i.e. insurance) to protect yourself.
Risk Management in the UK
Risk management services include risk identification and assessment, claims and loss cost management, safety engineering and program administration. Risk management solutions include professional liability, directors' and officers' liability, workers' compensation, general liability and property. Some risk management and insurance brokerage companies such as Aon Corporation provide affinity products for life, disability income, personal lines for associations, individuals and businesses as well as affinity products for professional liability.
Getting Help
Risk management and insurance brokerage companies do all the work for you. They identify risks, advise you on how to reduce risks and suggest which insurance policies would really suit your needs and protect you from loss. They shop around and find the most suitable insurance policy with the lowest premium rate. In addition, they negotiate with the various insurance companies and ensure that you get the best deals and discounts. Global risk management and insurance brokerages have a global distribution network which they use to place your insurance risk with the best possible insurance provider.
Many of these risk management and insurance brokerage firms also advise companies on issues such as employee compensation, benefits, management consulting, communications and human resource outsourcing. If the company provides underwriting services, they can offer you credit life insurance, extended warranty products, select property and casualty insurance products and supplemental life, accident and health insurance.
|
