Risk management is a commonly known topic. Yet, its meaning can vary depending on which business sector you are working in.
This article will tackle the topic of risk management from the angle of insurance.
Risk management is adopting the practice of identifying and analysing the potential exposure to a loss.
Once identified, steps are taken to assist in reducing the financial and non-financial impacts to the risk imposed.
Insurance risk management focuses on loss risk, where an identified loss may occur, or an accidental loss.
Once a risk is identified, processes are important. This is the process of making and implementing decisions in a business designed to aid and reduce the adverse effects of a loss to a business. This is managing risk management.
Managing risk management, involves a sequence of steps, including:
1. Identifying and analysing the potential risk exposure and/or loss scenario;
2. Examining possible and alternative scenarios to handle the potential risk exposure;
3. Selecting the most appropriate response techniques;
4. Taking steps to implement the techniques in everyday business interactions;
5. After the implementing and/or testing phase – evaluate and monitor the results. Do the techniques work in practice? Can they be improved? Or modified? Are they easy to utilise?
6. Aim to constantly improve and add to the techniques.
The implementation phase requires incorporating the functions of the management process, which includes: planning, organisation, leading and monitoring resources.
Adopting these practices in your business won’t prevent a loss arising. However, it will certainly aid in streamlining processes and adopting a risk aware outlook, to ensure your business is better equipped towards being risk ready, should a loss arise.
The sad reality is that many businesses (more than 50%) fail after a significant claims loss. This is often due to a combination of factors, such as time away from the business to resolve a loss (claim), when you already have a full diary of work commitments; and, a lack of access to support, to address the increasingly complex and technical nature of a loss, risk or dispute.
Having access to the right skills at the right time can save your business money in navigating a complex and technical area, reduce expenses associated with the risk or loss; and, ensure your business is best represented in defence of a risk, loss and/or claim.
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Sarah Robinson @SR Insurance Consulting, is the Founder and Principal. SR Insurance Consulting is a business created to provide consulting services to businesses and small to medium sized brokers. Prior to starting her own business, Sarah was Assistant Vice President Claims, at a global leader in insurance and risk advisory solutions. She has served in a variety of insurance roles over the past 18 years, working for law firms, as an in-house lawyer and as a claims management specialist.
SR Insurance Consulting blog is not intended to act as advice. Should you require advice, please contact SR Insurance Consulting directly. The blog is not designed to be an exhaustive cover of each topic discussed. Each matter should be considered on a case-by-case basis.
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