A good Risk Management program: like money in the bank
True, it can be complex for a large corporation, but for small and medium-sized businesses, a Risk Management program can be straight forward and imperative asset. Risk Management involves the evaluation, management and economic control of risks that threaten the assets or earnings of your business.
In order to evaluate the risks faced by your business, your first task is to identify and measure them. Classify them as property, earnings and liability threats. Then look around at all your property and make a list of those assets and earnings which are at risk.
Buildings, equipment, inventory and vehicles are obvious property risks. Appraisals and valuations will give you the measure of the financial threat they represent. Flow-charts will help you to highlight areas such as production bottlenecks which can endanger your business earnings. Examine your company’s operations and products to discover possible liability exposures to the public, other third parties or employees. To deal with the risks, you should have an effective loss prevention programme.
For instance, it may be that you have a key piece of equipment without which your operation would suffer, or you have a computer installation and valuable documents that are indispensable to your business. Your loss prevention program needs to address problems like these unique to your own business and reduce the chance they will occur.
Fire and natural disasters are likely to have the most severe impact. Regular inspections, preventive maintenance, upgrading and good housekeeping are keys to safeguarding your facilities. Fire-protection measures such as sprinkler systems give you tangible benefits in this respect. Keep up-to-date on all local and area by-laws and regulations which govern the repair and rebuilding of damaged buildings. Be aware, too, of the zoning of your premises and any changes that are legislated.
Don’t overlook the risks of theft, burglary and transportation of your goods. Alarm systems, steel doors, barred windows are all good physical protection. You should check that employees are using alarms properly and are locking doors and windows methodically. All merchandise should be properly packed and marked to help avoid damage in transit, particularly if it is fragile. Attractive merchandise on the other hand may be better left unmarked to reduce the chance of theft.
When you review your liability risks, take into account possible bodily injury, property damage, advertising injury and personal injury. That latter term applies to harm caused by libel or slander (except in advertising), false arrest, detention, imprisonment or malicious prosecution, wrongful entry or eviction or other invasion of the right of privacy. Make sure that the interior and exterior of your premises is as safe as you can make it. In the case of your products, strong packaging and clear labeling are important, especially if they are dangerous in any way. If you provide services to the public, you should guard against professional errors which could lead to law suits against you.
See that your workplace is safe and healthy for all your employees. This includes their protection against sexual harassment and discrimination as well as their physical safety. You should be familiar with all legislation and regulations which govern employees in the workplace. Remember any staff who work out of Province or outside Canada. Oversights could prove costly; damaging lawsuits against you might impair your company’s finances. They will certainly hurt its image.
Automobiles present their own liability problems, influenced by the jurisdictions in which you operate them. Do not overlook leased, rented, hired and employee-owned vehicles as well as owned automobiles. Look out for the use of such vehicles by family members not in your employ.
When your Risk Management program is in place, you are then able to assess which risks you and your business can bear comfortably. You can transfer to others some of those that remain. Use legal agreements as much as possible to pass risks to sub-contractors and suppliers. For example, you can require them to sign “Hold Harmless” or “Waiver” agreements to assume some of your liabilities. Beyond these, your insurance should provide coverage for most eventualities. As insurance advisers, we will gladly assist you with your Risk Management program, especially in the field of loss prevention and of course to arrange a suitable, comprehensive insurance program.