Risk Management
Working out what could go wrong, deciding what to do about it, and returning to check whether it worked.
Businesses that would rather decide in advance.
Risk management is not tied to a size or a sector. What it asks for is a willingness to look at your own exposures honestly and act on what turns up.
- Operations with real physical hazards, vehicles or equipment, where loss frequency is driven by things that can actually be changed.
- Businesses whose risks mainstream insurers will not cover at a viable premium cost.
- Businesses looking for greater control over their insurance costs.
- Companies expanding into new locations, states or lines of work, where the risk profile is moving.
- Employers whose exposure runs through training, driving and workplace practice rather than through property.
Every business has unique goals, and industry-specific risks standing between it and those goals.
Risk management is the work of reaching those goals while minimizing what threatens them.
It is not a document produced once and filed. Because risk management is cyclical, reviewing the plan is not the end of it but another part of the system, and the part that makes everything before it more effective.
The stages of the process
- Determining the risks: identifying the risk factors present in your own business and how they affect your ability to achieve your goals. This is the initial part of the process.
- Understanding and prioritizing them, by how likely each is to occur and how severe the result would be. Knowing which factors to prioritize over others is the key to managing them.
- Developing the plan: training sessions for the team, adjusted operations, changed work schedules, updated technology systems or equipment, or putting resources into getting employees certified.
- Reviewing it on a schedule that fits the business and its specific risk factors, and accounting for new risk factors as they appear.
Where the exposure usually comes from.
Knowing the common business risks is what gets the process started.
- Location hazards. Where a business operates sets much of what it will face, including damage caused by natural disasters, which is among the most common sources of business loss. The location of operations is also one of the factors that determines how often something goes wrong.
- Lack of employee training. Training programs are one of the few risk factors a business controls directly. Accidental injuries and unsafe driving both trace back to them, and both are addressable without changing anything else about the operation.
- Technology failures. Systems fail on their own and they are attacked from outside. Cyber hacks are now a standard business risk, and aging systems and equipment raise the likelihood of both kinds of failure.
- Compliance with laws. Requirements change and the business is expected to keep pace. Falling behind creates exposure that has nothing to do with an accident and will not be caught by a safety review.
- Lawsuits from customers or employees. Claims brought by the people a business serves and the people it employs are their own category, and the one least affected by physical safety measures.
When the answer is a captive rather than a policy.
Captive insurance is a different way for a business to insure the risks it faces. Rather than taking out a policy with a traditional insurance company, the business sets up a separate legal entity, a captive insurance company, that acts as the insurer itself.
- Why businesses form one. The common reasons are risks that mainstream insurers do not or will not cover at a viable premium cost, greater control over insurance costs, possible tax advantages, and removing the wait for claims to be processed along with the risk of a payout dispute.
- Ownership stays with the business. Legally, the business itself owns and controls the captive insurance company. It is your entity, insuring your exposures.
- Day-to-day management is usually outsourced. In practice it often makes sense to get outside help overseeing the daily management, partly to reduce the administration and bureaucracy involved in running an insurance entity.
- Managers bring the technical view. The other reason to use outside management is insight: ways to potentially improve the tax position, and the legal pitfalls worth avoiding.
- It follows the risk management work rather than replacing it. A captive is a financing decision, and it rests on knowing which risks the business carries, how often they occur and what they cost. That knowledge is the output of the risk management process.
Risk management questions we hear most
How often should the plan be reviewed?
The timing varies depending on the business and the specific risk factors involved. What matters is that the review is part of the process rather than the end of it, because new risk factors come up over time and the effectiveness of an existing plan can only be judged after it has been running.
What is a captive insurance company?
A separate legal entity that a business sets up to act as its own insurer, instead of taking out a policy with a traditional insurance company. The business owns and controls it.
What kinds of risk does a review actually look at?
The ground it covers is wider than insurance. Location hazards, gaps in employee training, technology failures, compliance with the laws that apply to the business, and the lawsuits that can come from customers or employees are all on the list, because any of them can turn into a loss.
Does forming a captive replace our insurance programme?
No. A captive follows the risk management work rather than replacing it. Ownership stays with the business, day-to-day management is usually outsourced to managers who bring the technical view, and it sits alongside a programme rather than instead of one.
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Let's put the right policy in place.
Oxford Risk LLC is an independent agency. We represent you rather than a single carrier, which means we can place your coverage with the company whose appetite actually fits your risk. Tell us what you need to protect and an advisor will take it from there.
- Call (330) 315-3081
- Hours Monday - Friday: 8:00 AM - 4:00 PM
- Offices Fairlawn, OH, Cranberry Township, PA, Columbus, OH, Livonia, MI