The purpose of insurance is to mitigate against risk. No matter how carefully structured and managed your business is, there will be exposure to risk in many ways almost daily. That exposure necessitates insurance to protect against loss, but many businesses start and end their risk management practices with insurance policies.
Simply buying more insurance isn’t enough because it doesn’t stop people from suing your business or employees from getting hurt. Insurance doesn’t cover damage to your brand if a major claim is made, nor does it keep your staff around if they feel unsafe working for you. And you could end up paying far more for business insurance than you should.
THE IMPORTANCE OF RISK MANAGEMENT
Risk management strategies are important for every size business. There are several situations to consider when assessing risk in your organization:
- The risk of lawsuits is higher than ever, especially from employees because of ADA adherence, safety issues, or even a standard workers’ compensation claim.
- Not only are professional service providers held to high standards, but courts are often sympathetic to the claimants in these types of cases.
- Most types of organizations can be held liable for the actions of employees, volunteers, and executives at the director or officer level.
- Inflated or fraudulent claims are increasingly common because of the perception of corporations as having deeper pockets than others.
The bottom line is that there are situations that go beyond the scope of insurance to protect your business. Even with extensive EPLI, Directors & Officers, and general liability coverage, the damage that an avoidable lawsuit can do to your brand and your business morale is irreparable.
BENEFITS OF TARGETED RISK MANAGEMENT IN YOUR BUSINESS
The first and most important benefit of having a good risk management plan in place for your business is a better understanding of what you might be exposed to daily. Through mindfulness and internal reporting, you can evaluate and react to potential risks as they occur, rather than when it’s too late. Other specific benefits include:
- Saving time, money, property, and people who may otherwise be unable or unwilling to work.
- Protection of your brand and public image against frivolous or fraudulent lawsuits and claims.
- Protect your staff from harm and nurture a safer and more enjoyable environment for everyone in your company.
- Improve operational stability by reducing the risk of legal liability.
- Improve your ability to react to situations that might interrupt business, or develop systems that ensure this doesn’t happen.
- Fully understand exactly what your insurance needs and can provide accurate reporting to your broker and carrier.
It’s not possible to fully eliminate risk from your business and its operations, but a good risk management plan will help to show your business is committed to loss reduction and prevention. This will not only provide the benefits listed above for your business, it makes your business a safer risk to insure for your carrier, reducing your rates and improving your coverage.
ACTING TO REDUCE RISK IN YOUR BUSINESS
Insurance is a vital (and in several cases, legally necessary) tool for risk management, but it isn’t comprehensive. A thorough risk management plan – one that fully protects your business and addresses all possible exposures – is one that is committed to preventing harm in every way possible. It should be an extension of your mission as a business and of your commitment to your employees and customers.
By taking that extra step and committing yourself to providing exceptional service, a safe work environment, and strong brand integrity that people can trust and rely on, you will reap multiple benefits.