By: Pierre Morrisseau, CEO, OneGroup
I don’t have to tell you how fast the world seems to be changing, and how novel risks seem to crop up and add yet more challenges to businesses.
There are many reasons for the increasing complexity of managing risk: Increased litigation, consolidation of insurance carriers, expanding regulatory environment, inflation, advancing technology, changing weather patterns—and the list goes on.
A question our clients often ask is, “How do we get ahead of all of these risks and the cost to protect ourselves?” While there is no one answer or simple solution because each company’s risks differ greatly, I always tell them to begin by eliminating as much risk as possible, put a solid risk management plan in place, and work with experts to finance your biggest risks.
While you can’t eliminate all risk, auditing your risks can reveal a clearer picture of what can be eliminated, and how best to focus your capital. Some risks can be self-insured while other risks can leverage insurance or other risk financing tools to help you manage bottom line costs. In addition, building a solid risk management plan also provides insurance carriers with the evidence that you are serious about managing risk, thus helping underwriters to work in your favor.
As companies look to out-perform their peers in highly competitive markets, it means moving faster, being innovative, taking on expansion including increased hiring—all of which, by default, increases risk. So, the only way for them to succeed is having better risk management. In fact, with the right help from risk management experts, risk management becomes an essential tool to increase your competitive position. It can help your company go on the offensive instead of simply being a cost to defend itself.
Something you seldom here when speaking of risk management is the impact your company culture has on the occurrence and cost of risk. Here again, taking the time to audit risk and create a risk management plan offers you the ability to create a risk communication and implementation plan. Building risk awareness and risk avoidance into your business culture may be the most impactful step you can take in controlling the impact of risk on your organization. Setting clear guidelines and goals is a critical step. Equally important is ongoing education, measurement and periodic review. Often, companies fall down in these areas due to lack of priority or lack of time and resources. This is where it is critical to work with a competent risk management team to keep you on track. The cost most often more than pays for itself and ensures you the best competitive outcome.
For example, my firm supports companies across all industries and at every size. We see companies whose executives view risk management as an expense to be avoided while others embrace managing risk as a strategic opportunity to give them a competitive edge and enhance their sustainable growth. These firms consistently work to understand their risks in human capital, operations, technology, financial and environmental, the latter of which we are seeing increased demand for as we open our operations in South Carolina and Florida where environmental risk is creating substantial volatility and cost.
The bottom line for businesses today is one of leveraging risk management to your advantage. Using it to support your bottom line is the far smarter thing to do.