Make risk control as automatic as a weather check

If the weather forecast shows a 40% chance of rain, we automatically know it’s smart to take an umbrella or raincoat to protect our health or designer clothes, but what signs do business managers automatically check to protect the ‘health’ and valuable assets of their businesses? André van der Walt, Hollard Agri MD at Hollard Broker Markets.

This is the question posed by Andre van der Walt, head of Hollard Agri within Hollard Broker Markets who adds “Other familiar weather conditions that increase danger include droughts, hurricanes, earthquakes and fierce lightning storms. These types of weather threats all have comparisons with risks in the business world but the challenge we face is that those in the commercial world do not pay as much attention to risks as they do to the daily weather forecast – even though there are obvious financial benefits.”

“Brokers and financial advisors will also win by leading the education process. Risk management is essential to flourishing businesses, but commercial clients need to understand the basics to get motivated. That is the intention behind giving FAnews readers a basic information plan to share. Every factory, farm, retailer or office needs a relevant risk management check list to become part of a daily routine – just like checking the weather,” he says.

The basic steps

1) Understand the fundamentals of risk.
2) Identify risks faced by your business.
3) Transfer that risk from your business in the most suitable way.

Possible starting point

1) Elect a risk management team backed and supported by a Declaration of the Board of Directors.
2) Mandate certain line managers and team members to report to this team.
3) Identify specific risks that fall outside the scope of the risk management team such as pure financial losses and Directors and Officers liability, among others.
4) Create a clear risk management target, because in any type of business this can be a strong weapon in focusing attention on a proactive and positive defence.

Main points of focus

Those who are mandated to be in charge of a company’s long and short term risk management will need to build a clear vision of what is required in their particular area of control. This will require three steps:

1) Identification
2) Analysis
3) Control

Topic guideline

Van der Walt says this process can be simplified by considering one specific topic at a time. “For instance, in the case of an alarm system, imagine it is missing or out of action. Weigh up its suitability and impact on the business and decide on proactive measures for damage control and dependable maintenance.

“As a starting point, here is a partial list of discussion points to encourage your clients when beginning this three-phase process. The questions they need to be asking revolve around quality, efficiency and suitability for the purpose of protecting productivity and assets.”

• Alarm systems and testing
• Key carriers – who is responsible for the keys to the business?
• All locks and lock mechanisms
• Safety and strength of roofs
• Safety and strength of walls, windows and doors
• Raw material stores
• Storage criteria
• Stock control
• Stock inspections
• Safety of finished products
• Safety of retail displays
• Distribution methods
• Money handling
• Money in transit
• Safes
• Scrap metal removal
• Pallets – does storage block emergency vehicle access?
• Servicing and maintenance records
• Fire escapes – are they clearly marked and accessible?
• Sprinkler systems
• Fire-fighting equipment
• Fire exercises for staff – how often?

Financial motivation

“Points of motivation to share with your clients, to help them overcome initial hurdles, include the potential benefits of discounted premiums and reduced claims excesses for businesses when effective risk management programmes are in place. Add to this streamlined productivity and the advantages far outweigh the effort required,” van der Walt concludes.