Everyone is a risk manager
Failing to anticipate the interaction and consequences of multiple risks has left many companies suffering significant losses, especially in the aftermath of the global economic recession.
As a result, companies have woken up to the need to introduce pro-active risk management strategies. Steyn McDowall, Global Risk Consulting Executive Aon South Africa, believes that one way in which companies can better manage their risks is by undertaking their own risk self assessment.
McDowall says that while this may not necessarily push premiums down it can ultimately have an impact on rates and become a very powerful risk management tool that has advantages well beyond just protecting an organisation.
The predominant factor in determining what an organisation pays for its insurance is driven by that organisation’s loss history. “It is only when you have a firm grasp on your vulnerabilities that you will be able to map out a proper business recovery or crisis management plan in order to recover from an incident as quickly and with as little damage or loss as possible. Therefore, if you implement a strong risk management plan based upon the facts and findings of your risk self assessment you can ultimately realise a positive shift in those losses and your future rates,” says McDowall.
McDowall says managers must constantly balance organisational needs with budget realities and should not overlook the potential consequences of their actions or be solely driven by the costs involved. By using the formula R = V x T x C (Risk equals Vulnerability x Threat x Consequences) one comes to the realisation that threats and consequences are real and facility managers have very little control over them. “The one aspect they do control, however,” says McDowall, “is the issue of vulnerabilities.” Vulnerabilities may be in the areas of safety and security, and learning of their existence offers managers the opportunity to enhance or improve upon them.
McDowall says by completing this type of internal assessment one definitely projects quality of management and while an insurance company carrying out an assessment would not expect to see a copy of your risk report, they would expect to see the results or enhancements. All insurance policies require that the insured does everything within its power to avoid and mitigate any potential claim.
“Every accident and liability policy written contains requirements for the policyholder to do all that it can to avoid a potential claim. Should that claim still arise it is expected that the policyholder take every step necessary to keep the claim as low as possible. Knowing where your potential weaknesses are and working to strengthen them will naturally accomplish the above,” says McDowall.
McDowall says when the market turns hard, companies will be in a better position. “As with many things, the world of insurance is cyclical and has its ups and downs. In a soft market, such as the one we are currently in, prices are reduced and coverage expanded as insurance companies vie for market share. When this market hardens, not only will prices go up but underwriting standards will be tightened and the more examples managers can provide to demonstrate that their risk is well-protected, the more likely they will be to receive favourable consideration for coverage,” concludes McDowall.
