Risk management is a critical area in any business even more so from an insurance point of view.
The Risk manager needs to identify, evaluate or analyze and prioritize the potential risks within the business and take every possible action to minimize, (treat) monitor and control any possible or unforeseen risks of situations that may potentially harm the business and should constantly be reviewed to make sure it stays relevant.
Risks take on many forms, from physical, financial, cyber, health & safety, natural causes and disasters, industrial, legal, reputational, compliance, operational etc. (danger, exposure, liability, perils, hazards).
Main influencers are: Operational factors, Physical factors, Human factors and technological factors and uncertainties (unknown).
Some risks are universal, and some are industry specific. In all its forms, risk management ensures that there is minimal risk and continuity for a company following a specific risk occurring, by avoiding, reducing, transferring or sharing of risk (Good communication, understanding the impact of risks and developing suitable responses to the risk, – example Cyber Insurance or Professional Indemnity etc.)
Risk management is an essential element every business should utilize and is critical to every business regardless of type or size, strategies to manage threats should be in place and constantly monitored and be measurable (outcomes should be reviewed and assessed) and new procedures and developments put in place reducing the possible risks.
Always assess the potential for uncontrolled, unpredictable losses (what if scenario’s) and put practices in place to control or reduce the impact of an occurrence on the business (reporting and monitoring) and to prevent a re-occurrence (Short and long term risk). When busy with this process, do not forget about customer service, ethical conduct and reputational risks which may have a huge negative impact on the business.
Risk Analysis focuses on identifying, analyzing, and prioritizing risks to achieve strategic goals, objectives, and capabilities by using management tools to good effect. Examples:
- Cause and effect
- Group discussions – Brainstorming
- Skills Training
Make sure the whole team is onboard, clarify requirements, risk consequence, share the vision and goals, assessment, communicate and take action, training, test everything (scenario’s) diversification, keep a risk register to prevent re-occurrence (track, evaluate, define, prioritize, impact and strategies) and have a plan B to optimize the positive outcome or limit the loss (negative outcome.
Author: Stephen Smit, (Executive Manager: Technical & Risk,Vision Insurance)