January 17th, 2018
While the term 'risk management' might conjure visions of larger companies, every business can benefit from implementing a sound risk management plan. In addition to helping keep workers as safe as possible, there are a number of financial benefits. Chief among these is the cost of insurance. Here, we'll consider how risk management can lower your business insurance quotes.
What Is Risk Management?
In this case, we're focusing on the term as it applies to protecting the resources of your company. With this in mind, risk management is the act of identifying and assessing operational dangers. It includes taking steps to eliminate them or mitigate their effect on your ability to conduct your business.
Risk management also incorporates planning for business continuity in the face of disasters such as earthquakes, fires, floods, and the like. The health and safety facets of a risk management program focus on areas in which workers might sustain lost-time injuries. Meanwhile, the production interruption aspect covers relocating critical functions to maintain operations if essential facilities are rendered inoperable. Similarly, a good risk management plan allows for rerouting production if a fundamental machine goes down.
Said simply, the key elements of a good risk management plan include planning, preparation, response, and recovery, along with continual review and revision.
The Key Benefits of Having a Risk Management Strategy
Having a plan in place speaks volumes about the soundness of your company's management processes. This is attractive to financiers as well as potential executives and line employees. Strategic planning will benefit tremendously from the existence of such a strategy. It also says you have standards to which everyone in the organization will be held to ensure the continued operation of the business—regardless of situation or circumstance. This goes a long way toward reassuring everyone who relies on your business, including your customers.
Financial Advantages Are Many
Insurance companies live and die by risk. In fact, their entire business model is predicated on avoiding it. This is also true for banks and other financial institutions to which you might turn to for operating capital. Including your risk management strategy in a financing or insurance proposal will be looked at very favorably—assuming it's sound. For insurers, this comes across in much the same way as assuming a higher deductible indicates your willingness to share risk. Developing a good risk management strategy says you have thought things through and taken steps to address potential calamities.
In addition to all of the above, having a sound plan reduces the shock your organization will experience following an incident. Reviewing it regularly, running drills, and updating it as situations evolve makes overcoming inertia easier. This, in turn, will enable you to take action immediately to minimize potential losses. Few actions will endear you as mightily to your insurer, who will reward you with lower business insurance quotes.
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