An organization’s risk management (insurance) program must be tailored to its overall objectives and should change when those objectives change.

 An insurance broker/advisor can not recommend insurance products and services without knowing what the client actually does, how they do it and what is important to them with regard to their insurance program.

Once it is known what they do, how they do it and what their business objectives are they can be better advised in terms of coverage and exposure to risk.

However, many times this step in the risk management process is overlooked or not addressed with the detail that it should be. Unfortunately, in the haste to sell product, coverage issues and exposures are often missed. In addition, every business is a moving target, in that, it is constantly changing and/or the business environment around them is changing.

To further that thought, brokers/advisors have to continually keep in touch with their clients in order to find out where they are taking their businesses and how they intend to go about it.

(Have operations changed? Are any mergers or acquisitions on the horizon? Has there been a bump in the number of employees? Are there any new tenants that may create an increased hazard? etc.)

By paying close attention to the clients business operations and have an understanding of its objective a true risk management program can then be developed and managed. Over time this will serve to limit their exposure to new risks and thus save money.

Bottom line:

Have a detailed risk analysis performed of the business exposures you face along with a review of your business plan. Then develop a plan to address those exposures.

Two important tenets of risk management:

1. Don’t risk more than you can afford to lose. and
2. Don’t risk a lot for a little.

These two are both basics – the first refers to the idea that if you don’t have enough money to pay for the exposure to loss (risk) out of your pocket/balance sheet, then insure for the risk, transfer the risk or avoid the risk.

This becomes the client’s comfort level with the risk at hand. Some companies are very comfortable with risk – they plan for it and manage it. Some companies are very uncomfortable with risk and want to chance nothing.

The second has to do with the fact that a business organization can protect vast fortunes and assets for a relatively small amount of money, comparatively speaking. That would be the prudent move for any business owner.

Bottom line:

Everyday and in just about everything we do we are faced with risk. Sometimes we choose to take the risk – sometimes we are a little more conservative. No matter how big or how small the business we all must make choices relative to appropriate risk tolerance for that business.

Therefore we must know what those risks are and what the choices and alternatives are to better protect the business organization. Have you thought about your risk tolerance lately?