A key component of business today is the importance of risk management. As the Valley grows, so do the challenges companies face in managing business. Risk management became an essential part of the new business environment. The main goal of risk management is to aid companies in implementing loss control strategies that will ultimately help reduce their escalating cost of risk.
Risk management helps companies protect their assets and lower their costs of risk through the process of identifying risk, analyzing exposures, controlling exposures, and implementing and monitoring risk management processes.
A company’s cost of risk can include insurance premiums, risk management consultants, third party administrators, legal services and agents or brokers as well as indirect costs such as loss of productivity, overtime, and opportunity costs.
The role of a risk manager is to identify a company’s risk exposure in order to aid them in controlling their exposures resulting, ultimately, in lower costs. Risk identification is achieved by conducting a loss control survey where the risk consultant and agent conduct a site visit, analyze the firm’s insurance policies, review of contracts and loss history. Once exposures are identified, a risk manager is able to aid in the analysis of the risk. The agent and account manager can then work to select the insurance coverage and carriers most appropriate to the risk.
A risk manager will assess the potential impact that various exposures have on their client’s business. Knowing the type of claims, the frequency and the severity of claims will aid in assisting businesses with controlling their risk. Through loss history analysis, loss avoidance, prevention and techniques of loss reduction such as claims management, litigation management and disaster recovery, risk managers can paint a bigger picture for their client on how to minimize or reduce their risk.
Risk administration requires commitment and participation. Through technology, planning, communication, training and accountability a risk manager is able to help monitor, track and evaluate all aspects of the risk management process.