Risk Management Programs: Not Just For Big Business

While large corporations generally recognize that they need a risk management program in place, many small and even mid-sized companies mistakenly believe they do not. Some of these companies have never experienced any significant problems, which further reinforces their belief that risk management is primarily for larger companies. They are, of course, wrong.

Risk management is all about evaluating the risk of occurrences that may impact the functioning and/or profitability of a company. Risk has many faces and can take the form of property loss, workers compensation claims, harassment of discrimination claims, and a myriad of other contingencies. Most of these exposures result in losses which come off the bottom; either in the form of direct payouts, including dollars lost as a result of business lost, or in the form of increased insurance premiums, not to mention legal costs in some cases. Clearly, all of these aforementioned exposures exist for companies of all sizes. That is why every business should endeavor to identify risks and develop solutions to mitigate or eliminate their potential impacts.

At Alcott HR Group, our risk management philosophy integrates a sound pre- and post-risk analysis into a “Total Risk Control Program.” The first phase — the pre-loss stage — involves identifying any hazards that could potentially cause an event as we look beyond the risks that already have been identified or have caused an event. We execute this by applying the question, “What if?” to different scenarios and listing resulting impact on the business. Once all of the “what ifs” have been identified, various solutions are developed to address the potential impacts. These solutions vary from securing full insurance coverage for the identified risk, to instituting employee training programs on workplace safety or management workshops regarding workplace legislation or what constitutes employee discrimination and sexual harassment.

The second phase of the risk management program — the post-loss stage — incorporates best practices to handle losses as efficiently as possible in order to minimize costs and broader liabilities. For example, in the area of worker’s compensation, a best practice may include providing the best care to the injured employee, while also working with medical providers to return the injured employee to work as soon as possible. A best practice may also include developing a restricted work position to meet the physical parameters set by the treating medical provider. In cases where claims appear to be somewhat exaggerated, we might recommend performing surveillance on the injured employee encompassing activity checks and Independent Medical Exams (IMEs) to determine whether the injured employee is abusing the system. For property losses, recommendations might involve developing a business continuity plan/disaster recovery plan and communicating that plan to all staff. The plan would establish operational guidelines and communications protocol relating to vendors, suppliers and customers and be designed to keep the company operational to the extent possible. An effective post-loss program will help a business remain viable through a difficult period and, over the long run, help make the company stronger as it moves past the challenging event.

To be effective, a risk management program must have the full buy-in and support of management, which must be communicated to the employees. It’s important to remember that a risk control program does not eliminate losses; however, it does play a critical role in identifying potential risks, developing sound remedial actions, and delineating the best course of action for minimizing exposures and containing the possibility of a devastating impact to a business.

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