When we hear the term risk management, typically we think of enterprise businesses or large commercial businesses that have teams of risk managers—and which are way more sophisticated than small- to mid-sized businesses.
The Oxford Dictionary’s definition of risk management is the forecasting and evaluation of financial risks together with the identification of procedures to avoid or minimize their impact.
Often, owners of small- to mid-sized businesses rely on instinct and their insurance agent to guide them on insurance-based products such as the risk management program. However, the insurance is only a risk transfer mechanism and it should be the last thing that agents and insureds discuss.
Where to focus
We can break this down into a simple process and in the end everyone will win. For small businesses, agents should focus on the employees, customers and the business processes. While it may not look like a formal risk management program, it is—if it can be documented.
Happy and healthy employees are good employees. Business owners should be sure to create a safe working environment in which employees go home in the same condition they arrived at the office. Employers and managers should create a culture in which employees are not working in fear of harm and they should work in an environment in which they can thrive.
When employees give their all and succeed, ultimately, the business will succeed. To help with this goal, employers need to understand that it is important to have clear rules in personnel and operations handbooks, which offer clear expectations and procedures throughout the workplace.
The customer experience
Now that employees are optimized, how is the business’s customer experience? If the business is in retail, hospitality or any other environment with public accommodation, how are the floors, signage and other aspects of the physical plant environment? The customer experience seems simple and a key to generating revenue, however, maximizing the opportunity to be sure the environment is safe will ensure no future accidents or claims is important. Ultimately, this will affect the business down the road.
Employees and customers are all part of the business process. The experience is optimized by the products or services the business offers. Is the business operating so every customer experience will yield a five-star review on Google? Is there room for error or misconception in the business’s processes? Looking at processes for optimization and experience as well as streamlining and reducing redundancies also can be a means to save money and time for the employees and customers of the business.
Ultimately, when we look at the program, it is risk management—but not in the traditional sense of the five steps of risk management (i.e., identify, analyze, take action, monitor, and control). When agents and advisers talk to their insureds about these opportunities, they can break it down into dollars and cents, because agents can build a business case with underwriters and assist to keep experience modifications low; and reduce claims exposure liability as well as property damage.
All of this seems as if it is a no brainer, but it is up to agents to bring tools and opportunities to our insureds to help them reduce risk and insurance cost without the traditional quote and hope method of selling insurance!