Now before insurance people get too excited, let me say that insurance is usually a very important part of an overall strategy of risk management. Insurance, however, is only one of a suite of treatment options available to organizations wanting to manage the uncertainty associated with achieving their goals and objectives. You might say insurance is part of risk management, but risk management is a whole lot more than insurance.
Insurance can protect a business from financial loss resulting from specific causes called “insurable risks” or “perils”. Common examples include property loss from fire, theft or flood; liability for personal injury; or claims arising from alleged negligence, professional errors and omissions. And while insurance companies are always looking to expand the market of insurable risks, in practical terms you can’t rely solely on insurance to protect you from unexpected or potential losses.
This is where risk management comes in. Risk management is a way to manage the uncertainty associated with achieving your goals and objectives. In very simple terms, it involves asking the following questions:
- What does success look like? What are we trying to achieve?
- What might go wrong? What unexpected opportunities might arise?
- What are we doing about it? and
- Is that enough?
Then, develop strategies to reduce negative risk while you maximize opportunities, generate profits and reduce losses.
Insurance is only one piece of the puzzle. It can cover you for insurable losses by transferring some of the risk to an insurer, in exchange for a regularly-paid premium. But a disciplined approach to risk management can inform sound business decisions, position your business to exploit opportunities, prevent losses and mitigate impacts if something bad does happen.
It can be that simple, and with a little help, you can do it easily and affordably.
Want to know more? I’d love to hear from you. If you have questions, comments or want to geek out about risk management, contact me, Chris Maclean, at: