Risk management processes to benefit your business insurance

Reviewing your risk management process can save you both time and money. A risk management process is a way of identifying, evaluating and controlling potential threats to your business. It considers different risk management strategies to address the exposure of risk to the business.

But, before you can implement a risk management process, you first must understand what the risks are. Once the key areas have been identified, you can then put together a process that covers your business for any liabilities and claims.

In this article, we look at how you can create a risk management process and how it will benefit your business insurance.

How to identify the risks to your business

There are many risks to owning a business. Risks in owning or renting premises, equipment, employees, theft, fraud and transportation. Each of these are areas you will need to review to see what the risks and threats are, what contingency plans you have in place to prevent them and if you need insurance cover to protect your business from any claims.

Most common areas of risks include:

1. Employees

2. The public

3. Building/premises

4. Vehicles

5. Industry specifics (tools, machinery and food)

6. Services or products

Once you have discovered the potential threats to your business, you can put together a risk management process.

Legal Requirements

As well as obtaining the legally required insurances such as employers’ liability, you also must look at other risk assessments that are needed to ensure the health and safety of your workplace for your employees and visitors. 

Legal risk assessments include health and safety assessments and regular fire safety inspections by a fire prevention officer who can provide annual certificates. You must also follow all employment laws when recruiting, promoting or dismissing employees.

Types of risk management

Once you have discovered the risks your business is exposed to, you can look at how to manage them. You can do this by using techniques to avoid, reduce, share, or retain the risk.

Risk avoidance is where you avoid the chances of the risk happening. This is where you can manually put measures in place to effectively stop any issues from occurring. 

Risk reduction is where you reduce the chances of risk from happening or reducing their effect, such as leaving warning signs like “mind your head” if there’s low ceilings or a “wet floor” sign for a wet floor, these warnings can reduce the chances of an accident happening.

Risk sharing is where you transfer a risk to a third-party and such as an insurance policy or other agreement. You can in this way share the risk with a third party or across an entire group.

Risk-retention is where risks are unavoidable but can be transferred to a business insurance policy. For example, if you own a restaurant and your freezer breaks it can ruin half of your stock and therefore your earnings. Covering this risk with insurance means you can claim back any business losses.

You can start the risk management process by:

1. Identifying your business processes and what risks are involved

Look at all areas of your business and the worst-case scenarios, list these out so you can move on to step two.

2. Analyse and measure the impact of the risk

With each risk, analyse and measure what impact this will have on your business, you can then categorize whether you can avoid, reduce, share or retain the risk.

3. Decide which risks are not worth taking

Some risks won’t be worth taking. It’ll be up to you how you manage this and what systems you put in place to stop certain risks from happening.

4. Mitigate or transfer the risks to insurance

Once you have looked at preventative measures, look at the risks that aren’t avoidable and what business insurances you will need to help protect your business from any claims. (I.e., freezers breaking and you making a loss as a result of this – insurance can protect you from any loses).

5. Contingency planning for risks 

Look at what contingency plans are needed for when disaster strikes, for example flooding to your business premises – do you have a backup solution so your employees can continue to work?

6. Monitor and review your insurances, contingency plans and processes each year or as your exposure to risk changes

Businesses change and with that, the business risks change too. Review your risk management process each year so you know you have the right insurances in place to protect your business.

Deciding what risks to insure

Once you have reviewed your business processes, know where the risks are and put together an action plan to prevent these risks, you can start looking at what specific business insurances you need to cover your company.

Most businesses will need to have a range of liability insurances as well as professional indemnity insurance to fully cover the risks of your business and issues that are unavoidable.

As long as you have preventative measures in place, insurance companies will be able to fairly and adequately charge you for providing insurance. If you speak to a specialist business insurance broker, they will be able to advise on the steps you need to take to cut your premiums and excess.

If you need help in deciding what insurances you need, speak to one of our advisers who will be able to discuss your business and provide recommendations to suit your needs.