How to reduce the cost of risk to your business – non-insurance tips

 

-Thinking like a risk manager

Reducing the cost if risk in a business isn’t just about lowering insurance costs, though they are the biggest identifiable budget item.  Lowering insurance costs will usually follow when using some of these non-insurance strategies.  The purpose of this article is to organize and identify business risks, so the owner can take steps to reduce the overall cost of risk.  We also highlight some of the professionals we network with, as they contributed to this article (and contribute to our success with great advice).  

To reduce the overall cost of risk, you should:

• identify it (we'll identify some common ones here),
• control it (we've identified many competent partners here),
• finance it or transfer it (insurance), and 
• monitor periodically. As you would any strategic plan.

Sounds like a lot, but read through some of the ideas listed here, and you'll begin to think like a risk manager too.  We’ve broken sections down into commonly used classifications taught by the Certified Risk Manager program used by risk professionals:

Property: Recognize the importance and function of your work space

• Premises alarms for Burglary and Fire protection, and provide fastest response time when something does go wrong.  Response time might make the difference between re-opening next week or next year.
• Take additional steps to protect when weather is expected to be bad - ahead of a hurricane, big snow storm, or other known new weather event.
• Engage a competent IT partner to protect your data from disk fail (mirror drives and off-site backup / restore), hack attack (regularly tested firewall and update virus protection), and communications fail (load sharing / redundancy from providers).  We network heavily and can refer many competent IT administrators, including cloud consultants.
• Have a disaster plan (see our easy tips on creating one quickly); make it accessible to all management, so that when something really bad happens, you can react with confidence and organization.

 Human resources:  Understand employees as your greatest assets – and potentially greatest liabilities

• Screen for the job.  Regulations are strict in Massachusetts, so always engage a professional partner.   We use Safer Places
• Document your searches, hires, reviews, and especially preparation for termination (Attorney Helene Horn Figman specializes in labor law)
• Get the most out of your employees, and keep them invested in the business (we use Heritage Hill Partners Inc. as a business coach who is especially good at managing  and motivating employees)
• Document regulatory compliance (e.g.: CMR-17 if you hold customer data) (two partners we recommend:  Clerc & Associates, P.C. law office), and (outsourced HR)
• Social Media policy – have clear do’s and don’ts that your employees follow.  Consider "business" and "personal" Facebook personas to separate on- and off-duty activity. 
• Plan for Loss of partner, rainmaker, owner from death or disability  Life and disability - contact us; we handle simple cases here, and bring in specialists whenever needed.

Liability: Consider your ‘product’ from a trial lawyer’s perspective

• Professional – know your limitations; collect insurance certificates from sub-contractors to document that they’re insured; Ask to be added as “additional insured”.
• Premises – recognize a “hazard”; use incident reports for near accidents.  These will help you to recognize trends, and take steps to avoid problems down the road.
• Products– over-engineer for safety; engage qualified professionals for work under your brand.
• Acts of Employees – such as accounting systems: collecting and submitting  adequate sales taxes  (engage a good CPA firm: e.g. Sharkansky LLP);

Net income: pay attention to risks that directly affect finances

• Quantify Costs of goods sold, and gross and net profits (am I making money?) –(get assists from higher levels: -Sharkansky LLP CPAs,  Rockland Trust, commercial banking, or get right into the details Inquiry Analytics, depending on your business.)
• Audit your bookkeeper from time to time (Trace Tech Solutions)
• Quantify costs if physical location rendered uninhabitable, and have a commercial leasing agent who knows the market get you and your employees back to work in new space right away (we use George Jamieson here in Norwell).
• Know the value of your business (Horizon Business Valuations LLC) and plan your exit strategy if less than 10 years out.  (Frank Mancieri).

Organizing risks into these categories, (Property, Human Resources, Liability, and Net income) will help to identify where potent risks are. Once identified, you can make better informed decisions on whether to manage, transfer, or accept these risks. Being informed is the first step.