Plan and move forward
If you do not work with a risk management firm now, the first question is, of course, “Why not?” The second question is something along the lines of, “Do you really need to work with an external firm?”
Especially today, with revenue and profits just inching up — if they are increasing at all — and every dollar a precious commodity, would you really benefit more from bringing in more experts from the outside rather than turning to your own internal experts?
“You can keep this process relatively simple, and organizations that are farther down the road in terms of enterprise or strategic risk management have found that you can sometimes get wound up in the process and not get it linked into the planning,” Luthi says. “The response that we hear most often is, ‘Keep it simple and designed and customized for your organization.’ I don’t think any organization that practices risk management uses a cookie cutter. Everyone needs to customize it to their own organization.”
You might delegate the responsibilities to a team of executive leaders, with your chief financial officer or chief risk officer at the helm. As always, keep in mind that so many of your employees are already strapped for time each day and might be overwhelmed by additional tasks — especially one so important and intrinsic to the future of your business.
If you do work with an external firm, build a relationship with them as you would with any other business adviser. They are on or near the same level as your accountant, your attorney and your banker. The longer and more closely you work with them, the more your risk management will actually take effect in your business plans.
“We need to make sure we understand what their key business objectives are,” says Regina Spratt, U.S. national brokerage leader, Marsh Inc. “How are they measuring themselves? Is it growth in the near term? Is it cost containment? We need that underlying understanding of where they are today, the challenges they face, where they want to go. The next step is how to design a risk management or insurance program around that.
“Those two sort of key pieces of discussion really drive what comes next for that company. It’s about building the structure internally, and then, with the support of brokers or insurance carriers, building it in terms of other resources that can help meet their business challenges and those risks that have been identified.”
No matter which route you choose, you will likely want to listen to experts who recommend you chart and graph — yes, graph, just like back in geometry and physics — a framework to use in order to reach your decisions. Chart both insurable and uninsurable risks — your uninsurable is your brand and your reputation — in order to be able to make decisions and define your risks.
“It helps to get it down, so you can make some decisions,” Spratt says. “It’s also a tool businesses can use, in the years going forward, to take a look at their risk profile. They need to understand the profile of their business and their risk management. From there, they can design an insurance and risk management program that helps them today and as they attempt to grow in the future.”
