Managing risk involves identifying hazard exposures, and reducing the frequency and severity of an occurrence (injury, damage, etc). The Holy Grail of the safety professional is the pursuit of zero incidents. Some hold fast to the philosophy that zero incidents is an achievable goal, and in some cases it is, but not forever. Hats off to those companies that can claim “a million plus hours of no injuries” but the difficult part is to sustain that accomplishment indefinitely. Unless human behavior (error) can be completely eliminated from the system, an incident is just a matter of time.
Unfortunately, incidents are inevitable and conceding to that fact is not a defeatist mindset. So organizations circle the wagons and use the tools they have to manage risk. To keep risk under control businesses need to employ a one-two punch approach.
The first punch is the front-end of risk management and involves the development of safety systems, policies, procedures and protocols. These are employed by front-line workers and delivered by supervisors, management and the resident safety professional. The absolute goal of this first punch is to create a work environment and workplace culture that molds behavior through communicating expectations and establishing accountability. Safety must be equally important as production and quality. Punch number one must do everything it can to reduce the likelihood of a loss, claim or incident.
Punch number two comes on the back-end and is used to counter a failed first punch. Punch number two is insurance. A well-managed insurance program limits liability and can prevent a company from financial failure. The keys to insurance are many as the risk manager is constantly balancing the cost of insurance with risk reduction. The most important thing about insurance is to have it when you need it by not letting a policy lapse. Some of the primary considerations for insurance include:
- Understand your exposures to select the proper type and coverage. You can find an insurance product for nearly every aspect of your business operation. General liability, work-comp, professional liability, property, environmental, product defect and bonds are some of the many types of insurance available. Overlapping coverage and “umbrella” policies can provide access to additional funds for very large claims. Are you better-off with or without a deductible? Are your claim limits per occurrence or aggregate? Have your business operations changed significantly opening you up to a different type of exposure that you may not be insured for?
- The fine print, or lack thereof, may include exclusions, exemptions, limitations and caps. It’s too late when a claim is staring you in the face to find out that your loss or peril is not covered. Although you’ve obtained an insurance certificate from someone providing services for you, the devil is in the detail of their policy—which you often don’t or cannot review. Only those savvy at interpreting policy language should be assigned the review task.
- Agreement language for activities such as construction often flow liability and risk down at every turn. The owner places requirements on a general contractor who then flows liability it down to its subcontractor who in turn pushes the exposure down to their subcontractor and so on. When claims or law suits raise their ugly head the agreement language comes into play and so do the attorneys. Don’t short-change a thorough review of a service agreement, agreement or even a work order.
When properly designed and executed the one-two punch of risk management is a critical tool to ensure the viability of a company.
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