A comprehensive approach to recognizing and managing risk in business Risk Management A comprehensive approach to recognizing and managing risk in business

Risk Management Introduction What is the biggest risk in your business? Traditional Risk Management deals with individual departments such as: Finance Insurance Security Loss Prevention It includes things like fire loss, a building being burglarized, having an employee involved in a motor vehicle accident, etc. These are often insurable risks. Speculative Risk Management is a risk where the possible outcomes are: Loss Profit Status quo and brand value It includes things like stock market investments, and business decisions such as new product lines, new locations, etc. This limits the risk to the those departments as they will normally not share information. If they do share information it is viewed as their problem not everyone's. Speculative Risk allows us to deal with the unknown and unexpected.

Comprehensive Risk Management Comprehensive Risk Management, or “Enterprise” as the industry is calling it, is a system that includes both Traditional Risk and Speculative Risk. This allows organizations to deal with Risk that is past, present, and future. Traditional risk has resulted in a process of identifying and managing the insurable physical hazards of an organization such as property and liability. This process can be used to help deal with Speculative Risk as well. The process generally includes five components… Traditional risk management focuses on pure risks and views each risk separately, where a Comprehensive approach to Risk Management encompasses all risks across a business or organization i.e. both pure and speculative.

1. Risk Identification A classification system (i.e. High, Medium, Low or 1,2 3,4) Operational Risks Financial Risks Property Risks Liability Risks Identification and measurement tools: Checklists Surveys Inspections Review of contracts and insurance coverage Loss control activities Data, claims and litigation review Compliance control

2. Risk Analysis Qualitative assessment tools: Classify exposures Examine frequency and severity of potential losses Identify organizational assumptions, contractual and compliance exposures Propose alternative actions and options Claims data Employee and third party exposures Retentions and transfers Measure cost of risk (retained losses, insurance, deductibles, cost of managing risk, etc.)

3. Risk Controls Action you can take before the loss: Avoid Prevent Reduce Segregate Combine Redesign Actions you can take after the loss: Emergency response Disaster recovery Management of claims and litigation Product redesign supervision Return to compliance with regulations and laws

4. Risk Administration Retaining small to moderate risks: Passive programs that react to losses and how to pay for them Pro-active programs that plan for losses and budget for them, possibly even fund them Transferring high severity, low frequency risks Adequacy and financial strength of insurers Contractual transfers Non-insurance transfers How do you administrate your risks in your business?

5. Risk Administration Managing the risks: Purchase insurance Claims and litigation Risk analysis as a tool Loss investigation Support personnel Tools/Databases and information flows: Risk management information systems i.e. Incident reporting systems/databases Insurer claims reports Third-party administrator reports Facility safety reports In-house claims data Incident reports Claims loss history Do you have tools? How do you share that information? Do you share that information.?

Risk Management To ensure a business/organization is successful, we need to be both aware of the risks and focused on the opportunities to improve when making decisions about risk.

Business/dept Owns Risk Risk Identified “example” All stakeholders participate Risk Identified “example” Risk Identification What can happen? Why it can happen? Nature of Risk Stakeholders Risk Analysis Risk Indicator Business/dept Owns Risk Area Needing Focus Risk Support Risk Mitigating Strategy Business Risk Log Company Risk Log Risk: Person decides to use a wheelchair to ride down 1 level of concrete stairs. Risk: Person decides to hit gas instead of brakes while backing up. Risk: Person decides to park inside an airlock. Risk: Person decides to have a date in the parking lot. High and Critical Risk

Benefits of Comprehensive Risk Management? No more ”NOs”, the organization can make a decision to accept the risk if it meets their ”Risk Appetite”. Improved communication. Partnerships form within the company that include all aspects of the business/organization. Company/Organization assumes the risk rather than individual departments. More freedom for ideas and creativity.

Risk Management What is the biggest risk within your workplace?