Is Insurance the Solution to Managing All Business Risk?
While insurance may offer protection against many business risks, no single policy or combination of policies will protect a business from the myriad of risks faced by the business, the business owners or their employees.
It is essential for the business risk manager/business owner to:
- Identify potential risks: What can possibly go wrong?
- Measure frequency and severity of risk: What is the likelihood of the risk occurring and if so what is the impact?
- Examine solutions: What are the most effective ways to treat the risk? Should you:
– avoid it;
– reduce the risk by limiting exposure;
– transfer it (outsource part or all of an operation to another or purchase insurance to cover the risk) or;
– retain it (self-insure or insure with high deductible plan)
- Decide which solution to use and implement the solutions.
- Monitor the plan and regularly review the results.