Boots on the Street
Ahren Hohenwarter
Identifying and Analyzing Risk
In a previous entry we discussed the 6 steps of both the ERM and TRM process; the first two are Identifying and Analyzing your organization’s risk.
As part of the risk management process, we look to confirm that your risk management approach supports your overall business objectives. As a business owner, what keeps you up at night? If that concern occurred, how would your income or cash flow be affected if there were unforeseen expenses or a shutdown of your operations?
Discussing the qualitative aspects of your business provides the important details needed to design a program that addresses your exposures while producing a ROI. Exposures are both qualitative and quantitative. Analyses into both offer the foundation for developing forward-thinking approaches to those exposures.
What is your viewpoint on risk? Is your company risk-averse? Is it in a financial position to take on more risk versus transferring that risk to another party or contractually to a carrier? To help determine your risk aversion, it helps to assess your company history. For example, if you are a start-up company, cash flow and funds are typically tight, so you are more likely to be adverse to risk to protect the financial viability of your start-up organization. Conversely, if your company has been in business for decades, there are different risks such as becoming obsolete, stagnant or too conservative with your business plan.
Additionally, we consider your industry, market position and competition in positioning your risk management solution to the changing needs of your business.
Quantitative analysis supports the qualitative discovery. We look at the historical numbers and prior losses to identify trends in your performance. We also analyze losses to identify the following:
• Average incurred costs per loss
• Total incurred trends
• Top exposures driving losses
• Locations with frequency issues
• Possible fraud behaviors
• Average reporting time
• Frequency vs. severity ratios
• OSHA-recordable performance
The results of the qualitative discovery and quantitative analyses will reveal opportunities to approach the critical areas driving your total cost of risk. We then isolate the root causes of these problem areas and look to implement control measures to mitigate the exposures.
Contact us today so we can design a program that’s right for your organization.