Everyday companies deal with risk ranging from a slip and fall incident to the theft of company trade secrets.
By managing risk, a company succeeds in keeping insurance premiums low. Companies that manage risk poorly, have higher premiums. Companies that manage risk well also gain by having an organized and productive workplace.
Managing Risks
Risk management is the way companies identify, quantify and control the variety of risks associated with their operations.
How Can Your Business Manage Risk?
Risks are the consequences of events, circumstances, or situations in your business. Negative consequences of any of these things hurt your business in some way. Some consequences your company can insure against, others – not so much. Your risk management plan allows you to deal with risk in a manner that reduces uncertainty and cuts exposure to negative consequences; companies need a plan to identify, rate, prevent, or correct the risk.
When finished you can classify the risk using the following matrix by Biz Guides.
| Risk Analysis Matrix | ||||||||
| Likelihood | Rare | Unlikely | Moderate | Likely | Certain | |||
| The event may occur in exceptional circumstances. Less than once in 2 years | The event could occur at some time. At least once per year. | The event will probably occur at some time. At least once in 6 months. | The event will occur in most circumstances. At least once per month. | The event is expected to occur in all circumstances. At least once per week. | ||||
| Consequence | Level | 1 | 2 | 3 | 4 | 5 | ||
| Negligible No injuries. Low financial loss. |
0 | 0 | 0 | 0 | 0 | 0 | ||
| Minor First-aid treatment. Moderate financial loss. |
1 | 1 | 2 | 3 | 4 | 5 | ||
| Serious Medical treatment required. High financial loss. Moderate environmental implications. Moderate loss of reputation. Moderate business interruption. |
2 | 2 | 4 | 6 | 8 | 10 | ||
| Major Excessive, multiple long term injuries. Major financial loss. High environmental implications. Major loss of reputation. Major business interruption. |
3 | 3 | 6 | 9 | 12 | 15 | ||
| Fatality Single death |
4 | 4 | 8 | 12 | 16 | 20 | ||
| Multiple Fatalities Multiple deaths and serious long-term injuries. |
5 | 5 | 10 | 15 | 20 | 25 | ||
| Once you have assigned a rating to each risk you can easily prioritize it as follows. | ||||||||
| Risk Rating Risk Priority | Description | |||||||
| 0 | N | No Risk: The costs to treat the risk are disproportionately high compared to the negligible consequences. | ||||||
| 1-3 | L | Low Risk: May require consideration in any future changes to the work area or processes, or can be fixed immediately | ||||||
| 4 – 6 | M | Moderate: May require corrective action through planning and budgeting process. | ||||||
| 8 – 12 | H | High: Requires immediate corrective action. | ||||||
| 15 – 25 | E | Extreme:Requires immediate prohibition of the work process and immediate corrective action. | ||||||
| Once you have rated and prioritized your risks it is time to meet with your business insurance advisor and review the list with him or her. Decisions about corrective action and insurance protection are in order for any identified risk with a rating of 4 and over. | ||||||||
