Business and business insurance evolve every year. New challenges, new products, new methods, and new risks continually appear. Insurance companies adapt or even produce entirely new types of coverage, including business insurance, to suit these changes. All of these types of business insurance fall under risk management.
Risk management is considered as one of the most important processes developed and it is advisable that every business should have one. Potential risks will always be present but it can be avoided with the proper risk management process in place. The process of risk management involves several cyclical steps. It begins with establishing a context, which then proceeds towards treating the risks assessed and prioritized. An important aspect of risk treatment is insurance. After this, a period of monitoring and re-evaluation of the effectiveness of the treatment will ensue before the process begins again.
The context of a risk means establishing the criteria to be used when weighing a risk. This includes identifying the capabilities, limitations, opportunities and hazards involved in the operation of an enterprise, for both the company and its clientele. It also incorporates the objectives of the company and performance indicators which tell whether the milestones towards an objective are being accomplished in a timely and efficient manner.
Once the context is established, the risks involved in achieving company goals are identified. A careful analysis of these risks is carried out. For prioritization and evaluation purposes, each risk identified is also quantified. These are then integrated into performance indicators so that those which have the most impact can be prioritized. Only after these stages can one formulate a coherent and well-directed risk management plan.
It is at the risk treatment stage that the best insurance policy should be sought. The components of a policy should be tailored to meet each identified risk accordingly. After the insurance has been sought, the risk management plan will be implemented, monitored and reviewed. This will include how well the enterprise?s insurance coverage matches the company?s actual needs and operation throughout the remainder of the year.
For most companies this is an annual process, where risk treatment occurs during the first quarter of the year, and risk analysis begins in the last quarter of that year. As new types of coverage are offered, the company can then take advantage of them and incorporate them into their current strategy. It is in this manner that risk management and business insurance go hand-in-hand.
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