Many people actively manage only those risks which they insure, and many people only insure those things which "everyone" insures. This usually means Motor, Property (mainly Fire and Theft) and Public and Employers' Liability (mainly thinking of Health & Safety issues). Sometimes these are sufficient, but there are four other types of risk, which are all too often ignored, which could have serious consequences for a lot of businesses.
1. Employment Risk. This means anything undesirable which might happen as a result of employing people, apart from physical accidents or disease. This could mean claims or conflicts over dismissal, competency, discipline, discrimination or harassment.
2. Reputational Risk. This includes not only libel and slander, but the damage to your reputation caused by ill-considered remarks (whether by yourself or by your employees) which offend the public, especially potential clients or customers. Sometimes the damage done to your reputation by a simple mistake can become far greater than it might have been, if your response to any complaints or enquiries is..unhelpful. Footballers and politicians are not the only people who can score own-goals.
3. Cyber Risk. This is anything resulting from the use of computers or related technology. It overlaps with the previous two categories as a great deal of damage to your reputation can result from uncontrolled use of the internet or social media by your employees, or even by yourself, since words written during a minor lapse in thinking can nowadays be made known to such a wide readership and cannot be denied. Cyber Risk also includes loss of data, data getting into the wrong hands, and the loss of computer services or facilities.
4. Environmental Risk. This is not only an issue affecting the well-known potential polluters of the chemical and oil industries. There can be serious costs arising from such things as cutting down trees subject to preservation orders, disturbing habitats of rare species, or damaging architectural sites. The cost can be in delays to projects or damage to reputation as well as damages or fines imposed by the Courts.
What can you do about all these risks?
1) Firstly, make sure you think about each of these when planning projects or reviewing activities. Try to identify where you are weakest.
2) Think about the likelihood of any undesirable event and also about the potential severity in terms of the impact on your business. Could any of these put you out of business, at least temporarily?
3) Consider options for controlling the risks. Establishing procedures, staff instructions, and training will probably be a part of any solution.
4) Where the risks seem particularly serious and the solutions you have identified seem inadequate, it may be worth seeking expert advice.
5) Look at possible additional insurances (they do exist for three of the risks I have described, but generally not for the loss of your reputation) as part of your response. Do this preferably after you have gone through the previous four steps, as then you will have a better idea of whether or not you need it, and also because, having already taken measures to control the risk, you should be better able to get lower premiums. Do not think of insurance as the complete answer, as an alternative to taking reasonable steps to control the risks.
Do not limit your thinking to the most well-known risks: think about these four as well and decide how relevant they are to your business. Take the initiative and manage them: do not be at the mercy of chance.
John Harvey Murray has worked in audit, accountancy and insurance in various local authorities. Now as the owner/manager of JHM Claims, he provides claims-handling and risk management services to help businesses and other organisations in Warrington, Merseyside and the North West, control unnecessary and unplanned costs including those arising from unjustified claims. Clients save time, money and stress.
John is a member of CIPFA, is a Registered Risk Practitioner with ALARM, and is a Specialist Member of the Institute of Risk Management.
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