It’s that time of year when we have resolved to do better. Most business owners or managers have probably resolved to increase revenue and profits in the New Year. We urge you to include improving your risk management performance, too. By identifying and mitigating the risks you face, those bottom line resolutions you make are more likely to come true. You need to reduce losses as well as increase revenue.
First, Have a Risk Management Plan
The first resolution has to be to have a risk management plan, and implement it. We sometimes get so immersed in our own work that we forget that there are managers and companies who do not take adequate steps to identify and manage the risks to their businesses. And others have a mistaken belief that they have a risk management plan just because they bought some insurance.
Some recent research by Chubb Group of Insurance Companies shows that both public and smaller private companies have significant gaps in risk management. A 2012 survey of public companies found that 2 out of three companies still do not have cyber insurance even though an electronic breach of data was seen as the most pressing risk. Similarly, 42% of these companies reported experiencing an employment practices liability event, yet some of them still do not have risk management tactics in place to mitigate this risk.
A related study conducted in 2013 found that smaller private companies may have invested even less in risk management despite the fact that 1/3 of them experienced a loss event in the past 3 years. Those that do take risk mitigation steps, like background screening, often mis-use the tactics. Some key findings from that research include:
- Most firms believed their general liability insurance protected them from most of the risks they face, including cyber losses, fiduciary liability, and employment practices liabilities.
- 42% of the companies had broad exclusionary policies toward criminal backgrounds, exposing them to legal action by the EEOC or other agencies.
- 68% of companies use social media, but only 12% have usage policies for employees.
- Many companies use cloud providers for data storage, but only half of these have plans in place for cyber breaches.
There is a lot of room for improvement. … Continue reading