Risk management is more important than ever

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South Africa’s volatile economic and societal climate over the past years, and particularly over the past few months, has had a major effect on how businesses operate.

Those who used to run smoothly with the help of forecasts and projections now avoid making business judgments that are set in stone and, instead, have shifted their focus to “managing risk”.

Risk is the leading cause of uncertainty in any organisation, which is why businesses are increasingly focused on identifying risk and managing it before it even affects the company. Organisations face a number of internal and external factors and influences that make it uncertain when, whether, and the extent to which they will achieve or exceed their objections.

External risk is that which management is not in direct control of. This includes exchange rates, interest rates, political issues, and so on. On the other hand, internal risk includes information breaches, non-compliance, and other events that are within management’s control.

Today, a business simply cannot define objectives without taking potential risk into consideration. The global business environment is constantly changing, and there is no reason to expect that volatility will decrease. In fact, it is only likely to increase, as uncertainty has become the norm. 

Risk management begins at the top

Risk management, particularly loss control, begins at the top of any organisation. It requires influential, competent leadership. If the head of the company makes it a point to emphasise safety, compliance and ethical behaviour, the rest of the organisation is more likely to follow suit.

Risk management costs money, but the costs of ignoring safety concerns and forgoing adequate insurance coverage can be far higher in the long run than any upfront savings.

Resources for risk management

Thanks to the internet, organisations have easy access to a pool of information around risk management, including loss control measures, safety, compliance, and disaster preparedness and recovery. There are extensive checklists and resources available for businesses of all kinds, in a range of industries. ERM Insights has a great list of resources for you to begin with.

Loss control and insurance

Loss control is the act of reducing severity by identifying the factors that aggravate or increase a loss, and taking proactive measures to lessen the effects of those factors. A business that is indifferent to loss control may have a higher than average number of insurance claims. And a poor loss history can make it difficult to find affordable insurance coverage at all.

Insurance is a principle safeguard in managing risk, and many risks are insurable. Some risks are an inarguable high priority, for example, the risk of fraud or embezzlement where employees handle money or perform accounting duties in accounts payable and receivable. Other risks are less of a priority, for example, product liability insurance is not necessary for a service business.

When insuring against potential risks, never assume a best-case scenario. Even if the same employees have worked for years without a problem, or you operate in a seemingly harmless environment, necessary coverage is crucial.

While potentially destructive business risks are all around us, there are ways and means to protect your organisation against them and to minimise their damage, if and when they occur. 

At Fulcrum Premium Finance, our brokers offer a reliable source of informed advice backed by years of experience, which allows them to better cater to the specific needs and risks faced by our clients. Get in touch with us.

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