Risk control management concepts are one component of a risk management program and can be applied towards the ultimate goal of asset protection. It is a fact that as a business owner if you manage your risk effectively you will obtain better coverage for less premium in today’s insurance market.
McLean Hallmark provides you with alternate methods of risk transfer and our goal for your business is to reduce your Total Cost of Risk. We consult with you as your organization moves from one phase of development to another and aim to reduce the frequency and severity of any claims.
Risk control is a key component in any sound company strategy. It is necessary to ensure long-term organization sustainability and profitability. As such, it is relevant to all industries and segments.
If you’re a business leader, then you already know the importance of risk control. It’s imperative that your business has a formal policy to limit the loss of assets and income.
Key Principles of Risk Control
Here are the top six techniques associated with risk control.
Avoidance is the best means of loss control – because you are avoiding the risk completely. If your efforts at avoiding the loss have been successful, then there is a 0% probability that you’ll suffer a loss (from that particular risk factor, anyway). This is why designing business processes and procedures for avoidance is generally the first risk control technique considered.
2) Loss Prevention
Loss prevention is a technique that limits loss. One accepts a risk but attempts to minimize the loss it can cause. For example, storing inventory in a warehouse means that it is susceptible to theft. However, a loss prevention program is put in place to minimize possible losses by using patrolling security guards, video cameras, and secured storage facilities.
3) Loss Reduction
Loss reduction is a technique that not only accepts risk and that loss might occur as a result, but actively seeks to minimize the loss. For example, although flammable material must be stored in a warehouse, you install state-of-the-art water sprinklers in the warehouse. If a fire occurs, the amount of loss will be minimized.
Separation involves dispersing key assets, so a catastrophe at one location limits losses to only the assets stored there. For example you can have a geographically diversified workforce.
Duplication essentially involves the creation of a backup plan – most necessary with information technology. A failure of an information systems server shouldn’t bring the whole business to a halt. Instead, a backup or fail-over server should be readily available. Another example would be use of a specialized disaster recovery service.
Diversification is a risk control technique that allocates business resources to create multiple lines of business that offer a variety of products and/or services in different industries. With diversification, a significant revenue loss from one line of business will not cause irreparable harm to the company’s bottom line.
All McLean Hallmark brokers are skilled at applying these principles to the industries in which they specialize, so check our Industry Expertise pages.