What is “risk control?” Did you ever come across this term during your research when you were planning to start a business?
This term is very important for your business, and it will determine whether you will make it to the top or not. In layman terms:
“Risk control is a method that firms use to evaluate potential losses, so that they can take action to eliminate or reduce threats to their business structure.”
Think of it is a process that allows you to assess the risks in your company’s operations that might result in liability or force you to pay worker’s compensation. The process looks at both non-technical and technical aspects of your business, issues at the lower level and problems in the hierarchy, financial policies, and anything else that might affect the firm. If you master the art of risk control, then you can reduce your losses.
Let’s have a look at the six techniques that are related to risk control:
As the name implies, it’s all about avoiding the risk in the first place. It involves eliminating all such actions that have a high probability of incurring losses. Once you master the art of avoidance, the next steps become easy to follow. You don’t have to think too hard or long on your decisions because your business foundation is sound and solid. In order to proceed with this technique, you need to have professional liability insurance.
For example: You own a chemical plant that manufactures commercial cleaning goods. During one of your inspections, even before the first batch has gone out into the market, you find out that the chemical used is dangerous for the workers. It can result in severe injuries and stop the manufacturing process. So you come up with a safe substitute that not only protects the workers but also prevents any lawsuits for your company.
This technique looks at salvaging the loss rather than eliminating it. The company is already at risk, but the next step you take will determine its future. Through this technique, you acknowledge and accept the loss.
For example: This year’s inventory of goods didn’t leave the warehouse on time. Whatever the reason may be, the inventory is still in the storage room, which makes it susceptible to theft. There’s nothing you can do to send out the inventory that very day, but you can take other measures to protect it. Having insurance will make sure that you don’t suffer from the loss in the event your unsold inventory is stolen, damaged, or destroyed. Another way to prevent the loss is to hire a few security guards or install video cameras outside the storage facility.
This technique is about acknowledging that there’s a possibility of risk and that the company should always be prepared for it. You need to think of all the possible scenarios that can harm your business and then take the necessary protection measures.
For example: You are in the business of making cleaning liquids that are highly flammable. There’s always the fear that the storage facility will burst into flames. While property insurance will cover any loss that might occur due to fire or theft, you need to double down on the protection. Finding a suitable insurance policy can take time, and a fire in your facility can set back the manufacturing process for months or even a year. So to keep your warehouse and business premises safe in the event of a mishap, you can get high-tech water sprinklers installed.
This technique involves dispersing all key assets, so that if a catastrophe happens at one facility, the manufacturing processes at the other facilities are not stopped. This can be an interruption of any form, which is why you need to look into business interruption insurance.
For example: A company expanding its operations decides to open the new plant in another city rather than right beside the old one. A fire occurs at the old facility and workers are forced to stop work. However, since the company has another production plant at a different location, the business processes won’t stop.
When in the business of making a new product, you should purchase product liability insurance to make sure that if a problem does occur with the product, you are safe from liability. This technique is all about creating a backup plan. It comes into effect when operating with state-of-the-art technology.
For example: your system was recently hacked and you had to take help from a disaster recovery service to bring the servers back up. You could also have protected yourself by purchasing cyber security insurance. This policy covers different things such as theft of data, notification expenses, disruption and corruption.
Lastly, this technique allows you to think and open doors for your business by diversifying your product line. The best thing about this technique is that if the business suffers from loss due to one diversified line, it will not damage the reputation of the other product line.
For example: You are operating a restaurant that is all about providing healthy meals. On the other end, your salads and dressings are available in pre-packed boxes at grocery stores. For some reason, your restaurant shuts down but the salads and sauces are still available. Your brand name carries on and there’s still possibility of revamping the brand.
Now you know why risk control is so important for your business. Following these steps will allow you to steer your business towards success and help you reduce and later eliminate loss. Don’t know where to start? Insuring your business can be a little tricky because you are confused with all the types of insurance policies available. If you are looking for a qualified insurance agent, who holds years of experience in this field, then visit Pawson. The company provides different types of policies that cover all kinds of business. To know more about their policies, contact them at 203-481-8898.
Digital Marketing Director