What Is Risk Management?

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When it comes to the day-to-day operations of your company, one important aspect you should always keep in mind is how well you are managing risks. Every single business has inherent risks involved. From how you hire and fire people to the potential for someone to be injured on your property, there are numerous risks that should be considered, mitigated, and planned for.

As a professional employer organization (PEO), we offer an array of HR related services, including risk management. Through risk management, we can help protect your company from huge losses down the road. If you haven’t invested in a quality risk management plan yet, we invite you to reach out to our team to learn more about how we can help. Check out the following details about what risk management entails and how it will benefit your business.

Step One Is Risk Identification

In many cases, companies falsely assume that during the early stages of operation, risk management isn’t that important. Small businesses often assume that due to the small scope of their operations, there really isn’t that much risk to manage. However, this is far from the case. In fact, in many situations, small businesses are at a higher risk for common issues because of their lack of preparation. Think about it like this — a large corporation has an entire HR department dedicated to managing everyday risks. Conversely, a small business probably doesn’t have an HR department and might be missing out on vital risk management tasks.

The very first step in risk management is risk identification. During this stage, our experienced team will analyze your business and look for any potential risks. This could be something as simple as your company needing an employee handbook to ensure policies are clear or something as complex as finding a liquor liability insurance policy. Risk identification is a vital step and will help build the foundation for the rest of your risk management plan.

Creating A Customized Risk Management Plan

Once the risks your company faces have been identified, it is time to create a customized risk management plan. This is where taking a one-size-fits-all approach is detrimental. Every single business has its own unique set of risks, which makes a customized plan a must.

Risk management is a three-fold approach. First, it will include risk elimination. This process involves getting rid of any risks that you possibly can. Next, your plan will include risk mitigation. This portion of your plan should reduce the expected value of a risk by reducing the probability of that risk. Finally, part of your plan will be risk acceptance. This involves identifying the risks that you cannot eliminate or mitigate and creating a contingency plan for these risks.

As you can see, risk management is a multi-level approach. Ideally, we would all hope to get rid of every risk our company faces. However, the reality is that there are some inherent risks built into your business that you simply must plan around.

Unique Risks Your Company Might Face

Depending on the industry you operate in, your business will face its own set of unique risks. Each risk category will involve a different type of plan. The following are a few examples of different types of risks you need to manage and a few approaches you might take to eliminate, mitigate, and accept the risks.

General Liability

One of the broadest forms of risk, general liability applies to almost any business in operation. This risk involves any bodily injury and property damage that occurs due to your operations or the conditions of your property. A classic example of this would be someone who slips and falls on your property due to a faulty staircase. General liability can be handled with all three approaches. You can get rid of obvious risks, such as a staircase that is missing a railing. You can mitigate certain risks, such as putting down salt every time it snows. And you can accept the fact that general liability will always exist and plan accordingly by purchasing a general liability insurance policy for your business.

Workers’ Compensation

Another common risk that any business needs to plan for is workers’ compensation claims. This includes the risks involved when an employee is injured or harmed on the job. The approach to this is two-fold. You can mitigate risks by enacting safety policies that must be adhered to and investing in proper training in these policies. You can also accept and prepare for this risk by purchasing the right workers’ compensation policy for your business’ needs — in fact, in most states, this is a legally required policy to carry.

Employment Practices Liability

Not only are you liable for injuries and other harm that befalls your employees, but you are also liable for any employment practice liabilities. These include everything from discrimination to sexual harassment to wrongful termination claims. The first place to begin is by making sure you have the proper HR practices in place. This can help prevent you from facing an array of employment practice claims. However, even with the best policies and practices in place, there is an inherent risk involved in employing people, no matter how small your business is or how well you think you know your staff. For this reason, purchasing Employment Practices Liability Insurance (EPLI) is a must.

Liquor Liability

If you run an establishment that serves alcohol, you need to plan for the risks involved. For example, your business could be held accountable if someone has drinks at your establishment, gets behind the wheel of a car, and gets into a wreck. Purchasing the right insurance policy is a must, as well as training your staff in the dangers of overserving.

As you can see, there are numerous risks any business may face. If you are looking for help with risk management services, we invite you to contact our professional employer organization today. We can assist you with an array of PEO services.

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