Understanding Your Business Risks
Every business faces risk. Some risks are obvious. Others are easy to overlook until something goes wrong.
The Plapp Insurance Services Business Risk Self-Assessment Series is designed to help business owners think more systematically about the risks associated with their operations, property, employees, customers, technology, vehicles, products, professional services, and other aspects of running a business.
Each assessment focuses on a particular area of risk and uses straightforward questions to help you consider exposures that may deserve attention. You can choose the assessments that are relevant to your business and ignore those that aren’t. New assessments will be added to the series over time.
These assessments aren’t insurance applications or coverage checklists. They aren’t intended to identify every exposure your business faces, determine whether your existing insurance is adequate, or recommend particular insurance policies or limits. No questionnaire can substitute for understanding the individual circumstances of a business. Their purpose is simpler:
To get you thinking about risk before a loss gets you thinking about it.
Business Risk Self-Assessments
Select any assessment that is relevant to your business. You don’t need to complete them in order, and there is no expectation that every assessment will apply to every business.
1.
Overall Business Risk Readiness
Evaluate your organization’s overall preparedness for unexpected events.
Topics include:
- Business continuity
- Financial resilience
- Key-person dependency
- Technology
- Suppliers and customers
- Property
- Liability
- Employees
- Contracts
- Fraud
- Weather
- Changing business operations
Purpose:
A broad look at the risks that can affect almost any business. This assessment is designed to help you recognize dependencies and potential sources of loss or disruption you may not have considered and think about how consciously those risks are being managed.
2.
Business Income & Extra Expense
Determine how well your business could survive an interruption.
Topics include:
- Business interruption
- Continuing expenses
- Recovery time
- Temporary operations
- Critical equipment
- Suppliers and customers
- Anchor businesses
- Civil authority
- Weather-related disruption
- Financial resources
Purpose:
Explore what could happen financially if your business were unable to operate normally. This assessment looks beyond physical property damage to consider how long recovery might take, what expenses would continue, where revenue could be affected, and what resources might help the business survive an interruption.
3.
Cyber & Privacy Risk
Consider how technology, electronic information, cybercrime and technology failures could affect your business.
Topics include:
- Critical technology
- Multi-factor authentication
- Backups
- Access controls
- Cybersecurity training
- Social engineering
- Sensitive information
- Third-party vendors
- Remote work
- Business interruption
- Incident response
Purpose:
Consider how much your business depends on technology and information, even if you don’t think of yourself as a technology business. This assessment explores ways a cyber incident, technology failure, data breach or financial deception could disrupt operations or cause financial loss.
More Assessments are coming. Future topics will include property, liability, employment practices, contractual risk, pollution, artificial intelligence, weather and parametric insurance, and other risks affecting businesses.
Risk Management Is More Than Buying Insurance
Five Common Ways Businesses Manage Risk
- Avoid it. A business may decide not to engage in an activity when the potential risk outweighs the expected benefit.
- Reduce it. Safety procedures, employee training, preventive maintenance, cybersecurity controls and other measures can reduce the likelihood of a loss, its severity, or both.
- Retain it. Some risks can reasonably be accepted by the business. Retention may be intentional, such as choosing a deductible, or simply reflect a decision to absorb a potential loss.
- Transfer it. Responsibility for some risks can be transferred or allocated to another party. Contracts, indemnification agreements, leases and insurance are common methods of risk transfer.
- Finance it. A business needs to consider how it will pay for losses that do occur. Risk financing can include insurance, deductibles, cash reserves, available credit, self-insurance and other methods of providing funds to recover from a loss.
These approaches aren’t mutually exclusive. A business might reduce the likelihood of a loss through better procedures, retain a portion of the risk through a deductible, transfer some responsibility through a contract or insurance, and use a combination of insurance and its own financial resources to finance losses that occur.
Traditional indemnity insurance isn’t the only insurance-based approach to financing risk. Parametric insurance, for example, can provide a predetermined payment when an agreed measurable event or threshold occurs, such as a specified amount of rainfall or hurricane wind speed.
That’s the perspective behind these assessments. Insurance may be part of the answer. Better risk management may be part of the answer. Sometimes both are appropriate.
Important Information About These Assessments:
The Plapp Insurance Services Business Risk Self-Assessment Series is provided for general educational and informational purposes. The assessments identify some common sources of business risk but are not comprehensive and may not address risks particular to your business or industry.
The assessments are not insurance applications, insurance coverage analyses, legal advice, accounting advice, safety inspections, or professional risk assessments. Completing an assessment does not establish that a business has identified all of its exposures or that any particular insurance coverage, limit, risk management practice, or other course of action is appropriate.
Insurance policies contain terms, conditions, limitations, and exclusions that determine whether coverage applies to a particular loss. Coverage availability and requirements vary by insurance company and jurisdiction. Parametric insurance also involves limitations, including the possibility that the financial loss experienced by a business may differ from the payment produced by the policy’s specified trigger.
Business owners should evaluate risk management and insurance decisions based on their own circumstances and, when appropriate, consult qualified insurance, legal, accounting, safety, information technology, or other professionals.
Completion of a Business Risk Self-Assessment does not create an insurance agent-client relationship or alter the terms or coverage of any insurance policy.
