Risk Management: Avoid, Reduce, Transfer or Accept?

The goal of accepting risk is to monitor them continually and adjust your risk management plan as the level of vulnerability changes, as it ... Skiptocontent Coverage ViewallCoverages CORE SPECIALIZED CORE CyberLiability Protectsyourcompanyagainstdamagesfromspecificelectronicactivities CrimeInsurance Protectsyourcompanyagainstspecificmoneytheftcrimes Directors&Officers Protectscorporatedirectorsandofficers’personalassetsiftheyaresued EmployeeHealth&Benefits Provideshealthcare,vision&dental,retirementplans,andlifeinsurance EmploymentPracticesLiability Protectscompaniesagainstemployment-relatedlawsuits Errors&Omissions Protectscompaniesagainstlawsuitsofinferiorworkorservice FiduciaryLiability Protectsfromlegalliabilityrelatingtoemployeebenefitplansponsorship GeneralLiability Protectscompaniesagainstbasicbusinessrisks. 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INSIGHTS ResourceHubBlogWebinarsWhitepapers MyAccountGetaQuoteGetaQuote September8•RiskManagementTips•Spotlight RiskManagement:Avoid,Reduce,TransferorAccept? CarlNiedbala COO&Co-Founder Ifwecouldsidestepvulnerabilitiesinlife,ingeneral,mostofuswouldlikelyjumponthatopportunity.Takingchanceswouldbelessstressful,outcomeswouldseemguaranteed,andworrieswoulddiminish.Butsucharealitydoesn’texist—notinlifenorbusiness.Inthispost,weexaminebasicstrategiescompaniesusetomanagetheriskstheyface. UnderstandingRiskManagement Whenitcomestoriskmanagement,there’snosecretsauce.It’sastraightforwardapproachbasedonfactsandprobability.Managingriskismerelyassessingpossibleexposurestoyourbusinessoperationandfindingwaystonavigateitwithaslittleharmfulimpactonyourcompanyaspossible. Keepinmindthatmanagingriskdoesn’talwaysmeanturningaroundandrunningtheotherdirectionfromit.Perhapsthatwasourancestors’strategy,butfleeingmoderndangerorharmisfarmoremanageablethaninancienttimes.Wemightfacea“slip-and-fall”claimwitharobustgeneralliability(GL)policyandakeenlawyer—notasaber-toothedtigeratthekillingendofourspear.  BestRiskManagementPractices Nevertheless,savvyleadersfollowbestpracticesinriskmanagementjustlikeinanyotherpartofabusiness(i.e.,marketing,sales,development,operations).Therearefourprimarywaystohandleriskintheprofessionalworld,nomattertheindustry,whichinclude: AvoidriskReduceormitigateriskTransferriskAcceptrisk Awidespreadproblemwiththisfour-stepapproachisknowingwhichstepisappropriateforwhichrisk.Eachindustryisdifferent.ConsiderthatweservemanybusinessesinSaaS,Fintech,Micromobility,Cannabis,andSharedEconomy.Andyet,eachcompanywillassessrisksdifferently(whichwe’llreview).  Forexample,aRideshareexecisgoingtoviewvehicleusagemuchdifferentlythanaSaaSleaderwould.Adeliverydriverwillfacemultiplevehicularchallengesontheroute,whereasaprogramdeveloperismorelikelytoencountercybercriminals.Thecompanyleadersrecognizethisandunderstandthatitmakesnosenseforbothcompaniestodealwithriskinthesameway.Riskmanagementmustbeultratailored.  Aprotipistostartbigandgosmall.Inotherwords,identifyyourindustryrisksandthenhoneinonthemicro-risksyourparticularbusinessmightface.  HowtoAvoidRisk Asmentioned,gonearethedaysofhightailingawayfromallperceiveddanger.However,somesituationscallforanavoidanceapproachtoriskmanagement.Iftheactivityhasahighlikelihoodofoccurring,anditwillalsocausesignificantfinancialharm,it’sbettertoavoiditentirely.  Localandnationwideregulatorsmakeiteasytoavoidriskinspecificareas.Whenregulationsandrulesapplytoyourindustry,onesignificantriskisbreakingthelaw.Avoidingthisriskhasaneasyanswer:don’tbreakthelaw.Byfollowingtheguidelinesregulatorsestablish,youavoidtheriskoffines,penalties,anddefensecosts. HowtoReduceRisk  Reducingriskmeansunderstandingtheactivitieswithahighlikelihoodofoccurringbutwithamanageablefinancialimpact.Somewouldarguethatrisksinthesecategorieshavealowimpact—andyet,evenalittlefinancialimpacthurtstosomeextent. Anexcellentexampleofthisrevolvesaroundthecybercriminalsmentionedbefore.IndustrieslikefintechandSaaSgrowfromatechnologicalbackbone.Inotherwords,onlyaworldfilledwiththeaspectof“cyber”canhostFintechorSaaScompanies.Therefore,themostsignificantdangertothesecompaniesisundoubtedlycybercriminals.  Asaresult,manycompaniesembraceariskmanagementplantoreducetheirexposuretotheseviciousonlineoutlaws,including: EstablishidentitymanagementSupportsecurityawarenessCorrectsecurityflaws Keepinmindthatnoneofthesebestcybersecuritypracticescanpreventacybercriminalfromharmingabusiness.However,itmitigatesthisparticularrisksignificantly. HowtoTransferRisk  Ifafinanciallydevastatingactivitycouldpotentiallyoccur,thebestoptionistosharetherisk.Handlingitalonecouldresultinsignificantsetbacks,ifnotashutteredbusiness.Mostofthetime,risksinthiscategoryarehighlyunlikelytohappen.However,thepossibilityisstillthere,andtransferringtheriskisthesafestbet.  Inthecannabisindustry,it’snotuncommontohavemassivegrowingplantsanddistributionhubs.Expensiveequipment,valuableproducts,andcustomizedbuildingsmakeuppartsofwhatacannabiscompanyprotects.Oneweekendfireorviolentstormcouldwipeoutanentirebuilding,costingloadsofcashforrestorationandlostproductiontime. Insteadofkeepingfingerscrossed,abetterapproachistoinvestinpropertyinsurance.Thiscoveragereimbursesfordirectlossesacompanyexperiences.It’san“indemnity”policy,meaningitdoesn’trequirelegalactiontotriggercoverage.Whentheriskismassive,butunlikelytooccur,transferringitisthewaytogo.  HowtoAcceptRisk It’snotalwaysthatbusinessescanavoid,reduce,ortransferrisk.Sometimes,youmustbuckledownandacceptit.Ifacceptingtheriskismoreprofitablethananyotheroption,thenit’stheoptimalstrategy.Afterall,everyindustryhasunavoidablerisksthatcomewiththeterritory.What’smore,althoughariskisajaggedpilltoswallow,someriskisnecessarytodobusinessinthemodernworld.  SharedEconomy,forexample,presentsauniquesituation.Withoutvehicles—automobiles,e-scooters,bicycles,etc.—moston-demandserviceswouldn’tevenexist.Buttheriskofusingthisequipmentoutweighstherealityofnotusingthematall,andtherefore,nothavingabusinesswhatsoever. Thegoalofacceptingriskistomonitorthemcontinuallyandadjustyourriskmanagementplanasthelevelofvulnerabilitychanges,asitalwaysdoes.Riskisn’tthefour-letterwordmanyindividualsassumeitis.Sometimes,it’sanavenuetosuccess—thekeyishowriskismanaged. Understandingthedetailsofwhatcoverageyourfast-growingcompanyneedscanbeaconfusingprocess.FounderShieldspecializesinknowingtherisksyourindustryfacestomakesureyouhaveadequateprotection.Feelfreetoreachouttous,andwe’llwalkyouthroughtheprocessoffindingtherightpolicyforyou.  Wanttoknowmoreaboutinsuranceforfast-growingcompanies?Talktous!Youcancontactusat​[email protected]​orcreateanaccount​here​togetstartedonaquote. RelatedArticles March10•News•RiskManagementTips Biden’sExecutiveOrderonCrypto—WhatYouShouldKnow PresidentBidenrecentlyreleasedanExecutiveOrderonCrypto,ensuringresponsibleinnovationindigitalassets.Here’sthenewsbeat. ReadArticle March9•RiskManagementTips HowESGIssuesInfluenceRiskManagement ESGissueschangerapidly,especiallyoverthepastfewyears.Let’slookathowtheseshiftsinfluenceriskmanagementnowandinthefuture. ReadArticle March3•RiskManagementTips FintechInsuranceTrendsfor2022 2021wasatransitionalyearforthefintechindustry.Here’salookatinsurancetrendsthatsurfacedandwhattoexpectin2022. ReadArticle February22•CyberLiability•Spotlight CyberLiabilityInsuranceTrends2022 Afteranexceptionallyroughyearincybersecurity,let’sreviewcyberliabilityinsurancetrendstoexpectin2022. ReadArticle January28•Directors&Officers•News•Spotlight D&OInsurancePricingTrends2022 TheD&Oinsurancemarkethasexperiencedsomeuniqueactionthispastyear.Let’sreviewrecenthappeningsandourpredictionsfor2022. ReadArticle November10•Errors&Omissions•RiskManagementTips WhatAreRiskRetentionGroups&What’sTheirRole? Riskretentiongroupsprovideaffordableandcustomizedsolutionsforgroupsfacingsimilarliabilities.Willitworkforyou? ReadArticle