Most business owners aren’t aware that they already think about risk management. You have if you’ve asked yourself any of the following questions:

●      How do I limit my business’ exposure to lawsuits?

●      How can I ensure the safety of my employees in the workplace?

●      How do I ensure the safety of customers or clients on business premises?

●      What if we are sued for selling a faulty product?

●      What if we are sued for manufacturing a defective product? 

Each of these concerns can be addressed and possible effects mitigated with a simple, four-step risk management process. Answer these four questions for your type of business, and you’ll be on your way to effectively managing the risk of loss.

1. What are the sources of possible loss for your business?

You and your management team should meet and discuss what aspects of your operations, products, or services expose your business to the risk of loss.

Workplace Safety

Of course, you are concerned about the safety of your employees, but beyond caring for their well-being you should also consider them one of your most valuable assets and protect their ability to work for you accordingly. In other words, if an employee is injured at work, that affects not only their quality of life but your access to that employee’s experience and skill.

Most states require that companies with more than a few employees carry workers’ compensation insurance. This is the first essential step to protecting employees, but how do you protect your business from the loss of the work of an injured employee?

You and your management team should brainstorm all possible scenarios for injuries at the workplace. If your business is manufacturing, then you must keep machinery in good running order, provide training on the operation and maintenance of equipment, and follow OSHA standards for safety.

Even retail, service, and storage businesses need to keep their space free from hazards. Many precautions are simply common sense. For example, mopping the floor just prior to opening the doors is probably not a good idea. Same for stacking twenty-pound cardboard boxes ten high in a warehouse. Establish cleaning and stocking practices that don’t place employees in the way of possible harm, and encourage employees to come forward if they notice a possible hazard.

Premises Liability

If vendors or the public visits your business, for example, in the case of retail sales or auto sales, or providing counseling, legal, or accounting services, you must carry liability insurance. Other than that, you and your management team should tour and inspect your facility for potential hazards regularly, and encourage employees to report any possibly hazardous condition.

If you are a car dealer, is the car lot free from potholes and other tripping hazards? If you are a law or accounting office, is the sidewalk leading to your entrance clear of obstructions? Are there handrails on ramps or stairs?

Each business will have its unique challenges in keeping its facility safe for visitors, and safety considerations may shift with the changing seasons. Keep on top of what must be done to provide safe access to your goods or services.

Product Liability

Obviously, the first step in minimizing risk exposure in these areas is to make the best product you can make. Still, if pre-market research and testing fail and a problem arises, your business may find itself a defendant in a product liability lawsuit.

Not only manufacturers can be liable for a defective product - distributors can too. Whether there are design defects, manufacturing defects, or marketing defects, any of these can ruin a business.

Of course, if you manufacture or sell products, you have product liability insurance. An additional way to mitigate the risk of loss is to review the products you make or sell with a product liability attorney to anticipate whether any problems might arise.

Liability for Ineffective Service

Again, the first step in reducing exposure to the risk of loss is to provide the best service you can provide. For many service-based businesses, this will involve initial training or education, and ongoing annual training requirements. For many services, malpractice or errors and omissions insurance will is required

2. Analyze all available risk management techniques.

Depending upon what type of business you have, you can employ any or all of the following:

Risk Avoidance

Risk avoidance is just avoiding risky behavior, or adjusting procedures, practices, or operations to prevent hazards. This involves training and monitoring employees to ensure compliance.

In some businesses, this is just impractical. Businesses such as construction, long-haul trucking, mining, and heavy manufacturing are inherently risky.

Risk Reduction

For businesses that must assume some risk, that risk can be mitigated by ongoing training and monitoring of employees, proper certifications, and regular inspections. Products tan be tested for quality-control.

Risk Transfer

Risk transfer can take place by carrying insurance, or through contracts with customers or clients, or your business partners in the chain such as retailers, manufacturers, or original equipment manufacturers (OEMs). It is possible to shift liability elsewhere with hold harmless or indemnification agreements.

Risk Retention

When business operations are inherently hazardous or the costs of mitigating risk or shifting liability are prohibitive, your business absorbs liability. This will come with an attendant increase in the cost of your product or service.

3. Implement the appropriate techniques.

When you and your management team have weighed options and decided on techniques that make sense for your business, you must create a plan or implementation. You might appoint a manager to spearhead whatever training and other changes must be made.

All employees must be kept apprised of expectations regarding your risk mitigation plan. Putting the plan in writing and posting at the workplace is a good idea. Another proven technigue to manage risks is to invest in insurance policies. Insurance plans protect individuals and businesses against significant financial loss by ensuring financial compensation to help the insured recover. Purchasing insurance also reduces the financial impact of business interruption and damage to facilities to assets. Several companies including Primerica offer life insurance, property insurance, and other plans for businesses. It would help if you looked at the ratings or online reviews for various insurers to help you find a good insurance company to manage your risks. Additionally, ensure you provide the right details when applying to prevent problems with the claims process.

4. Monitor the success of your risk mitigation program.

Every business owner should monitor and periodically analyze the effectiveness of their current risk management techniques. If you determine your chosen technique(s) are not working, or are not worth the cost, you can then pivot and try something else.

If you are having trouble with any aspect of managing your business’ risk of loss, consult with your insurance company. They likely have risk managers to help you.