This has been an interesting week! I write this as I return home from a Sitkins broker networking event in Albuquerque, New Mexico. The conference was great, New Mexico was beautiful (my first visit), and the election and Hurricane Sandy were on everyone’s mind. It all made me think about keeping pace with changing risk.
Sitkins International is a group of very enlightened insurance brokers/agents that excel because of the tight adherence to best practices of founder Roger Sitkins and evolving principles by Larry Linne and its team of top-notch advisors. I spent two days immersed with some of the leading performers and most creative thinkers around risk, anywhere in North America.
The post meeting discussions were often centred on the Presidential election and the impending super storm, and it was extremely interesting to hear what leading thinkers in risk had to say about both! As we spent two days thinking and talking about risk these massive events that we have no control over were happening around us.
So, with the world constantly and rapidly changing, how can we manage risk effectively? The first step is to realize that change is constant and that risk management is a process, not a project. Risk needs to be assessed constantly and changes made to the strategy and tactics to deal with them.
Whether the next president is Obama or Romney will change America and the world. It has to.
No one knows how, but the course of history is certainly altered based on the American President’s policies and actions. US economic and foreign policy is acutely felt around the world in fuel prices, interest rates, trade volumes, physical security, etc. Major weather systems can affect voter turnout, delay travellers, disrupt businesses, and cause damage, death and injury.
Every organization should have a prioritized list of its risks (Risk Register). But this is not done once and forgotten about. At least once or twice a year the list needs to be reviewed and assessed to make sure it reflects the current state of risk both internally and in the world around us.
Major events going on around the business, whether they are regional or global, need to be assessed on an ongoing basis. How will a major storm affect my business? Will retail stores be closed? Will our buildings be damaged? Will our employees or customers be hurt? Will construction materials be in short supply and at a higher cost?
Use this list as a guide for dealing with changing risk
- Create a risk register. Brainstorm with your team about what risks you have: Operational, Hazard, Financial and Strategic.
- Prioritize your risks in a Risk Map. Basically, for each risk ask yourself what are the chances of this risk happening (likelihood or frequency) and if it does, what will be the cost/harm (impact or severity)?
- For each risk assess what you are already doing about it? Is it enough?
- If not, what else can we do to manage the risk? What are our options and what will be the cost and effectiveness of each alternative?
- Implement the chosen risk management solution(s).
- At least annually go back to the team and assess the list of risks, their priority, the efficacy of the risk management solutions in place. Make required changes.
- On an ongoing basis stay alert to changes that might affect your business, whether they are internal or external, local, national or global.
- Consider whether these changes will require an adjustment to your risk management plans.
Don’t let perpetual change discourage your risk management efforts. Think of risk management like your business plan. Just because things are constantly changing doesn't mean planning is a waste of time. As things change, the plan needs to change to keep pace, not be abandoned in futility.
ClearRisk’s Risk Management Information System can help professionals navigate even the most complex risk landscape. With automated workflows and processes, in-depth data analytics, and constant updates to match each day’s unique environment, any organization looking to move forward with their risk management processes can benefit from our solutions. Want more information?
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