09/11/1999 - 21:00

Managing risk cuts premiums

09/11/1999 - 21:00


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IT IS hard to find an area of business that does not draw some level of risk.

Managing risk cuts premiums
IT IS hard to find an area of business that does not draw some level of risk.

A business successfully managing its risks will often be rewarded with reduced insurance premiums.

National Insurance Brokers Association national operations manager Peter Michell said risk management was all about controlling a company’s exposure to risk.

“It’s an all embracing thing,” Mr Michell said.

Insurance Council of Australia WA group manager Daryl Cameron said risk management involved procedure documentation, policy and staff training.

“Just sticking up ‘look, lock, leave’ signs in a public carpark is not a risk management strategy,” Mr Cameron said.

“Risk management is a way of limiting the commercial, financial and even competitive risk facing a business. A lot of it, from our point of view, is in documentation.

“Usually people talk about risk management in isolation but I think it is an area people are becoming more aware of. Risk management is certainly a growing industry.

“These days a lot of the issues risk managers are talking about are high profile.”

High profile risk management issues include workers’ compensation and the Y2K problem.

Mr Michell said risk management had started to become popular in the late 1970s when a number of big corporations started building up risk management divisions.

He said most insurance brokers were now involved in risk management as big companies started outsourcing risk management areas.

Risk Management’s Jim Royer said some companies were relying too heavily on their insurance brokers.

“Risks managers work entirely for a client to help them deal with their specific risks,” Mr Royer said.

“Most firms think of insurance as a black box and leave it all up to their brokers.”

Mr Cameron said businesses often faced risk because they relied on someone further down the chain – be it a supplier or customer.

“There are so many variables in running a business. It is so competitive.

“If you can minimise the imposts on costs that can give you a little bit of an edge.”

In fact, protecting a competitive advantage can be part of a risk management plan.

Mr Cameron believes properly managing risk will help small businesses survive.

“The reason a lot of small businesses fail is they don’t spend enough time analysing their risks and managing them with professional help,” he said.

“It helps them plan for foreseeable risks, such as fire, and plan ways to minimise them.”

One area many businesses overlook is cash management. Having large amounts of cash on the premises can be an invitation for robbery. The person taking cash to the bank could also be at risk.

Fast food outlets such as Hungry Jacks are believed to be leaders in this field because they have policies in place for handling large amounts of cash.

Mr Cameron said electronic commerce was one way businesses could minimise their cash handling risks.

He said workers’ compensation was another major risk management issue facing WA companies.

A recent change in this area has been the ability for company directors to take out twenty-four hours a day, seven days a week accident and injury cover.

“Self-employed people have always had that option,” Mr Cameron said.


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