Is it time to hire a risk manager?
Insurance Insight
In today’s turbulent business climate, can your organization ignore risk management? Every organization must consider risks seriously, whether you are a two-person shop or a major corporation reporting to stockholders. Who in your organization performs this function?
Many organizations have an employee who wears many hats, and usually organizations place insurance, safety and risk-management responsibilities with either a finance person or, in larger organizations, a personnel director. That decision may work if you have a small organization, but as your business grows, so do your assets at risk and your loss exposures.
A risk manager analyzes an organization’s core business functions to determine insurance coverage needs and to reduce risk. To analyze coverage, the risk manager must examine the organization’s current and impending activities to determine whether those endeavors are covered adequately under the organization’s current insurance policies. For example, a few months ago I assisted a frantic North Carolina executive. He assumed that, although the business had two corporations, all of its employees were covered for workers’ compensation. When one of his employees was injured, he found out the hard way that employees under the second corporation were not covered under his workers’ compensation coverage. With thorough risk management and an experienced independent insurance agent, his loss could have been prevented.
The risk manager often becomes the “go-to” person in an organization when employees see trouble on the horizon. “Can we do this?” is a question the risk manager must answer frequently. A risk manager’s job is rarely to say “no.” Instead, the job often requires imagination and innovation to answer the question “How can we do this?”
A risk manager’s job may involve working with line supervisors to ensure employees are following safety procedures. If you have no written personnel or safety procedures, a risk manager will work with peers to develop them for your organization. Personnel issues, such as sexual harassment or potential dismissals, may, in conjunction with human resource officers, involve the risk manager. Training, such as supervisor safety training, will probably fall to a risk manager. OSHA and safety inspections and adherence to safety policies are regular parts of the risk-management function as well. Managing claims is an integral part of the insurance function. The risk manager works with other managers to ensure all losses, whether injury or property damage, are reported to insurance carriers. Developing a reporting procedure for all claims to guaranty prompt claims reporting is critical to accident management.
Educational backgrounds vary among risk managers. While most hold at least a bachelor’s degree and professional accreditations such as the associate’s degree in risk management developed by the Insurance Institute of America, the major issue to consider is the person’s ability to think creatively, to mitigate or to avoid risk. While a risk manager must be able to interact with senior managers and board members, he or she must also be comfortable with line employees, among whom safety problems occur most frequently. If you must make a choice, choose excellent communication skills and good common sense over technical training.
When is it time to consider hiring a risk manager? First, you have the option of a “rent-a-risk-manager” who will consult with your organization for a monthly or annual fee. However, if the potential savings a risk manager offers your organization exceeds his or her salary, given an acceptable rate-of-return, consider hiring a risk manager permanently.