What is risk in business insurance?
Risk in business insurance is defined as the possibility that a sudden or accidental loss could affect the continuation of a company’s activities and operations. Theft, fire, vandalism, fraud, flooding, lawsuits or class actions: many situations can happen, and a firm shall be prepared to deal with them.
In business, insurance acts as a safety net, but it does not relieve the organization of its responsibility to properly manage and know the risks to which it may be exposed.
Examples of loss exposures to business risks
While every industry is different, most potential losses can have multiple consequences if not managed properly:
- Damage to physical property, such as buildings, stock and equipment
- Liability in case of an accident or negligence
- Leak of customer sensitive information, or that is critical to business operations
- Reductions in the value of your products or services following a loss
- Unforeseen expenses to repair or replace damaged property or equipment
- Impact that a loss could have on your ability to conduct business
- Loss of revenue in the event of a business interruption
- Other unforeseen business-related expenses
Bottom-line benefits of managing risk
Risk management provides a clear and structured approach to identifying all those risks. Well integrated into business processes, it helps demonstrate that you are managing your activities responsibly. It offers many instruments regardless of the field of activity of the organization.
A business with an effective risk management plan can also:
- Save resources such as time, assets, income, property
- Protect its reputation and public image
- Prevent or reduce the risk of civil liability lawsuits
- Increase the stability of operations
- Protect people from harm
- Protect the environment
- Enhance its ability to prepare for circumstances that could interrupt business
- Assist in clearly defining insurance needs
- Set a business continuity plan that takes into account the most likely scenarios of loss
A winning commitment
Although it is not possible to eliminate all potential risks, a set risk management plan demonstrates your business’s commitment to loss reduction and prevention.
Having such a documented program can help your business get better insurance and even benefit from more advantageous pricing.
Ask an insurance representative or a risk manager who will assist you in your efforts.