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T H E C A N A D I A N
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you identify the risks that require the most
attention.
STEP 3: Examine your options
Select and implement the appropriate risk man-
agement techniques. There are five major risk
management techniques:
1.
Avoidance:
Can your organization eliminate
a service or an activity it considers too risky?
2.
Prevention or modification:
What steps can
be taken to reduce the likelihood of losses
occurring? Can you change the activity so
that the chance of harm occurring and impact
of potential damage are within acceptable
limits? (Establishing policies and procedures
is the most common form of modification. For
example, if your organization owns an auto-
mobile, you may manage risk by selecting
and screening drivers, training drivers and
developing other transportation policies.)
3.
Mitigation:
What steps can be taken to
lessen the impact of losses should they
occur?
4.
Retention:
Accept the risk as is. Some risk
is inherent in the activities of your operation;
your organization can accept or retain all or
a portion of the financial consequences of
a risk. (Deductibles are a form of retention.
Another form of retention is deciding not to
purchase an insurance policy for a specific
exposure.)
5.
Transfer (sharing):
Your organization may
transfer either the actual risk or the financial
consequences of a loss to another party.
Insurance is a form of transfer where you
pass the risk of financial loss to the insur-
ance company. There are aspects of risks
that cannot be fully transferred, such as
damage to your reputation or goodwill. As a
result, most risk transfers involve sharing the
risk with another party.
STEP 4: Decide which option to
use
After reviewing all the possible options and
looking at your risk, decide which risk manage-
ment technique best strikes a balance between
effectiveness and affordability.
STEP 5: Implement the chosen
option
The first part of this step is to create the risk
management plan. Ensure that any staff and
others are trained and informed about the plan.
Not only do they need to understand the policies
and procedures resulting from your risk review,
they must understand that they have a broader
role to play. They should be risk sensitive and
understand that everyone in the organization
suffers the consequences of the increased cost
of risk.
Employees/volunteers should understand how
to complete the appropriate forms and reports.
They should also be updated on accident and
claims frequency and cost.
STEP 6: Monitor results
First, evaluate the plan to determine if it is work-
ing. Also look at whether your risks changed
during the course of the year, and if changes
to the plan are required. In the annual review of
your operation, you may find that you are over-
insured (e.g., if you have discontinued a service)
and can drop the additional coverage. If your
operation has expanded, you can see where you
may require additional coverage to ensure that
you and your organization are fully protected.
Keep accurate records of how the plan has
changed and the results of the annual reviews.
It shows your insurer that you are committed to
risk management and have a history of imple-
menting thoughtful and adaptive plans.
Conclusion
Risk management is a practical process with
real-world implications. It is a way of thinking
that should permeate your business. With a good
plan, you are in better shape to face the risks that
life, and business, invariably present.
The Importance Of Understanding Risk continued from page 17
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