Risk Management Process and Insurance

An effective risk management process will assist identifying, analysing and controlling risks to your business

Risk management framework

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What is a risk management process?

A risk management process is the framework of identifying, evaluating and controlling potential threats to the business. It will consider different strategies to address exposures within a tolerance level acceptable to the business.

Risk Management Process Steps

    Why a risk management framework necessary?

    An risk management framework will identify and manage risks that can prevent the business from meeting its strategic objectives. Whereas, insurance for business is an effective means to transfer unacceptable risks.

    Mistakes and accidents will invariably occur and can be very costly and time consuming. Considering what risks have the potential to throw your business off track, could mean the difference between success or failure.

    The key to a risk management framework is understanding what pitfalls your business is exposed to. Arrange a call back and one of our specialists will then give you a free 15-minute call to discuss your needs.

    What can a risk management process acheive?

    No business can be successful without taking risks, the question is how much risk can you accept in order to achieve your strategic objectives? A risk management process can ensure you achieve your objectives without taking unnecessary risks.

    The development of a risk management framework will assist your business understand its risk appetite. Communicating that message to your staff will set the tone and form an important part of your company culture. 

    Finding a balance between risk and reward is a continual challenge for any business. A formal risk management framework will assist understanding what risks are acceptable and which need to be transferred.

    How does a risk management process work?

    All risk management processes follow the same principles, that enables your business to manage uncertainty in an effective and systematic way.


    1. Identify risks to your business

    The first step of a risk management process is to investigate and detail risks that might affect your business or objectives. There are a number of risk management tools available such as risk assessments and risk reviews that can assist with identifying & recording risks.


    2. Analyse and measure the impact

    The second step of a risk management process is to determine the likelihood and consequence of each risk. By evaluating each risk, it is possible to quantify the potential to impact your business or objectives. A risk register is a valuable risk management tool to record and score the potential risks.


    3. Decide which risks are unacceptable

    The third step of a risk management process is to take decisions concerning which risks are unacceptable compared with your risk appetite. Risks that are acceptable should be monitored and reviewed on a regular basis. Whereas risks that are unacceptable should either be avoided, reduced or transferred.


    4. Mitigate or transfer any unacceptable risks

    The fourth step of a risk management process is to action risks that cannot be avoided should either be reduced or transferred to an acceptable risk tolerance level for the business. You should consider ways to mitigate the exposure by transfering unacceptable risks from your balance sheet.


    5. Contingency planning

    The fith step of a risk management process is to consider risks that cannot be managed. If your initial plan to control the risk fails, what is your plan B? For example, in the event of a cyber breach, what are the steps to effectively respond and mitigate the impact after the incident has occurred?


    6. Monitor and review regularly

    The sixth step of a risk management process is to continually monitor, review and report on risks to your business and objectivesThe risk management framework does not finish once the risks have been identified, analysed and controlled. Your business and its objectives will continue to be exposed to new and emerging risks.

    Why is risk appetite important to your organisation?

    Identifying your risk appetite is an important step in the risk management process and will also assist with strategic and operational decision making. It goes to the centre of the business and will impact how you deal with customers, employees, regulators and shareholders.

    When risk appetite is clearly understood and communicated, it becomes a powerful tool not only for managing risk but improving performance. An effective risk management process can protect your organisation against financial shocks, improve decision making and optimise operational efficiency. 

    To consider ways to manage risks to your business talk to an insurance broker about different products available designed to offer financial support when required by calling 0345 625 0711.

    How to manage risk with business insurance?

    When risks that have the potential to cause a significant financial impact but the chance of occurring is low, they are best transferred from your balance sheet. 

    Without commercial insurance, companies would be required to maintain increased capital reserves to protect against unforeseen events. The pooling of insurance premium therefore provides an effective risk management framework to spread the cost and reduce the financial impact.

    Taking the time to consider what risks have the potential to throw your business off track, could mean the success or failure of your company down the road. Mistakes and accidents will invariably occur and can be very costly.

    Safety risks

    Your risk management strategy should appreciate you have a legal obligation to take reasonable steps to prevent accidents or harm to your employees. The Health and Safety Executive offers a useful guide to your obligations required under UK law, including undertaking a risk assessment and purchasing employers' liability insurance.

    If your business interacts with members of the public, you also have a duty of care to maintain a safe environment. This will include any customers, suppliers and contractors. You do not have a legal requirement to purchase public liability insurance, but it is commonly purchased to mitigate the cost of potential compensation claims.

    Dependent upon your business activities you may have additional safety risks you need to consider within your risk management framework. For example, the use of industrial machinery and engineering inspections.

    Financial risks

    Your risk management strategy should make sure you have sufficient cashflow to manage your operation and pay your debts is critical to the success of your business. The liquidity of your business will allow for you to meet your obligations and further invest in delivering on your strategic objectives.

    Your risk management framework should consider potential shocks to your cashflow that may require significant outlays. This could include high value customers not meeting their obligations under contract or civil ligation against your business for a breach of their professional duty. 

    Surety bond insurance can assist your business with customers which are unable to make payment. Whereas, professional indemnity insurance can offer protection against legal costs incurred in defending allegations and will pay any damages awarded.

    Regulatory risks

    Your risk management strategy should appreciate there are around 90 regulators in the UK with ranging roles and responsibilities, from protecting consumers and promoting the effective functioning of markets to wider responsibilities around the environment and safety.

    Regulators are increasingly active in pursing businesses that do not comply with their legal requirements. Many businesses believe they are too small to become the target of regulatory investigations, fines or penalties. However, your risk management framework should accept that regulators will pursue wrongdoing no matter the size of the organisation.

    Director's liability insurance can offer protection against civil, criminal and regulatory proceedings for individuals while acting in a managerial capacity on behalf of the company. Whereas, corporate legal liability offered under a management liability insurance policy can protect the business from civil litigation and regulatory investigations.

    Security risks

    Technology can offer wide range of benefits from improved productivity, flexible working to reduced costs. However, in an increasingly digital world your risk management framework should consider your reliance and exposure to security risks.

    Data breaches and cyber attacks are increasing in terms of size and frequency. Any risk management framework will need to take into account cyber security, insurance protection and contingency planning.

    Cyber security insurance can offer protection and access to specialists to assist with mitigating the damage of security and privacy breaches. Whereas, crime insurance can offer protection from the theft of property and money and both covers can be combined under a cyber crime insurance policy.

    Property risks

    Your risk management strategy should take into consideration the assets that your business owns can be tangible goods, such as vehicles, buildings, computers, stock, or intangible items, such as intellectual property.

    A risk management framework should consider your acceptable risk level of damage to your business assets. Fires, floods, explosions and riots, are just some of the risks your business assets maybe exposed.

    Property damage insurance under a commercial combined policy can protect your company’s buildings and contents against loss or damage from a range of insured perils. Consideration should also be made to business interruption insurance that protect against the loss of income from being unable to trade.

    What risk management process tools are available?

    The below are commonly used risk management process tools to monitor and report on risks within your organisation:


    Risk Assessments

    Are completed per activity, with the aim to identify hazards and risk factors that have the potential to cause a harm and evaluate the risk associated with that hazard.


    Risk Reviews

    Are completed with a view across the entire company, with the aim to determine appropriate ways to eliminate the hazard or control the risk when the hazard cannot be eliminated.


    Risk Register

    Identifies key areas of risk in terms of potential frequency and impact, highlights issues that require attention and allocates responsibility. Once the risks have been identified, a simple spreadsheet with a basic scoring mechanism can serve as a risk register.


    Business Continuity Planning

    Will consider the major risks your company and identify both short and long-term solutions to mitigate the impact. A business continuity plan will be specific to your organisation and identify responsibility with a crisis management hierarchy should an incident occur.

    Can we assist with improving your risk management framework?

    We work with a risk management partner who is an expert within their speciality and can offer a range of services, which include creating and improving upon your risk management framework.


    Risk process reviews

    A comprehensive review of the risk management plan and process can offer an independent review of your ability to accurately identify, measure and control risk. Reviews can be carried out at a single location or across different locations of your business to identify any inconsistencies that might increase risk levels.


    Management and board reviews

    An independent review of the board, management structure, risk management framework, and the individual skills and behaviours of the management team, can provide a valuable insight. Findings can be reported to identify solutions for optimising structures, practices and resources.


    Claims or incident reviews

    A comprehensive review of large losses and claims histories can identify a range of preventative measures to reduce the risk of incidents reoccurring. An independent review will often be able to report a range of solutions that combine risk management with your business insurance.


    Organisational learning

    Key learning issues can be identified to ensure your organisation can deliver on its risk management strategy. Findings can be reported to identify any structural, process and behavioural changes required. New strategies can be developed to ensure risk management is embedded within your organisational culture.


    Arrange a free 15-minute call back to discuss your individual requirements and see how we can support and improve your risk management processes.


    Steps to improve risk management process

    This guide is for information purposes and based on sources which we believe are reliable, the general risk management and insurance information is not intended to be taken as advice with respect to any individual circumstance and cannot be relied upon as such.