Rethinking your risk management this new Financial Year
Insurance providers have faced many challenges in the past year mainly due to the bushfires, floods, and the ongoing global pandemic. One of the outcomes from these disasters is that many insurers are reducing their capacity across a variety of industries in an effort to replenish their returns.
Low investment potentials due to extremely low interest rates combined with rising property and liability premiums have rightly drawn concern from the business sector. So how do Australian businesses manage their risk management strategies as the markets slowly recover?
Re-evaluate your risk management strategy
All businesses face a certain amount of risk, so it’s important to identify these risks and re-evaluate them every 12 months. An updated risk management plan ensures that your employees and customers are kept safe and any negative impacts on your business are minimised.
For example, one of the biggest threats to many SMEs in Australia is cyber-crime. This means that you need to know how hackers and spammers can gain access to your network and formulate plans to prevent this occurring. You also need a crisis plan if your company is affected by cyber-crime, detailing the exact steps that need to be taken in such an eventuality, including exploring the need for cyber insurance.
If you are in a bushfire area, then you need to review your bushfire policies to ensure they are up to date and still relevant. General policies and procedures that many employees take for granted should also be reviewed and updated for relevance to help reduce your operational risk. A company’s resiliency is partly founded on how it manages risk, so revisiting your risk management strategy on a yearly basis makes sound business sense.
Differentiate your company’s risk profile
Market premiums are generally based on the losses experienced by an insurance company’s portfolio. What this means is that whilst a company with a very low risk profile may be paying lower premiums than a company with a higher risk profile, they will still face the same premium increases.
The best way to reduce these potential premium increases is for a company with a low risk profile to differentiate themselves from the general market. This can be achieved by utilising data modelling techniques that clearly demonstrate your company’s low risk profile. It’s this type of approach that can help a business lower the costs of premiums in the current market conditions.
Customise your insurance cover
Many businesses don’t have the right type of insurance cover to reduce their risks. This often happens when a company deals directly with an insurance provider, bypassing the expertise of a knowledgeable adviser or broker because they think they know what they need. It goes without saying that an experienced adviser or broker who fully understands the nuances of both the current market and your industry can create a customised insurance strategy that is perfectly tailored to your specific needs. If your company wants to transfer some or all of your risk to an insurance provider, the assistance of an adviser or broker is a very sensible strategy.
As you move to reassess your company’s risk management strategies this new financial year, one of your first steps should be to contact an experienced adviser. Find your local adviser today.