Success in todays complex business environment has become greatly dependent upon workforce productivity. A talented team of employees who lack proper safety controls and operational processes will more often than not struggle to meet its full potential. On the flip side, a workforce that understands and contributes to those key operational components greatly enhance the chance of increased profitability for an organization.
This is why the creation of a proper work environmentone that is safe and secure for employees, customers and datais vitally important. It means minimizing downside risk whenever possible by entrenching everyone in a culture that identifies risk before it happens and responds appropriately if something happens a risk management culture.
There has been an invigorated focus on enterprise risk management, the analysis of a broad spectrum of loss exposures that businesses often face. For example, executives need to be concerned by such things as reputational damage, a falling stock price, shifts in customer appetite for products or services, and even currency fluctuations. In addition, businesses may be impacted by traditional insurance exposures. There have been some dramatic examples in recent years:
- Hurricane damage from Superstorm Sandy and other severe weather events
- The Ebola crisis that left a Dallas hospital reeling
- Recent cyber attacks on SONY Pictures, Home Depot, Anthem Inc., Target Corp. and the federal government
Regardless of the threat, its important for every commercial enterprise to have a plan in place long before something bad happens. While not all risks can be controlled (the weather is a good example), businesses have an opportunity to promote a risk management culture that incorporates worker safety, public safety and data safety. Historically, businesses purchased property and casualty insurance and crossed their fingers. Today theres a recognition that proactively creating a risk management culture is a requirement. President Barack Obama moved cybersecurity to the top of his 2015 agenda after recent hacking attacks. It would follow that every business needs a bullet-proof cyber-risk management plan as soon as yesterday. Establishing an environment of personal safety for customers and employees is equally as important as cyber security. The Occupational Safety and Health Administration reports that a strong safety culture has the single greatest impact on accident reduction of any workplace practice.
So, how do you build a risk management culture?
As with any internal behavioral change, building a risk management culture requires commitment, communication, behavior reinforcement and measurement.
It starts at the top. Executives must have an obvious and overt commitment to risk management that is well-articulated to the rest of the enterprise. This commitment needs to be kept front and center; managing risk should be a consideration in all major decisions. If the C-suites commitment to a risk management initiative dissipates over time, it can send a signal to the troops that risk management and safety arent important, the exact opposite of the original intention.
Businesses can begin by conducting an honest assessment of their current risk profile. Working closely with a trusted advisor such as your broker, consider engaging carrier loss control specialists to provide their assessment and make recommendations. These professionals will identify potential problem areas and suggested remedies. Theyll also help set benchmarks of how youre performing at the moment that can be used for comparison purposes down the road.
Its helpful to think of these fitting into specific lines of insurance coverage. For instance, for General Liability insurance, consultants will examine potential liability to public exposure. Depending on the business, this could be an examination of product packaging to ensure quality control, or properly limited access to hazardous areas. For Workers Compensation insurance, this may include examining slip and fall potential, job rotation practices and whether there are proper guards on machinery. When it comes to auto insurance, these specialists will examine driver selection, vehicle maintenance and monitor and assess driver behavior.
To be successful, an organization must do a good job of communicating the importance of risk management. This communication should raise awareness and provide how-to information to employees. Employers must understand education needs to occur in order to drive continual improvement and adoption of a risk management mindset. This communication should bleed through all levels of the organization in a consistently open and honest manner.
For employees, the question will often be whats in it for me? (besides a less risky workplace). Determining that is an important piece of the puzzle and employees need to be incentivized in some way to modify their behavior, and this requires the right approach for the employee population. Some teams will respond to financial incentives, such as tying compensation to safety-oriented metrics; others may respond to a different type of incentive. Its incumbent upon the employer to figure out what type of incentive will work best with their particular workforce. It also helps to assess worker commitment to risk management in regular performance reviews.
The final aspect of transforming your workplace into a risk management culture is to measure your performance. After all, you cant manage what you dont measure. For starters, employers can benchmark their risk management performance based upon metrics such as accidents, injuries, claims and whether insurance premiums rise or fall. Forward-thinking companies will also measure their performance through subjective means such as culture surveys that provide a glimpse into employee mindsets.
Its all part of creating a foundation for protecting your business. Risk management is no longer simply about purchasing the right insurance. Its much bigger than that. Todays risk management demands a cultural mindset that positions the entire team to safeguard the best interests of the business.
James W. Gow Jr. is senior vice president and property & casualty practice leader for Corporate Synergies.
