Success in today's complex business environment is greatlydependent upon workforce productivity. Creating a proper workenvironment—one that is safe and secure for employees, customersand data—is vitally important. It means minimizing downside riskand creating a risk management culture.

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There has been an invigorated focus on enterprise riskmanagement, the analysis of a broad spectrum of loss exposures thatbusinesses often face. Executives need to be concerned aboutreputational damage, falling stock prices, shifts in customerappetites for products or services, and even currency fluctuations.In addition, businesses may be impacted by traditional insuranceexposures. Some dramatic examples in recent years include:

  • Hurricane damage from Superstorm Sandy and other severe weatherevents.
  • The Ebola crisis that left a Dallas hospital reeling.
  • Recent cyberattacks on SONY Pictures, Home Depot, Anthem Inc.,Target Corp. and the federal government.

Regardless of the threat, it's important for every commercialenterprise to have a plan in place long before something badhappens. While not all risks can be controlled (the weather is agood example), businesses have an opportunity to promote a riskmanagement culture that incorporates worker safety, public safetyand data safety.

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Historically, businesses purchased property and casualtyinsurance and crossed their fingers. Today's businesses recognizethat proactively creating a risk management culture is essential.President Barack Obama moved cybersecurity to the top of his 2015agenda after recent hacking attacks. Every business needs abullet-proof cyber risk management plan as soon as possible.Establishing an environment of personal safety for customers andemployees is equally as important as cyber security. TheOccupational Safety and Health Administration reports that a strongsafety culture has the single greatest impact on accident reductionof any workplace practice.

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Risk management

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How do you build a risk management culture?

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As with any internal behavioral change, building a riskmanagement culture requires commitment, communication, behavioralreinforcement and measurement.

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It starts at the top. Executives must have an obvious and overtcommitment to risk management that is well-articulated to the restof the enterprise. This commitment needs to be kept front andcenter; managing risk should be a consideration in all majordecisions. If the C-suite's commitment to a risk managementinitiative dissipates over time, it can send a signal to the troopsthat risk management and safety aren't important, the exactopposite of the original intention.

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Businesses can begin by conducting an honest assessment of theircurrent risk profile. Working closely with a trusted advisor suchas a broker, consider engaging carrier loss control specialists toprovide an assessment and make recommendations. These professionalswill identify potential problem areas and suggested remedies. Theywill also help set benchmarks of how the company is performing thatcan be used for comparison purposes down the road.

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It's helpful to think of these fitting into specific lines ofinsurance 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 productpackaging to ensure quality control or properly limited access tohazardous areas. For workers' compensation insurance, this mayinclude examining slip and fall potential, job rotation practicesand whether there are proper guards on machinery. When it comes toauto insurance, these specialists will examine driver selection,vehicle maintenance and monitor and assess driver behavior.

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To be successful, an organization must do a good job ofcommunicating the importance of risk management, which should raiseawareness and provide how-to information to employees. Employersmust understand that education needs to occur in order to drivecontinual improvement and adoption of a risk management mindset.This communication should bleed through all levels of theorganization in a consistently open and honest manner.

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For employees, the question will often be “what's in it for me?”Determining that is an important piece of the puzzle and employeesneed to be incentivized in some way to modify their behavior. Thisrequires the right approach. Some teams will respond to financialincentives, such as tying compensation to safety-oriented metrics;others may respond to a different type of motivation. It'sincumbent upon the employer to determine which will work best withthe workforce. It also helps to assess worker commitment to riskmanagement in regular performance reviews.

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The final aspect of transforming the workplace into a riskmanagement culture is to measure performance. Employers canbenchmark their risk management performance based upon metrics suchas accidents, injuries, claims and whether insurance premiums riseor fall. Forward-thinking companies will also measure theirperformance through subjective means such as culture surveys thatprovide a glimpse into employee mindsets.

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It's all part of creating a foundation for protecting yourbusiness. Risk management is no longer simply about purchasing theright insurance. It's much bigger than that. Today's riskmanagement demands a cultural mindset that positions the entireteam to safeguard the best interests of the business.

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James W. Gow, Jr., senior vice president and property andcasualty practice leader for Corporate Synergies, is a seniorunderwriting executive who has held leadership positions at majornational carriers. He possesses deep functional experience inunderwriting, risk management, business development and sales withspecific expertise in such diverse industry verticals as publicentities, specialty transportation, environmental property andcasualty, hospitality and commercial real estate. Additionally, Gowserves as a resource to both the Insurance Institute of America andthe A.M. Best Company. He can be contacted at [email protected].

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