Success in today's complex business environment is greatly dependent upon workforce productivity. Creating a proper work environment—one that is safe and secure for employees, customers and data—is vitally important. It means minimizing downside risk and creating 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. Executives need to be concerned about reputational damage, falling stock prices, shifts in customer appetites for products or services, and even currency fluctuations. In addition, businesses may be impacted by traditional insurance exposures. Some dramatic examples in recent years include:

Hurricane damage from Superstorm Sandy and other severe weather events.
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 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's businesses recognize that proactively creating a risk management culture is essential. President Barack Obama moved cybersecurity to the top of his 2015 agenda after recent hacking attacks. Every business needs a bullet-proof cyber risk management plan as soon as possible. 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.

Risk management

How do you build a risk management culture?

As with any internal behavioral change, building a risk management culture requires commitment, communication, behavioral 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-suite's commitment to a risk management initiative dissipates over time, it can send a signal to the troops that risk management and safety aren't 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 a broker, consider engaging carrier loss control specialists to provide an assessment and make recommendations. These professionals will identify potential problem areas and suggested remedies. They will also help set benchmarks of how the company is performing that can be used for comparison purposes down the road.

It's 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, which should raise awareness and provide how-to information to employees. Employers must understand that 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 “what's in it for me?” Determining that is an important piece of the puzzle and employees need to be incentivized in some way to modify their behavior. This requires the right approach. Some teams will respond to financial incentives, such as tying compensation to safety-oriented metrics; others may respond to a different type of motivation. It's incumbent upon the employer to determine which will work best with the workforce. It also helps to assess worker commitment to risk management in regular performance reviews.

The final aspect of transforming the workplace into a risk management culture is to measure performance. 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.

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

James W. Gow, Jr., senior vice president and property and casualty practice leader for Corporate Synergies, is a senior underwriting executive who has held leadership positions at major national carriers. He possesses deep functional experience in underwriting, risk management, business development and sales with specific expertise in such diverse industry verticals as public entities, specialty transportation, environmental property and casualty, hospitality and commercial real estate. Additionally, Gow serves as a resource to both the Insurance Institute of America and the A.M. Best Company. He can be contacted at James.Gow@corpsyn.com.

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Getting serious about risk management

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