Unlocking Business Resilience: The Critical Role of Risk Discovery in Insurance

Jeff was a dedicated employee at CulinaryTech Solutions, renowned for its premium commercial kitchen appliances. Tasked with the critical role of managing the warehouse operations, Jeff's day-to-day activities were pivotal to the seamless delivery of these appliances. Despite CulinaryTech's commendable commitment to safety protocols, a tragic oversight occurred one day when a heavy commercial-grade oven wasn't secured properly before being moved by a forklift. This lapse in safety measures led to a catastrophic accident, claiming Jeff's life as he was caught beneath the falling machinery. This incident, resulting from a momentary deviation from the company's stringent safety checks, profoundly impacted everyone at CulinaryTech Solutions, serving as a grim reminder of the indispensable value of risk management.

Throughout my career collaborating with agents, brokers, and carrier teams, I was told stories like Jeff's all too often. Avoidable tragedies like Jeff’s story underscore the critical need for comprehensive risk management and mitigation strategies.

The Indispensable Value of Agents & Brokers

Engaging with industry professionals on the essence of value creation, I often encounter a prevalent myth: the notion that the services we sell are only needed at the time of a claim. However, the reality is starkly different. While the claims process is vital, it cannot fully restore the lives disrupted by severe incidents akin to Jeff's. Moreover, many business leaders, without the privilege of a full-time risk manager, find themselves vulnerable to underinsured losses or completely uncovered risks.

When I formalized the GMG Advantage framework, I was tasked with guiding our prospects and clients across various industries to look beyond mere policy and price.

The purpose of the GMG Advantage program is to accomplish the following:

• Increase the value of our team's time and services,
• Educate our prospects on the risks they face, and
• Assess the likelihood that those risks will pose a serious threat to the organization, customers, and/or employees.

Enhancing Business Value Through a Risk Audit

A risk audit involves proactively identifying and assessing potential risks. To effectively manage these risks, consider exploring the following five key business areas, along with recommended strategies for each:

1. Strategic Risks: How resilient is the organization against unforeseen challenges? Reviewing key person contracts or engaging in discussions with senior leaders, and board members, can reveal the concerns that threaten their peace of mind.
2. Operational Risks: What exposures might impact the organization’s ability to run effectively and efficiently? Consider discussing business continuity planning in partnership with a damage restoration company. Several companies might offer complimentary business continuity plans in exchange for introductions to your clients and prospects. You might also consider analyzing the organization's loss history for claims trends.
3. Legal Risks: Every organization has some level of legal risk to manage. If this is an expressed concern of your prospect or client, consider discussing how legal counsel or governmental organizations can be included in your risk identification and prioritization processes.
4. Human Risks: All companies rely on people to operate and be successful. Consider what policies and procedures are (or are not) implemented within the organization. Is there an updated employee handbook? Are safety protocols reviewed regularly and enforced? Are processes in place to mitigate illegal or unethical behavior? Carrier loss control teams can be really helpful in this area in offering advice and counsel. Consider speaking with your carrier reps to understand what tools and services they provide clients to manage human-related risks.
5. Technology Risks: A company’s IT infrastructure can become a vulnerability due to underinvestment in technology updates, systems going down, or expanding the organization’s technology capabilities creating new opportunities for bad actors to get into the company systems. Underwriting guidelines have tightened in the last few years to ensure companies improve their IT infrastructure. Speak with a cyber underwriting expert if you wish to learn more about what’s “hot” when it comes to cyber risk audits and prevention.

These five areas of risk are not all-encompassing and do not always need to be utilized in every risk audit. In my experience, these suggested recommendations are a good start towards becoming more consultative with your clients and prospects. To understand when to use each tactic, powerful first-meeting discovery questions will help you uncover which risks should be assessed and how. You might also review underwriting guidelines or purchase risk assessment questions through companies like AM Best Underwriting Guidelines or the Rough Notes Magazine Advantage Plus program (I'm not sponsored to suggest these resources, I have just found them helpful in the past when it comes to thinking creatively about risk).

And remember, it does not stop with risk identification. The true power of predict and prevent programs is acting on the issues and gaps found in your prospect’s risk management program.