Making a fool proof plan for managing risks in business is critical for the success of any business. Not paying attention towards the probabilities of risk can be harmful for the business. An efficient risk management plan, comprising general insurance tools, can help the organization to recognise all possible areas of risks. These areas can be related with the following:
People: Business risks to people manifest when the people working in the organization are at work. This work relates to the organization and should have the goal of bringing business and profitability. However, employees or manpower are sometimes not careful or are negligent in keeping the safety while operating the machinery or equipment or while carrying out other operations. Besides, there can be other unfortunate unknown disasters. A business has to safeguard itself and its staff from such risks.
Property: Disasters can harm the physical assets of an organization. Fire, flood, storm or hurricanes are some of the most common natural disasters that can damage the assets and ruin the capability of a business to generate profit. There can be events whose magnitude is so huge that the survival of business can come into danger - just imagine a huge fire or a natural calamity. Having insurance is not a choice but a necessity in this case.
Finances: Risks that manifest from the financial resources or anything that is related to the financial aspect of the company are financial risks. They can arise while making the financial decisions or making the risk management plan. Guidelines for taking financial decisions can be a part of the risk management plan. Businesses, these days, also insure themselves against risks of frauds. Directors and key managerial personnel are also safeguarded on account of any financial damages caused to public, due to their decisions.
Strategy: When the management of the company prepares strategy to execute various tasks such as advertising, production or manufacturing, research and development or any kind of activity related with business, it carries the risk of going wrong. The costs can be magnanimous in such cases.
Regulatory risks: Risks pertaining to norms and policies made by the government or the body regulating the organization are called as regulatory risks. There can be changes in tax structures or investment rules. Regulatory changes have a direct or indirect impact on businesses.
There can be many more types of risks faced by business organisations. The process, which can take all of the above and other miscellaneous types of risks into consideration and determine the best possible course of action to mitigate them, is known as risk management function of the business. Many companies are having separate departments to handle such risks.
Apparently, risks are uncertain and they cannot be foreseen in terms of their preciseness and exact nature. This is why they are seen as risks - they are uncertain and can happen any time without giving any notice. Still it is important that steps are taken to mitigate every kind of risk to protect the organisation and its business activities from potential harm.
Earlier, there was hardly any process to cover business risks. It is only after the 18th century that the concept of insurance came into being. Today, a business has powerful insurance tools at his disposal.
You can easily cover risks related to damages caused due to fire, natural calamities, theft, accidents, etc. The costs of covering such risks are quite minuscule as compared to the amount of coverage you get.
The irony is that, still a large part of Indian business community tends to avoid general insurance plans - mainly to avoid costs towards premium. There are millions of people who do not renew their general insurance plans just because they did not meet any calamity and found insurance irrelevant.
But is that the right approach? What if a business comes across theft or any such risks when it is not insured? The loss can be several times higher the cost of premium. Just think about this aspect from this point of view and then you will never want to expose your business to the risk of not having insurance.
