Risk Management Investments or Insurance Expenses - how to decide where to spend the money

Risk management is a process by which business risks are identified, analyzed, engineered, reduced, eliminated or transferred. Often, insurance is the final transfer of risk.


Certain risks point to insurance solutions, for example large liability limits for products or automobile exposures.


Other risks immediately point to engineering or operational risk management. Think of insurance as replacing a monetary loss. If a building burns to the ground, money replaces the loss as building funds or asset value. Now, think of losses that money cannot replace. Money will not buy a second Mona Lisa.


Failure to recover data from damaged computers, loss of cryogenically stored materials, losing the irreplaceable, these risks require management.


The cloud changes the data recovery problems of the past, but it exposes data to misuse and mischief. Simply keep a second portable record separate from the original. This duplication technique can be used for inventory management too; split mission critical stock storage into two locations.


Use redundant monitoring systems on refrigeration or other climate controlled areas. Implement a self-contained back-up energy supply such as a generator. If money cannot replace the materials stored, take avoidance and reduction loss control measures.


Do you have a product which requires a high level of expertise to operate properly?


Once the product leaves your care, poor operator training can lead to injuries or property losses. Distinguishing between defective equipment and operator error can be difficult, or it may become secondary to the financial depths of the stakeholders' pockets.


If your product requires operational expertise, reconsider selling it as a service whereby your own personnel complete the task. You may save your company exposure to liability claims.


Risk management techniques work well with non-monetary issues or when components are irreplaceable at any price. Think through your operations and identify risks which cannot be solved with money. Risk manage those.

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