Whether you are a homeowner, landowner, business owner or the member of a board, it is important to understand the workings of Risk Management. To attain such an understanding, you must start at the beginning with learning about all the pieces involved.

What is a risk? A risk is any danger that can hurt you, your business or your organization. Risks can harm people, buildings, infrastructure, finances and the environment. Negative risks (should they happen) can be dangerous and expensive. You are not alone in facing these risks, as every person or organization faces unwanted risks.

If a negative risk does occur, it can cause:

  • Damage to infrastructure or buildings (i.e. by way of natural disaster)
  • Injury to family, visitors, staff, customers or community members (i.e. from hazards)
  • Financial losses (i.e. theft of actual funds or equipment.)

Some risks are common to every home and organization, such as; fire, flood, and accident. While other risks are very specific to your organization or industry. Risk management will help you to prepare for all the unexpected risks pertaining to you and your industry. It helps to keep you or your business from being too vulnerable to these risks and gives you a plan to follow should something go wrong.

While on the road to learning about risk management, it is important to clarify the difference between risks and hazards. Many people confuse and/or interchange these two terms. Firstly, a hazard is something that poses a threat to life, health, property or environment. Risk is the chance that someone or something will be hurt by that hazard. For instance, a river is a hazard and flooding is the risk, or, leaving things unguarded is a hazard and having these things stolen is the risk. Not only can people, property or businesses be affected by hazards and risks, your reputation can be irreparably damaged if you are not prepared to handle these risks as they arise. It is vital to know the hazards and risks that you or your organization face.

Risk Assessment

To get a clear picture of what your risks are in any situation, a risk assessment can be performed. This risk assessment will help you gather all the information you need to subsequently create a risk management plan. Some risks are easy to predict, like possible flooding when your building is near a river, but some are beyond our control, like theft. Without a proper risk assessment, you cannot possibly expect to put together a comprehensive risk management plan.

How do you perform a thorough risk assessment? You should take a very careful look at all the risks you or your organization may face. Here’s how to begin:

1. Identify

  • All the risks facing your home or business
  • Who or what could be hurt by the risk
  • How bad it could be if it happens

2. Analyze

  • Probability (what are the chances it could happen to us?)
  • Severity (how bad would it be for us if it did happen?)

3. Rank – the risks in order of importance

  • How soon could it happen?
  • What would losses and costs be if it did happen?
  • Will it affect day to day operations?

Another option for performing a detailed risk assessment, if you find the idea of this overwhelming, is to call a professional to assist you with this process. AIS can put you in touch with experts that can support you through your risk assessment to be sure you have thought of all the possibilities.

Finally, you will be able to use the information from your risk assessment to begin your risk management plan. By looking closely at your risk assessment, you will be able to determine which risks you can fix, minimize, transfer and prepare for. An all-inclusive risk management plan should detail which risks you will repair, which risks can be reduced, which risks must be transferred to insurers to worry about and which risks you just have to plan for. Your risk management plan should be constantly re-evaluated, as risks are always changing.

Why should you have a risk management plan? It could save you thousands of dollars! Not only can you plan to have some financial reserves for unexpected risks, you will likely reduce your insurance rates and, in some cases, be able to acquire insurance where you previously could not. In some situations, you may be able to eliminate certain risks with very small fixes, thereby improving your home and business life immeasurably.