What keeps you up at night?
You wake up at night in a cold sweat! In your dream (or nightmare), you are on the witness stand in front of the judge, jury and, of course, the local media, having to answer questions as to why you approved a lease agreement that has now caused a class-action lawsuit against the port for $14 million...
Thank God you woke up! It's no wonder that the first question you are asked by your risk manager or insurance broker is, "What keeps you up at night?"
Every major decision and aspect of your operation is subject to risk. An adverse outcome can impact several areas of your business, from financial loss to damage of physical assets, disruption of operations, decline in worker productivity, loss of a major client or key members of your management staff and even destruction of your reputation and standing in the community.
Risk and its consequences is not a difficult concept to comprehend. The challenge is understanding and implementing specific actions within a business culture to mitigate potential for loss.
With every action, there is a reaction. Every decision carries the potential to create loss in your organization. Understanding your risk and taking a proactive approach in communicating and educating all employees, especially those in management positions, on how risk is viewed and controlled in your company is a first critical step in mitigating future losses. Just as you have prepared and planned for natural catastrophes and regulations regarding security and terrorism, so must you think beyond the obvious and prepare and plan for other events that could have a substantial impact on your bottom line.
In-house risk managers and risk management departments can coordinate with senior management in all areas of operation in identifying your organization's risk management philosophy. Conducting risk assessments will help you identify the most critical issues of concern and the best methods for addressing those issues. Your current insurance broker can be a valuable source of information regarding exposures and risk control methods.
A risk assessment is an important tool for meeting certain objectives of a successful risk management program. These objectives are:
- Reduce potential for loss by providing expert advice and innovative solutions;
- Identify and define your risk appetite;
- Assume a cost-effective approach to loss-control expenditures and insurance buying;
- Address both present and future exposures; and
- Provide resources in the form of services and products that add value to the risk management decision process.
The more your organization embraces a risk management culture, the more attractive you become to insurance carriers, lenders and even new tenants and clients. Bottom line is that an active and organized risk management focus can lead to fewer adverse events, lower claim activity, better insurance coverage and lower premium costs -- in essence, saving money!
Ms. Heffernan led a discussion on the applicability of risk management to port operations, safety and technology on June 11 at the American Association of Port Authorities' Port Operations, Safety and Information Technology Seminar in Seattle.
