Risk Management - how do you know what to insure?

You can’t plan for everything, but it’s important to understand the kinds of risks that might hit hard. Every business should plan how to minimise risk and deal with it, if the unthinkable happens.

There is no one rule to apply to risk. Emotion can sometimes derail the process without a framework in place to assist decision-making. Start by brainstorming up every conceivable risk. Then divide your list into two columns:

• What potentially catastrophic events may affect your business?  What events could result in financial loss, cause you to change your life or force you to close your business? Think about insuring for these risks.
• What risks might potentially cause you to suffer losses but which you could manage out of your own resources such as cash assets? You may not need to insure against these risks.

People tend to think about things first - buildings, vehicles, plant and equipment. Factor in the human capital risk too. What would happen if you couldn’t work for six months? Who are the other key people? What would be the impact if they couldn’t work for six months or couldn’t return to work at all?

People sometimes over- or under-insure in the wrong area and find gaps in their risk management plan too late. For professional advice in structuring your risk management plan connect with your local insurance consultant. If you’re not quite sure where to start, talk to us first to help unpack it.