Is Your Targeted Risk Control Process Effective — Or a Liability?
SEPTEMBER 7, 2021
While lists of “Top Workplace Risks” are popular, key risks vary from industry to industry, business to business, and even year to year for many organizations. That’s why effective strategies focus on the process of identifying critical risks and targeting them with best-in-class solutions — and continually repeating this process to ensure ongoing improvement and cost savings.
Businesses spend $170 billion a year on costs associated with occupational injuries and illnesses that impact the bottom line. The recent increase in “mega claims” (those typically totaling $3 million or more in incurred losses) to a 12-year high further complicates the issue. These measurable losses allow companies to calculate return on investment (ROI) when taking specific loss control actions that they can measure against improved loss experience.
However, few people realize how rare an effective risk control process is — one that truly fires on all cylinders. Naming each “cylinder” can help clarify how the process works:
- Claims: Do you analyze claims from all insurance lines to identify specific loss trends? Claims are more than workers’ compensation — you should also incorporate property loss, general liability and other exposures into your targeted risk control process.
- Targeted risk control: Do you implement robust solutions to solve these loss trends and prevent future claims?
- Analytics: Do you continually measure all factors and determine which risk management strategies are (and are not) delivering ROI and consistent process improvement?
Many businesses do a great job on one or two of these objectives, but that’s not enough. A truly effective risk control process includes specific steps that must be followed correctly and consistently. If they’re not, the process won’t be effective, or, at worst, could result in costly damage. If you identify the wrong loss trends, for example, you will end up investing in the wrong solutions, which would both waste money and fail to solve the root problems. If those problems remain, the losses continue to grow and start a domino effect. Therefore, the wrong risk control process can waste resources and neglect costly liabilities. From a cost-benefit standpoint, investing in a poor risk control process can be worse than doing nothing.
While success might seem straightforward, there are a lot of moving parts and high-stakes decisions involved. Claims costs typically make up 60% to 80% of an organization’s premium and total cost of risk (TCOR). A breakdown in one step can compound costly problems in the subsequent steps. That’s why an effective risk control process is critically important.