Risk management is one of the areas commercial insurance brokers often deal in; however, its actual meaning remains unclear for many laymen. This article seeks to shed some light on the matter.
As commercial insurance brokers specialising in risk management, we often meet with confusion on the part of clients as to what exactly that term means. Most laymen and women have only a vague idea of what actually constitutes risk management, which is why, in this article, we have attempted to try and define the term in as simple a way as possible.
In its simplest form, the term ‘risk management’ refers to the way a human being deals with a potentially risky situation. This often entails a three-step process whereby the person begins by understanding the risk in order to then analyse it and act upon it. This process is capital in ensuring humans do not unnecessarily put themselves in physical, social or financial danger, and that the relationship between risk and reward in their everyday lives remains high.
What commercial insurance brokers do is, quite simply, transpose this three-step process to a business context. Rather than assess the risks an individual person is exposed to daily, these companies undertake that analysis in a corporate context, and seek to help companies judge how best to tackle these obstacles so that their risk-benefit ratio is as positive as possible. To achieve this, most commercial insurance brokers use a series of internationally recognised standards, applying them to each individual situation as relevant. However, adherence to the standards is not mandatory, and some companies choose to simply implement their own techniques, rather than follow any previously established ones.
Whichever way their commercial insurance brokers go about it, however, it is undeniable that companies benefit greatly from having experts conduct risk management assessments for them. Not only do these case studies often make businesses aware of the risks they are facing, but they also help them cope with said obstacles in a way they may not have accomplished on their own.