Threat Control

Smart companies take a proactive approach to risk

Back Commentary Nov 3, 2014 By Christine Calvin

Workers’ compensation rates have increased by more than 40 percent since 2009, and according to the Workers’ Compensation Insurance Rating Bureau, the rise isn’t soon likely to stop. That’s why proactive business leaders like Rod Barbour and Adrian Borg are thinking strategically in advance to guard against risk. They bid traditional workers’s comp providers adieu and joined cooperative insurance pools that are now saving their companies tens of thousands of dollars annually.

Circumventing risk involves carefully analyzing a situation to determine the major hazards, then taking steps to minimize potential damage. In the pages of our November issue, we look at a variety of business threats — from Congress’ consideration of net neutrality (“Protecting Ourselves From a Slower Internet,” page 20), to malicious computer hackers’ propensity for feeding on small businesses (“Web of Thieves,” page 60)  to the imperiled livelihoods of beekeepers (“As the Bees Go,” page 52) — to understand how business owners manage their risks.

During the recession, risk management seemed a lot more like crisis management than a forward-looking, enterprise-wide approach to handling risks in a way that promoted sustainable growth. But today, smart companies align their risk management tactics with their strategic plans, which is helping them achieve their most important business priorities. These companies are proactively searching out vulnerabilities and changing processes and procedures to prevent them in the future.

Organizations have historically viewed risk management as amassing capital to address workers’ comp, security breaches, regulatory requirements and emergencies. But today’s companies — having learned from the trials of our nation’s recession — are beginning to view risk management as a vital part of a their comprehensive strategic plans. As Borg Fence and Decks discovered when it joined an insurance captive (“Captive Market,” page 84), a solid risk mitigation strategy can have tremendous impacts on a company’s reputation and profitability.

But the types of risks to which companies are exposed, as well as their severity, are growing, leaving businesses of all stripes and sizes vulnerable and underprotected. According to a 2011 report by Accenture, “Companies are increasingly concerned about the spectrum of risks — from supply chain to operations to regulation to reputation.”

Financial fraud and cybercrime are on the rise, the market is volatile and dozens of industries are being hammered by California’s drought. As such, 98 percent of participants in Accenture’s 2013 Global Risk Management Study reported an increase in the perceived importance of risk management at their organization.

Many are responding by improving their access to robust data, investing in technology that can provide extensive reporting capabilities and “visibility into individual scenarios,” according to Oracle, which released a white paper on the topic last year.

“There is a renaissance in analytics technology underway today, and it arrives just as the issue of risk takes on an even higher profile for leaders across industries,” wrote Deloitte analytics expert Vivek Katyal on the company’s blog. “You probably have been using analytics — or some version of it — for years. … But today risk analytics is more focused on data exploration, segmentation, statistical clustering, predictive modeling, and event simulation and scenario analysis.”

Leaders of companies and jurisdictions of all sizes fight a daily battle against risks both seen and unseen — and many have come up with creative strategies to ward off losses. This month’s stories explore ways to recognize and thwart the hazards that stand between your business and economic prosperity.


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