Managing Your Total Cost of Risk
To develop the most appropriate risk management program for your organization, approache “insurance” through a variety of insurance and non-insurance strategies, such as:
• Identification processes (qualitative and quantitative).
• Loss analysis tools to uncover exposures.
• Implementation of pre- or post-loss initiatives that address cost containment.
• Business continuation planning/disaster recovery.
• Risk financing options, retained losses or transferred.
• Regulatory compliance issues.
As a manufacturer, how do you quantify your true cost of risk? For example, if you are faced with a recall, how do you calculate your loss of reputation or market share? It is difficult, at best, to quantify this scenario. In contrast, other components of your cost of risk are easily identified, such as insurance premiums, or lost production costs caused by downtime of a custom piece of machinery.