We've noted these key concerns:

Lack of acceptable business interruption and related time-element coverage. To save costs, the previous risk manager elected to decline business interruption coverage. Following a more than $1 million property and business onterruption loss, the company sees things differently today, yet is still focused on purchasing a low deductible (and higher cost) insurance option. We coached the executive team to consider a higher deductible, to save premium cost while still protecting the organization against serious events with larger dollar impact.
Inadequate management liability coverage. As a small-to-medium private company, the board of directors avoided purchasing directors and officers coverage based on the belief that a claim or suit would be highly unlikely. Recently, basic coverage was purchased for a low limit, incurring a minimum premium; however, a higher limit is available from the incumbent carrier for little or no additional cost. For reasons I can't discuss here, we recommended a broader coverage form and higher limits for a similar premium cost.
Benefits costs far beyond average for the industry, size and geography of this company. As a long-term company with loyal employees and customers, this organization has placed a premium (literally) on its ability to maintain health and benefits at a level far exceeding what is customary and competitive for its industry and geography. Monthly employee contributions for healthcare are less than the cost of dinner for two at the local grill & bistro. We recommended the company right-size its benefits offering — still maintaining best-in-class coverage for its industry and geography, while accepting cost adjustments that are fair to employees and support the company's financial and operating objectives as well as its longer-term health.

These examples highlight basic risk management principles of understanding and managing risk within an organization's risk profile and financial wherewithal. In each case, the company's risk management strategy hasn't caught up with its size and competitive position. Left unchecked, the current situation is diluting the company's value. Recent events have highlighted the need for adjustment, as both coverage and cost have contributed to the company's inability to maintain current levels of employment with healthy cash flow and profitability.

Special Reports /

Risk management savings vs. sensibility

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