In today’s world of uncertainty, it may be difficult to know where to focus our efforts as we are largely in unprecedented territory. In recent times, we have not seen the level of threat the coronavirus pandemic presents to public health and economic impact on businesses on such a global scale. As the virus spread across the globe and stay-at-home orders were instituted, the world economy was virtually shut down. In the US, many states are now beginning to re–open and businesses are taking steps to re-emerge. Those tasked with managing their organization’s risk are still facing many unanswered questions that will likely impact the ability to maintain resilience through the crisis and beyond.
- How long will the pandemic persist, and will it reoccur?
- How can we ensure our workers, customers and visitors are safe?
- What will the economic recovery look like?
- How will the insurance markets react at renewal?
- What are the expectations for managing risk moving forward?
- Has our risk appetite and related risk tolerance changed?
Today’s risk environment forces us to be agile and flexible enough to take on these unknowns, but we will often find success in controlling what we can control. Prior to the coronavirus pandemic, risk professionals were faced with navigating an increasingly hardening insurance market impacting nearly all lines. Now the insurance industry outlook is further complicated with the unknown ramifications of COVID-19. Due to the continuing evolution of the pandemic, many industry experts agree the market is uncertain. However, some industry analysts are indicating the global pandemic will likely impact pricing in the remaining quarters of 2020. With this uncertainty in the marketplace, organizations are best suited to face these challenging times by reducing their vulnerability to more traditional risks.
Having a solid understanding of the following areas may assist in persevering over the current coronavirus crisis and future challenges.
RISK TOLERANCE + INSURANCE
Having a strong relationship with your insurance advisor and a functional knowledge of your risk transfer program may prove valuable in determining your risk tolerance and need for standard or alternative risk transfer solutions. A qualified insurance specialist will be able to assist in evaluating your current program, risk tolerance changes in light of the pandemic and proper vehicles for the transfer of risk. Organizational needs have likely shifted due to the health crisis and many companies are finding themselves looking for avenues to access capital with a need to have cash on hand. Re-evaluation of your risk appetite and related risk tolerance may allow you take more risk in certain areas thereby saving on your cost of risk and allowing access to more capital.
BUSINESS CONTINUITY PLANNING
Prior to the onset of the COVID-19 virus, few companies planned for a pandemic halting the world economy in their risk evaluations. There are various expert opinions as to the probability of a future economy-crippling pandemic; however, companies should use this crisis to renew their commitment to protecting their organizations from more traditional business interrupting events such as natural disasters and cyber-attacks. The current pandemic and subsequent focus on risk management provides an opportunity to review, enhance or build their business continuity plan to help mitigate future business losses from more common hazards such as fires, floods or tornadoes. Having a comprehensive business continuity plan that incorporates a business impact analysis, emergency response, crisis management and communication, and disaster response and restoration planning is a risk management best practice to further protect the organization from business interruptions and reputational harm.
PANDEMIC RESPONSE + CONTINUITY PLANNING
Relatively new to risk management is the development of a Pandemic Response and Continuity Plan. Such a plan should be designed to address the recent coronavirus as well as future pandemics or other public health emergencies. This should be a wide-ranging plan that should be established as a subpart of the company’s overall business continuity plan and specifically addresses how the company will respond in the event of future health emergencies—either global or local.
While coronavirus is dominating the headlines today, the risk of a devastating cyber-attack is still a significant threat to your organization. With many employers observing stay-at-home orders, employees in record numbers are accessing company networks remotely – significantly increasing the threat to the organization. As with business continuity planning, a risk management best practice should be to complete a thorough cybersecurity assessment and review or establish a formal cyber resilience program with an established cyber incident response plan. An Incident Response Plan (IRP) is a key element of a comprehensive cybersecurity and business continuity plan as it outlines how an organization will respond to an adverse cyber event. The hours and days immediately following a cyber event are critical to controlling the fallout from a business continuity, reputational harm and financial perspective. An effective IRP should be established well in advance of a cyber event and should address individual roles and responsibilities, reporting procedures, breach containment, communication plans and government notifications.
While most organizations have a robust occupational health and safety program for accessing and controlling employee workplace exposures these programs can become stale over time. The organization’s safety manual and training schedule should be reviewed and revised as necessary to keep up with evolving exposures. Furthermore, risk managers should have a very clear understanding of the organization’s workers compensation loss trends by completing a detailed trend analysis and ensuring safety efforts are aligned to mitigate these trends. These are generally controllable exposures that insurers will direct their attention to when evaluating your insurance program. Any improvements in controlling your loss trends will likely optimize your insurance cost as well as provide the obvious benefit of improving employee safety.
While mitigating the impact and disruption to our businesses from the current coronavirus pandemic presents its own set of challenges; we can use this occasion to strengthen our current risk management programs to better position ourselves from future unknown events. Navigating the current global pandemic has been the primary business focus and will likely dominate our attention for the foreseeable future. However, having solid and comprehensive risk management programs can improve our ability to face the growing number of threats to our organizations and provide for greater perseverance through challenging times.
For assistance in reviewing your risk management and risk transfer programs please contact MJ Insurance. We have a team of risk management professionals able help guide you through this crisis and assist with optimizing your company’s risk profile to better endure future business interruptions.