Redefining the Status Quo: A New Way to Assess Risk
Risk in business is inevitable. In fact, it is an integral part of the business ecosystem. From the supply chain to environmental factors, many elements of a business are one accident or outage away from real revenue loss. Insurance is built to provide companies relief in those situations, but a closer look begs the question — does traditional insurance really protect me from the risks our dynamic world poses? Sure, it may cover a machine in the production line that breaks down or the damage to your fleet from a hailstorm, but what about when your warehouse manager moves over to a competitor, taking with him a wealth of knowledge and bringing your operation to a grinding halt? Risk assessment and safety planning have traditionally focused on physical things you could insure. It fails to account for less tangible but very real risks that your business could be facing such as the retention of key talent. The traditional approach to risk assessment just isn’t cutting it — that’s why we decided to innovate.
An Outdated Model
Insurance is a fundamental component of any risk mitigation strategy. By paying premiums, a company gains protection against potential risk in the form of reimbursement for damages covered by their policy. In many cases, insurance is purchased to cover liability, workers’ comp, and the company fleet. But often, insurance does not adequately cover risk. According to the Insurance Journal, 3 out of 4 small businesses in the United states are underinsured by 40% [1]. When risk turns into reality, many organizations come to the painful realization that while they may get a payout from their insurance provider, it is often not enough to cover the losses they incur. Traditional insurance is failing to properly identify the dynamic risks businesses face.
On top of their insurance policies, many companies have a safety officer and countless plans in place to create a safe environment for their employees. There are OSHA posters and safety protocols littered across many plants and warehouses. And yet, in the US alone, there are around 4500 fatal injuries every year with companies losing over 80 million production days [2]. As much as companies strive to provide a safe environment for their employees, the reality is that many fail — but why is that the case? Here are three reasons:
1) Traditional Risk Assessment is One-Dimensional
Traditional insurance looks at risk in terms of severity — which can end up being quite a grim sentiment. It asks how much will a potential event (such as an employee injury) cost us? This focus on cost above all else fails to ask how an injury impacts the employee and their peers. Risk assessment should analyze the severity of risk, the frequency of risk, how prepared your company is to respond, how long the effects of an event could be, how widespread the risk might be, and especially how it will impact your people. If you only look at the direct costs such as medical bills and insurance premiums, you can miss the massive indirect costs that risks can pose.
2) Traditional Risk Assessment Happens in Silos
Many risk assessments will treat the individual parts of a business as separate, but this could result in exposing new risks in other parts of the organization, or completely miss risks that fall “between the silos”. Companies do not exist in bubbles. Third party contractors, raw materials suppliers, and distribution partners are just a few potential sources of risk that are technically outside of an organization. A robust risk assessment should examine an organization holistically and understand the way risk flows in and out of all the different parts of the company.
3) Traditional Risk Assessment is Reactive
Traditional risk assessment often takes a past-tense view at situations, reacting to risks after they occur instead of proactively attempting to eliminate them. Imagine that a warehouse experiences a power outage due to local substation issues. They then purchase generators to avoid that issue in the future. Proactive risk assessment would identify that the entire warehouse is dependent on that one substation, and have generators installed before ever losing power and productivity. Risk should be identified, not responded to.
The current insurance model is flawed, and to be honest, it leaves many businesses vulnerable. It looks at your risk in a shallow way, can easily miss hidden risk, and does little to prevent future risk and truly protect your company. With all of these issues in the traditional insurance model, where do we even begin to make changes to have the greatest impact on your organization?
In our opinion the place to start is with one of the most overlooked and most impactful risks you face — key talent retention. From minimum wage increases to a competitor poaching one of your key people, employee turnover is often ignored in the traditional risk assessment model. We believe it should not be.
Employee Turnover as Risk
Whether you are hiring young talent fresh out of college or have an aging workforce with years of experience — employee turnover is an unavoidable risk. According to employee retention reports, the average employee loss equates to a cost of around 33% of their annual salary, and this only goes up for positions with greater experience and responsibility within an organization [3]. A business faces the direct costs of hiring replacements and lost productivity, and perhaps more importantly — the loss of knowledge and skills that can be devastating if the wrong person leaves without passing them on.
Employees leave, but why? And how can this risk be mitigated? Some might argue that today’s workplace is a bidding war, and that you must be able to pay more than your competition. But according to studies — compensation is not the main factor in most decisions to leave a company [3] In fact, some of the biggest factors in these decisions are environmental — how safe is my environment? How much do the leaders within my company care about me?
At the end of the day, it seems that most employees want their workplace to be an environment where they feel safe and valued. Employees are the foundation of an organization, and yet most risk analysis does not stop to think about turnover and how to retain key talent. This needs to change.
It is Time to Innovate
Our approach to risk assessment puts the understanding that employees who feel that leadership is active and engaged in improving their safety are less likely to leave your organization front and center [4]. Our team of risk assessment experts will provide a true and deep assessment of your risk, alongside a plan to implement and communicate it throughout your company.
Our process begins with a full analysis of the organization. The more data we can get the better. We partner with you to collect data from your organization with a variety of surveys and tools. Importantly, we gather this data from all levels of the company — contributions from management and workers on job sites both provide vital intel and help us to avoid any blind spots. We keep collecting data until we feel that we have a thorough picture of the risk your organization faces — From hazards and work conditions to the scope of your manuals and employee behaviors.
This data is then analyzed to gain a data driven understanding of the exposure your company faces, the gaps in your service schedule and more. This approach also helps us come into your company as a truly unbiased third party, bypassing company politics and perceived bias to create a swift and effective change in your safety culture. Our data-backed approach decreases injuries and claims while increasing communication and awareness. Our goal as your risk assessment partner is to work ourselves out of a job as we strive to create:
1) An Environment that Lowers Your Risk
Multi-dimensional risk assessment results in programs that can accurately gauge and address your risk. Proactive training, communication and planning reduce the incidents and costs your organization runs into. Our clients experience a reduction in OSHA citations and rates, reduced MOD rate, alongside lower injury risk.
2) An Environment that Retains Your Talent
Intentional communication organization wide will demonstrate to your employees that leadership is engaged and cares about their wellbeing. Combined with increased safety — your employees will be less likely to pick up and move along. On top of that, improved culture and morale can become an asset to attract talent and customers and position your organization as a leader within your industry.
And you know what the best part is? Not only will you have a better understanding of your risk and the correct coverages and plans in place to mitigate that risk — but we also get it done at a fraction of the cost of the average salaried safety officer.
If you are ready to transform your organization with a data driven approach to risk assessment and unlock the full potential of your team, we would love to chat with you. Click here to learn more!
References
- Schmittlein, M., “How to Help Small Businesses Avoid Underinsurance and Anticipate the Unexpected.” April 16, 2012. Retrieved May 09, 2021.
- Zacharatos A., Barling J., Iverson R.D. “High performance work systems and occupational safety.” Journal Applied Psychology. 2005; 90:77–93.
- TINYPulse. “TINY Pulse Employee Engagement Report.” Seattle; Tiny Pulse. January 1, 2018.
- Amponsah-Tawiah, Kwesi et al. “Occupational Health and Safety Management and Turnover Intention in the Ghanaian Mining Sector.” Safety and health at work vol. 7,1 (2016): 12–7. doi:10.1016/j.shaw.2015.08.002
