Tag Archives: Business Insurance

Nov 06 2013
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Healthcare Reform

Reinsurance Fees—Possible Exemption for Certain Self-insured Plans

The Affordable Care Act (ACA) creates a transitional reinsurance program to help stabilize premiums in the individual market for the first three years of Exchange operation (2014-2016) when individuals with higher-cost medical needs gain insurance coverage. The program imposes a fee on health insurance issuers and self-funded group health plans.

On Oct. 24, 2013, the Department of Health and Human Services (HHS) released an advance copy of a final rule  under the ACA. In the final rule’s preamble, HHS states that it intends to issue a proposed rule that would make the following changes to the reinsurance program:

  • Exempt certain self-insured, self-administered plans from the reinsurance fees for 2015 and 2016; and
  • Modify the collection deadlines for the fees to reduce the upfront burden to plans and issuers.

Reinsurance Fees

Contributions to the reinsurance program are required for health plans (fully insured and self-insured) that provide major medical coverage. Certain types of plans are exempt from the requirement to pay reinsurance fees, such as health flexible spending accounts (FSAs), health reimbursement arrangements (HRAs) that are integrated with major medical coverage, health savings accounts (HSAs) and coverage that consists solely of excepted benefits under HIPAA (for example, limited-scope dental and vision plans).

For insured health plans, the issuer of the health insurance policy is required to pay the reinsurance fees. For self-insured health plans, the plan sponsor is liable for paying the reinsurance fees, although a third-party administrator (TPA) or administrative-services only (ASO) contractor may be used to make the fee payment at the plan’s direction.

The reinsurance program’s fees are based on a national contribution rate. The reinsurance fee mainly consists of amounts collected to cover reinsurance payments and administrative costs, but it also includes funds that must be deposited into the general fund of the U.S. Treasury.

For 2014, the national contribution rate is $5.25 per month ($63 per year). The national contribution rates for 2015 and 2016 have not been established yet. The reinsurance fee is calculated by multiplying the number of covered lives (employees and their dependents) during the benefit year for all of the entity’s plans and coverage that must pay contributions, by the national contribution rate for the benefit year.

HHS has indicated that issuers and plan sponsors will be required to submit an annual enrollment count to HHS no later than Nov. 15 of 2014, 2015 and 2016 based on enrollment data from the first nine months of the year. Within 30 days of this submission or by Dec. 15, whichever is later, HHS will notify each issuer or plan sponsor of the amount of its required reinsurance contribution. The issuer or plan sponsor would be required to remit this amount to HHS within 30 days after the date of HHS’ notification.

Possible Changes

In the preamble to the final rule, HHS states that it intends to propose in future rulemaking to exempt certain self-insured, self-administered plans from the requirement to make reinsurance contributions for the 2015 and 2016 benefit years. At this point, it is not clear which self-insured plans will be covered by the proposed exemption. However, it appears that self-insured plans will be required to pay the reinsurance fees for the 2014 benefit year.

HHS also intends to issue a proposed rule that would change the collection method for the reinsurance fees. Under the revised collection method, the fees would be collected in two installments to reduce the upfront burden to plans and issuers. The fee for reinsurance payments and administrative expenses would be collected at the beginning of the year and the fee for payments to the U.S. Treasury would be collected at the end of the year. Under this payment schedule, a larger payment would be due in January 2015 and a smaller one would be due in December 2015 for the 2014 reinsurance fee.

These changes will not become effective until HHS issues additional guidance.

More Information

Contact your Texas Associates Insurors representative for more information on the ACA’s reinsurance fees.

 

 

Dana Rostro is the Director of Employee Benefits Sales and Operations at Texas Associates Insurors. Dana is ACA certified and has helped clients develop the best strategies for their operations within the new healthcare legislation.

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Nov 02 2013
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Business Insurance, Personal Insurance

A Casual Look at Property & Casualty Insurance

While shopping for insurance, whether for your home or business, you may have heard the term “property and casualty insurance” used by your agent or insurance representative. When looking at your quote or reviewing your issued policy, you will see lists of coverages such as “personal property” or “general liability”. These coverages fall under either Casualty or Property and make up the essential parts of your policy. Without these, there would be no coverage and no protection for your assets.

But, “what is property and casualty insurance and do I need it?”

Property Coverage

You may find Property coverage more straightforward than its counterpart, Casualty. If you carry any insurance for your building, equipment, furnishings, or your home, car, or personal belongings, then you already have property coverage built into your policy. This coverage protects you against direct damages to your property by covering causes like fire, lightening, and wind.

Property coverage can also apply to loss of income generating ability, as you would find in Business Income coverage. This applies specifically to your ability to generate income in the event of a covered accident or damage that prevents your business from operating. A few days or several weeks could cripple your business and result in closing without this type of property coverage.

Casualty Coverage

Casualty can be difficult to define but it typically refers to the liability coverage found in business and personal policies. The term casualty is not applied to Life, Health or Property policies where liability is not a factor. You will probably hear most often that casualty is insurance covering injury or property damage to others “for which you are legally liable”.  In simpler terms, it is coverage for damages caused by you due to your negligence.

Accidents happen both at home and on the job all the time which can result in injuries.  A friend visiting your house could be seriously hurt because the deck you built collapsed.  Or, a customer at your salon might slip-and-fall because of an unsecured mat and suffer serious fractures. These types of accidents are not anticipated but because of our potentially negligent acts, could result in thousands of dollars in medical bills and legal fees.

Why Do I Need It?

If you own anything of value that you could not replace out-of-pocket in the unfortunate event of disaster, then chances are that you need Property and Casualty insurance.

If you have ever been careless while driving, at home, or at your place of business, you need Property and Casualty insurance.

For all the savings you may have or for all the planning you’ve done, nothing can prepare you for an unexpected event like a fire. The cost to repair and replace your belongings and cleanup the damage in the aftermath could total in the thousands. The best and most effective plan for protecting yourself and your family from financial crisis is insurance.

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Nov 01 2013
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Business Insurance, Risk Management

Taking the Risk Out of Building

As the U.S. home market slowly recovers, builders are seeing a boost in construction contracts. New commercial buildings are being built at a rapid pace. With these surges in construction, specialized policies like Builder’s Risk provide important protection against exposures that are unique to the building trade.

The Basics of Builder’s Risk

The Builder’s Risk policy provides protection for homes or commercial buildings under construction, while being remodeled, or undergoing renovation. The policy covers materials like concrete, lumber, and fixtures as well as machinery and equipment used to maintain the building. The policy also covers the cost to remove debris caused by a covered accident, like a fire or lightning strike.

In most cases, a Builder’s Risk policy is required for buildings under construction and purchased when the home or building is at least 30% complete. The limit of insurance is based on the estimated value of the project once its complete. Because the value will increase as glass, framing, and other materials are added, the limit should also be increased. Once the project is done, coverage will end when the building has been taken over by the owner, the work has been complete for 90 days, or the builder has abandoned the project.

Pitfalls and Perils

Accidents happen and by their nature, they’re never anticipated. An accident can stall or completely stop a building project. To avoid the pitfalls of damage, there are three types of perils coverage to choose from: Limited Perils, Specified Perils, or Special Perils.
Each has their own unique advantages but the most inclusive is Special Peril, which covers accidental losses that are not specifically excluded. While this type of coverage is the most attractive, it is also the most expensive. Though the cost may be more than its counterparts, the broad coverage pays for itself in the event of a large loss that might otherwise have been excluded.
Valuing Your Property

It’s a common misconception that all property policies replace damaged items based on their original replacement value. While many companies sell enhanced policies with special endorsements, like Replacement Cost, a great majority of policies come with Actual Cash Value.

In the event of covered damage to your property, claims are paid on an Actual Cash Value basis by default. This means only the depreciated cost to repair or replace will be paid. This can leave the project with a shortfall in funds and possibly halt further construction. To avoid this common mistake, check the policy and endorsements to ensure that Replacement Cost coverage is included.

Policy Limitations

While the coverage provided is vital to most building projects, limitations apply. Builder’s Risk does not cover Earthquake, Flood, Steam Boiler, or intentional acts of damage. Because policies vary by company, coverage for materials in transit, equipment such as scaffolding and trailers, or theft of materials may be limited or excluded. For an additional premium, separate policies or endorsements can be added to ensure coverage is in place where it is needed.

Coy Sunderman is a risk advisor specializing in risk solutions for construction businesses, oil & gas operations, manufacturers and distributors/wholesales. Coy is a Certified Work Comp Advisory and holds his CIC (Certified Insurance Counselor) designation.

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Oct 24 2013
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Business Insurance

What is Commercial Umbrella Insurance & Why Do You Need It?

Most businesses have a variety of insurance policies to cover things like employment liability, property damage, officers and directors, commercial vehicles, workers compensation, etc. The coverage you purchase should be specific to your business, the industry in which you work, and the unique risks you and your employees face in a typical workday. In theory, your business insurance policies should cover you in the event your business is sued. The reality, however is that the amount of liability protection these policies offer may not provide enough financial protection. This can leave your business open to risk and make your assets vulnerable.

Lawsuits Are On The Rise

Our society is becoming more litigious every day. In fact, recent research shows that 89% of Americans believe lawsuit abuse is a problem. The rise in the number of lawsuits (both legitimate and not) and the size of jury verdicts impose a heavy financial burden on many businesses, large and small. Just consider some recent cases that have hit the courts:

  • Pizza maker Papa Johns is the subject of a $250 million class action lawsuit over text messages it sent to customers offering discounts and coupons on pizza
  • The maker of Nutella, a popular hazelnut spread, agreed to settle a $3 million class action suit that alleged it falsely claimed its product was healthy
  • And who can forget the famous case of Liebeck v. McDonald’s, in which 80-year-old Stella Liebeck spilled a McDonald’s coffee in her lap, causing third-degree burns on her legs, lap, and groin area. Liebeck tried to solicit McDonald’s for a mere $800 to cover the skin grafts required for her injuries, but McDonald’s refused. Ultimately, the jury settled, awarding Liebeck $2.7 million.

Such lawsuits are not restricted to large companies like Papa Johns, Nutella and McDonalds. Take the case of Eric Nordby, who owns several small businesses in Auburn, California. He was the subject of a lawsuit alleging non-compliance with ADA requirements. At the time the suit was filed, the plaintiff in the case was been responsible for filing 140 of the 200 ADA-related cases in the Eastern District of California. Whereas other defendants chose to settle for upwards of $15,000, Nordby chose to fight the suit.

In cases like Nordby’s, there are no guarantees that the outcome will be in the business owner’s favor, and there is a very real possibility that the legal fees incurred, or the settlement, may cause extreme financial hardship for the business. This is because no matter what precautions you have taken, there may be gaps in your business insurance policies.

Why Umbrella Insurance

A commercial umbrella insurance policy can augment your existing business policy with supplementary liability protection against financial losses stemming from lawsuits and accidents. These types of policies are designed to provide increased limits of financial protection to your business from unexpected risks, and best of all, they are surprisingly affordable. That’s because the underlying policy limits are used first and your commercial umbrella coverage limits only kick in after those policies have reached their limits.

For example, if your current policy covers you for $2 million and you are successfully sued for $3 million, your business umbrella policy can pay the outstanding $1,000,000. Without umbrella coverage, this money would have to come out of your business profits.

There are a variety of things that an umbrella policy can cover. Some common examples include:

  • Excess General Liability
  • Excess Commercial Auto Liability
  • Excess Employers’ Liability
  • Excess Product Liability
  • Excess Marine Liability
  • Excess Energy Liability
  • Excess Premises Liability
  • Excess Contractors’ Liability
  • Limited Excess Professional Liability

If you’re not sure whether your business should have a commercial umbrella policy, give us a call. One of our experts will be happy to review your existing policies and identify any potential gaps in coverage that a commercial umbrella policy can address.

Dave Perez is a risk advisor at Texas Associates Insurors and specializes in property and casualty risk assessments for business owners.

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Oct 17 2013
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Risk Management

4 Small Business Legal Risks to Watch Out For

Every business has to make legal considerations on a daily basis, regardless of what industry they find themselves a part of. For small businesses and start-ups, legal considerations can often determine whether or not the company can achieve growth potential. Therefore, accounting for legal risks should be one of the fundamental characteristics of a small business’ enterprise risk management (ERM) strategy. Here are four legal risks that your ERM strategy must account for in order to safeguard your business.Insurance policy

Choosing your ownership structure

Choosing your ownership structure shows how businesses face legal risks before they even begin to operate. That’s why choosing the right ownership structure is such an important decision for businesses. This decision will impact whether or not you’ll be able to accept investors as well as how many and what types of investors. Your ownership structure will also influence whether you’ll be able to easily sell your company, what your personal legal liability will be and what your tax liability and benefits will be.

Litigation

Litigation is something that almost each and every operational business will have to deal with at some point. It is also something that can cost businesses a lot of money. For small business and start-up owners, legal fees can have a crippling effect on the company’s finances, often more so than actual settlements may demand. While juries tend to be sympathetic towards small businesses, the risk and cost of litigation is hardly ever justified and is something that should be avoided at all costs.

How do you avoid litigation? Seeking legal advice before you make any important business decisions that could lead to litigation can certainly help. Which brings us to our next point..

Failing to seek legal consultation when necessary

It’s only natural for small businesses and start-ups to avoid hiring an attorney in order to reduce legal costs. However, without appropriate legal advice, you run the risk of making decisions that could negatively impact on the business such as entering into legal agreements that don’t fully protect your interests. These failed decisions could end up costing the business much, much more than any legal consultation would. By failing to seek appropriate legal advice when necessary, your business may become threatened in the long run.

Ignoring Intellectual Property

Intellectual Property law is a complex area that is often avoided by small businesses, especially non-tech businesses that believe that they don’t face any intellectual property risk. However, failing to account for intellectual property and intellectual property insurance will leave your rights unprotected when it comes to the ownership of original ideas. This has the potential to significantly damage the future success of a small business, whether they realise it or not.

If your business is constantly experimenting and creating new technologies/processes that are unrivalled and eligible for patent, you may want to amend your employment agreements so that they clearly specify ownership of intellectual property. This can prove critically important when it comes to potential investments, particularly if you end up licensing your trademark to another company.

Legal matters may strike some small business owners as the itch that cannot be scratched, however, it is important to safeguard your business on an ongoing basis so that emerging legal implications are acknowledged and mitigated. By reviewing your risk management strategy and amending policy so that legal risks take focus, you can ensure your small business or start-up can become a success.

Small Businesses face many risks on a day to day basis but you can ensure the safety and future of your Business with a free risk assessment today.

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Oct 10 2013
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Risk Management

Benefits of First Aid Training in the Workplace

Most Businesses are not legally obliged to provide staff with on-site Health and Safety training. However, with incoming Health Care Reform and nationwide promotion of wellness in the workplace, more and more companies are beginning to offer First Aid training to staff. In light of this, we explore the benefits of making First Aid training a requirement in the workplace.02F66770

Practical benefits

First and foremost, introducing an ‘in-house’ First Aid Training Scheme has its practical benefits:

  • All employees become more safety aware, helping bring down the number of accidents;
  • First Aid saves lives, particularly where there are grave injuries and it is critical that immediate action is taken;
  • First Aid training does not have to take a long time, some managed training courses are only a few hours long;
  • First Aid trainees know exactly what’s in their first aid kits, how to use the contents and the various ways to react in an emergency;
  • The training gives employees critical knowledge and the confidence to effectively manage an emergency without fear or confusion;
  • They learn how to give injections, use painkillers, bandage injuries and control blood flow.

Tailored to the Industry

While outside First Aid programmes are widely available and supported on many fronts, ‘in-house’ first-aid programmes allow the company to tailor the scheme to suit their place of work and their financial capabilities. As well as that, on-site first-aid programmes can be incorporated into the company’s overall risk management strategy, reducing the need for a massive overhaul of current policy.

The problem with outsider First Aid programs is that they are generally run as a ‘one size fits all’ process. With ‘in-house’ first-aid programs, you can determine the learning criteria, based on the requirements of the workplace. For example, First-Aid training for a large office will differ from a first-aid programme designed for a construction agency. In-house training allows the company to specify what areas need to be covered and apply the learning to simulated scenarios that could occur in the workplace.

Cost

The main concern of companies in terms of the cost of introducing in-house training is considering the right provider and the exact number of sessions they should deliver, as well as the number of participating employees.

At first glance, it may sound like there’s a lot to consider in terms of the company’s budget. However, once you take into account the financial effects of workplace injuries, reducing accident severity and potential through first aid training can save a company quite a bit of money in the long term.

Employee Morale

It is hugely important to consider Employee morale in the overall business process, no matter what industry you operate in. At the end of the day results will depend on the efforts of your staff and if morale is low, the work is going to suffer.

By providing onsite First Aid training you can demonstrate how you care for the welfare of your employees and show them how they are valued in the workplace.

Providing First Aid training doesn’t cost Businesses a lot of money, however, workplace accidents do. By introducing an in-house scheme tailored to meet the demands of your workplace, you can sure up your company’s risk management plan and ultimately ensure the safety of those connected with the business.

If you are considering introducing an ‘in-house’ First Aid Training scheme, contact us directly for advice on how to do so.

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Oct 09 2013
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Health Insurance, Healthcare Reform

Impact of the Government Shutdown on Healthcare Reform

The U.S. Constitution requires Congress to pass a bill establishing a federal budget, often called a spending bill. For a spending bill to pass, the Senate and the House of Representatives must all agree upon the bill, which must then be approved by the President. When Congress is unable to agree upon a federal budget, or when the President vetoes it, before the budget cycle ends, a government shutdown occurs.

Due to Congress’ inability to reach an agreement on a spending bill, a government shutdown began on Oct. 1, 2013, following the end of the federal government’s fiscal year. Although the Republican-controlled House of Representatives has passed a spending bill that maintains spending levels, the bill does not provide funding to implement the Affordable Care Act (ACA). The Democratic-controlled Senate has refused to take up any bill that does not fully fund the ACA.

What happens during a government shutdown?

Similar to a lockout in the private sector, during a government shutdown, the government stops providing all “non-essential” services. This means that many government functions will stop, and many federal employees will be furloughed.

However, military personnel and essential employees will not be furloughed. In addition, other “essential” government functions and services will continue. These functions and services include:

  • Social Security, Medicare and certain types of veterans’ benefits;
  • National security, including the U.S. military and embassies;
  • Public safety, including air traffic control, emergency medical care, border patrol, federal prisons, most law enforcement, emergency and disaster assistance, overseeing the banking system, operating the power grid and guarding federal property;
  • All agencies with independent sources of funding, including the U.S. Postal Service and the Federal Reserve; and
  • Members of Congress, including essential Congressional staffers (but not those that are non-essential).

Which government agencies are affected?

Nearly all federal agencies will be affected by the government shutdown in some way. The Administration’s Office of Management and Budget has detailed contingency plans that describe each agency’s course of action.

The government estimates that roughly 800,000 federal workers will be furloughed as a result of the government shutdown.

Department of Health and Human Services

HHS said that a government shutdown could mean furloughing 40,512 workers, amounting to 52 percent of HHS employees.

However, the effect that the shutdown will have on each office will vary based on whether the service is essential. For example, those running the Suicide Prevention Lifeline would stay, but those in charge of investigating Medicare fraud would be furloughed. In addition, some parts of HHS will only be partially shut down.

Department of Labor

A majority of the DOL’s employees will be furloughed. About 13,350 employees will be furloughed, amounting to 82 percent of the DOL’s workforce.

Internal Revenue Service

Nearly 90 percent of the IRS’ workforce, or 86,200 workers, are expected to be furloughed. Although Social Security benefit payments, automated revenue collections and daily cash management for the federal government will continue, the IRS will stop performing key functions, including audits, examinations of returns, processing of paper returns and call-center operations for taxpayers with questions.

Certain essential employees, such as law enforcement, will not be furloughed, along with some positions that are paid for by funds outside of Congressional appropriations.

How does the government shutdown impact the ACA?

The government shutdown has very little, if any, impact on the health care reform law, despite efforts to defund the law. Because funding for the ACA was passed by Congress in 2010, the health insurance Exchanges still opened for enrollment on Oct. 1, 2013, and won’t be affected by the government shutdown.

Although the Exchanges are operational despite the government shutdown, technical difficulties may still occur due to a high volume of traffic. When attempting to access Exchange websites on Oct. 1, consumers experienced wait times, glitches and error messages indicating heavy Internet traffic.

IT contractors are currently working to fix the issues. However, the shutdown affects non-essential government workers, which may include some of the IT staff.

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Oct 03 2013
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Risk Management

Risk Management for Start-Ups

Starting a new business is often the biggest risk. Particularly in the current economic climate. There are so many risks to consider as you look to find your feet and establish who you are and what you stand for. It may be tempting to remain positive and ignore the risks, but the truth is, you need to know how to handle them if they occur. risk reduction strategy

While the chance of your business going bankrupt may seem unlikely, having a solid financial plan that details procedures for managing debt will help minimise this risk. This is just one example of the functionality of a Risk Management strategy, something every company needs, especially start-ups.

Understanding the risks

While risks can vary from industry and sector, there are a number of risks apply across the board. Once you have an understanding of these risks and the potential damage they can cause, you can set about establishing your Risk assessment plan to ensure the safety of your brand new business.

  • Market Risks – Every market has its risks which refer to whether or not there is sufficient demand for what you have to offer at the price you have set. Take into account your competition and consider what you’re offering and how you can provide a better service than your counterparts.

  • Technology & Operational Risks – While technological risks may apply in some sectors more than others, ensuring that your equipment is sound and data is fully protected and accessible is a vital component of a risk management strategy.

  • Financial Risks – Setting up a Business is the first major financial risk you take, but it doesn’t stop there. Paying for equipment, staff, property as well as insurance follows and at times it may seem like your pockets are getting shorter. Tightening the belt can help get your Business off the ground.

  • People Risks – Surrounding yourself with the right kind of people can greatly help your business to flourish. Surrounding yourself with the wrong people can damage your prospects, indefinitely.

Pragmatic Risk Management

The best way to combat these risks and prevent them from happening whilst preparing for the worst possible outcome, is to sit down and plan out your Risk Management strategy by following these steps:

  • Assess how likely or unlikely each risk is. Equate through high risk, medium, and low potential.

  • Consider the consequences of a risk manifesting itself.

  • Identify what you would do in the event of a risk manifesting itself. Prepare your strategy based on the above recommendations.

  • Finalize what you have considered and prepare your Risk Management Strategy based on an evaluation of cost, potential and potential damage.

Setting up a business can be difficult in more ways than one. With so much to consider, it’s important that you are aware of the factors to consider and consult your insurance agency to set about preparing for these obstacles. With a clear head, an appetite for success and an awareness of the risks, your start-up will prove successful.

Learn more about Risk Management; ask one of our experts

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Oct 02 2013
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Health Insurance, Healthcare Reform

Filling Your Employees in on Health Insurance Exchanges

Not only does the Affordable Care Act legislate for every US citizen to purchase Health Insurance of some form or another, it also obliges large and small businesses to provide their employees with Health Insurance. October 1 marks the opening of the Small Business Health Options Program (SHOP) marketplace, which will give employers with 50 or fewer full-time-equivalent employees a program through which to purchase Health Insurance coverage.02F62387

Effective of October 1, employers are required to provide a notice to employees about the exchange including whether or not they may have access to subsidies if their employer does not offer affordable health care. With the countdown to Health Care Reform now fully underway, employers need to know how to inform their employees about the exchange and how it will affect them.

Focus on the exchange.

The one thing your staff will be most interested in knowing is how they are going to be covered and what they need to do to ensure they are covered. By first explaining that the exchanges are marketplaces where individuals and small employers can buy health insurance, you can give employees a comprehensive insight into what policies are available and what government subsidies will be available to them. Once you explain the ins and outs of the health insurance exchange to your employees, you can instruct them on how you will be providing coverage and what that coverage will include.

What else should you communicate?

As the Affordable Care Act is a quite complicated piece of legislation, it is vital that you don’t over-complicate things when explaining its provisions to your staff. Communicating too much information to employees can create unnecessary confusion and should be avoided. Instead, employers should focus on the present. Refrain from focusing on the long-term and hypothetical situations, as the Affordable Care Act may be subject to reform over the next 5 years.

The most important information to communicate to your employees is the fact that the Affordable Care Act will change many rules about health insurance in 2014. As of January 1, Insurance companies must accept everyone who applies for coverage, regardless of their condition of health. In addition, the law also requires that every individual must be covered or else they will be subject to a hefty fine, come January. By outlining the timeframe of the Affordable Care Act coming into effect, you can ensure your employees are aware of deadlines and fully prepared for them.

HOW should you communicate?

By planning for a consistent communication plan, you can cover how the Health Insurance Exchanges will affect employees in the near future, while accounting for long-term developments. In communicating with employees, it’s important to use all available resources to make information as accessible as possible.

The provisions of the Affordable Care Act can be difficult to throw your head around, but it’s crucially important for employers to get up to speed with how it will affect them and their employees come October 1 and beyond. By analysing the legislation and devising a straight-forward communications strategy, you can ensure your Business is ready when the SHOP exchanges open.

Struggling to throw your head around the Affordable Care Act? By contacting us directly, you can avail of FREE expert advice on how to prepare for Health Care Reform.

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Sep 26 2013
1 Comment
Risk Management

Risk Management: Predicting the Unpredictable

Michelle Symonds of TechRepublic UK recently argued that risk management fails to effectively address ‘real’ project risks, which she calls ‘the unknown unknowns.’ In her article, Michelle questions the value of Strategic Risk Management within the business, asking whether risk planning and management really serves a practical purpose, or “is it simply designed to provide a get-out when problems start to occur, or an explanation of why the budget is over-running?”Risk management flow chart on paper

While Michelle makes some compelling points about the attitude of Businesses when it comes to managing Risks – such as her argument that many Businesses often fail to differentiate between some risk factors, instead implementing plans that are ‘little more than a standard template that lists the same risk factors for every project,’ one of the biggest mistakes a company can make in Strategic Risk Management – her argument that Risk Management does not serve a purpose is very much up for debate, particularly in an ever-developing Industrial world that has seen the role of Risk Management within the Business do nothing but grow.

She may be correct in outlining the failure of Standard Risk Management to fully account for unpredictable risks however, if implemented properly a successful Risk Management Strategy will help mitigate the possibility of a loss when the unexpected comes around.

Risk Management: A Definition

Douglas Hubbard, author of the book: “The Failure of Risk Management: Why it’s broke and how to fix it,” defines risk management as “the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events.” When it comes to unpredictable risks, Hubbard’s indication that ‘control’ is one of the key aspects of Risk Management gives us a clear projection of how the ‘unknown unknowns’ should be treated. After all, Risk Management is about managing Risks, not necessarily preventing them. Taking this into consideration, it is inherently possible to control the unknown unknowns as they come, and here are some suggestions on how you can amend your policy to do so.

Stress-tests

Stress-testing is becoming an increasingly popular trend in large Businesses across the US. This involves deliberately setting up a situation that tests employees’ ability to handle the pressure of a risk occurrence, which in this case could be an unpredictable risk like a weather-related risk event. By carrying out stress-testing, you will be able to evaluate your employee response to situations that may occur but cannot be predicted. This will help you address vulnerabilities and ratify your policy accordingly.

Eliminate fear

Fear is one of the most important factors to consider when it comes to assessing risk. While fear can help you keep on your toes, it is important not to let it hinder performance and the overall business process. Fear of the unpredictable will automatically cause a focus on potential negativity, but if you are to shift this focus to a more positive outlook, you can account for the ‘unknown unknowns’ in a manner which lends itself to success.

Unpredicted risk events will occur, often on a daily basis, in different forms and on different scales. However, with continuity in your Risk Management Strategy,  you account for these risks as they come and ultimately protect the long term future of your business.

Risk Management can be a difficult topic to understand. If you need anything cleared up, then speak to one of our experts for free.

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