November 25, 2014 | Industry Insights
Turn Vague Risk Concepts into Actionable Plans
Often we hear of risk management plans, but that broad concept can produce vague, theoretical documents that are filed away and overtaken by operational events. Instead of wasting time and money on an unused document, why not create a clear, actionable plan?
The U.S. Customs and Border Protection Agency’s recent Five-Step Risk Assessment highlights the three main components that of a quality loss-reduction effort.
- Risk Assessment
- Threat Assessment
- Vulnerabilities Assessment
By strengthening these three legs of your loss-control program, all companies in the shipping business can design and implement measures to reduce losses from crime, catastrophes, unrest, delays, regulatory errors and financial problems, to name a few.
A risk assessment looks at external threats to a company that can be protected against by some kind of process or technological improvement. That could include better training, a workflow change, negotiations with business partners, improving written policies, simplifying forms or boosting security, for example. It is the overarching evaluation of two subcomponents—threats and vulnerabilities—and it supposes that you will use accurate data from external sources and internal audits or reviews.
A threat assessment identifies external threats to your shipping business—those could be geographic challenges (weather, terrain, etc.), demographic problems (crime, corruption, civil unrest, strikes, health scares, e.g.), political issues (change in leadership, regulations, trade disputes/sanctions), financial instability (partners, banks, your own), or mechanical (truck breakdowns, train derailments, refrigeration failures, etc.). There are, of course, others depending on your industry, and you can and should get very specialized in your evaluation of threats, since any one could cause a serious property loss, business interruption or liability claim against you.
A vulnerability assessment is a review of your internal weaknesses that could lead to a loss. Typically, companies should look at their internal security procedures, supply chain management and agreements, workflow processes, training, credit/financial strength, hiring and firing practices, accounting methods, data protection and backup, fleet maintenance, and compliance efforts—though this is just a partial list.
There are many, many companies that can help you develop a quantitative assessment that is statistically valid, but even getting started by coming up with a list of threats and vulnerabilities as well as data resources or needed audits/surveys to develop data pools is a movement in the right direction. You might be surprised how many issues you identify that you have never planned around. You might even have one of those “aha!” moments, spotting an underlying cause of loss that you had not noticed before.
Once you’ve made your initial list, it will be important to segregate problems by priority or importance. Items can qualify as priority based on their frequency, their likelihood, or their potential (or actual) loss-cost. Your insurance broker is an especially good person to involve at this point since he can provide solid information on how your policy coverage plays in to your risk of loss. At Roanoke Trade, we offer risk management services alongside insurance protection for the shipping industry as part of a complete suite of loss mitigation programs.
We invite you to learn more about us, our experienced talent in this highly specialized area, our creative solutions, and the value we will bring to you and your clients. Please contact us at 1-800-ROANOKE.