Whether you’re a manufacturer of textiles and fabrics, niche high-end products, medical sutures, lighting fixtures, eco-friendly apparel, or any other Massachusetts and Rhode Island domestically-made products, there are always a number of constant, growing, and emerging risks that your company faces, from product quality and contamination issues to breaches of technology.
Large organizations can typically manage most losses swiftly and without too much fallout. But, a small or medium-sized business can be completely devastated by even the most common losses, such as theft, fire, flood, legal liability, injury, or disability.
Without a solid business insurance plan in place to control or finance your risks, your company’s operations, assets, and reputation are extremely vulnerable. This is why Risk Management is especially vital for small to mid-sized Manufacturing businesses like yours.
The good news is that it’s never too late – or too soon – in the life cycle of your manufacturing business to think about and address the Five Elements of Risk Management, which are:
#1 Risk Identification
Risk Identification is the critical first step of any Risk Management process. Start with making a list of all the risks that could affect your company’s operations, projects, sales, facilities, reputation, employees, long-term success, and anything else you and your team can think of.
#2 Risk Analysis
Risk Analysis means taking all of your identified risks and analyzing each and every one from a qualitative and quantitative perspective. Questions you might ask for each risk include, “What is the likelihood of this event happening and what are the possible consequences?” and “If this event happens, what would the losses cost us?”
#3 Risk Control
Risk Control is all about finding the best options for you and your employees to limit your exposures to each of the risks you’ve already identified. There are multiple options to consider when you are trying to control a potential risk. You can simply avoid the risk completely; however, in business, 100% avoidance is often an unreasonable method for controlling risk. Another, more realistic option is to modify behaviors that can lead to a situation. For example, if you want to limit the chances of an IT breach, a good Risk Control would be to train your employees on cyber security best practices.
#4 Risk Financing
Risk Financing is the process of deciding how to finance any potential losses associated with each and every risk on your list. There are three options for Risk Financing:
- Self-Finance, which means your company is willing to take on the risk and the responsibility for covering the costs that result from any losses
- Transfer of Risk, which is done through a contract with a vendor, supplier, customer or tenant that transfers the responsibility of the risk to that party
- Purchase Insurance, which means that your company is willing to take on a risk, but may not have all the resources to cover any resulting losses, so you select the proper insurance for that specific risk
In Risk Financing, a crucial question to ask yourself over and over again is “Are we willing to take on this risk, and, if we are, do we have the ability to cover this risk ourselves?”
#5 Risk Implementation and Evaluation
Risk Implementation and Evaluation sounds like the end of the Risk Management process, but it’s not at all, because from here on out the key is to consistently evaluate your plan’s effectiveness. As you review your process, questions to ask may include, “Is this process working?” “Is this process costing more than we thought it would?” and “Are there ways to implement this process that would save us more money?”
You may be thinking to yourself, “This sounds like a lot of work.” If you’ve never undertaken this process before, or even if it’s been awhile since you evaluated your Risk Management plan, then, yes, we can see how you might be hesitant to get started on this on your own. But, with guidance and support from an experienced Risk Management team, as well as a commitment from you to planning and consistency, it can be fairly easy to implement a Risk Management process and have it run smoothly.
We would be happy to share more information about our risk management services and our manufacturing insurance solutions. To begin your partnership with the region’s most experienced business insurance team, contact HIG today.
