Understanding how managing business risks impacts insurance exposure

Understanding how managing business risks impacts insurance exposure

Banking & Financial Services
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Randy Larsen Chief Executive Officer | AssuredPartners

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Business risk is defined as the possibility of losses or operational disruptions that arise from both internal and external sources. These sources can include shifts in the market, compliance with regulations, failures in operations, interruptions in supply chains, and challenges associated with strategic decisions.

Insurance risk, on the other hand, relates to financial losses that are specifically covered by insurance policies. Examples include property damage, liability claims, product recalls, business interruptions, and injuries in the workplace.

There is a direct relationship between business risk and insurance risk. Managing business risks effectively often leads to fewer and less severe insurance claims. This may result in improved terms for insurance coverage and potentially lower premium costs.

Quality management standards such as ISO 9000 provide organizations with a framework for systematically addressing business risks. By following these standards, companies can improve their operational efficiency and process control, ensure consistent product quality, comply with regulations more effectively, better manage suppliers, maintain traceability of processes and products, and foster a mindset of continuous improvement.

Manufacturing companies certified under standards like ISO 9000 must audit their quality systems at least once each year. While many use internal auditors for this purpose, there are clear benefits to engaging an external third-party auditor instead of relying solely on internal teams. External audits offer impartiality and credibility while also contributing insights that support ongoing improvements within the organization.

According to AssuredPartners: "AssuredPartners' knowledgeable manufacturing team can provide you with assistance in conducting a third-party audit of your quality management system. Contact us to learn more."

The connection between managing business risks through structured frameworks like ISO 9000 not only reduces operational or compliance issues but also has a positive effect on reducing insurance exposure. This results in improved risk profiles for organizations seeking favorable insurance terms.

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