ALTERNATIVE RISK FINANCING: NOT JUST FOR THE BIG GUYS

Large corporations often use "alternative risk financing" - assuming some of their own risks, in addition to buying insurance - as a way to improve cash flow and lower their total costs. However, this technique can offer substantial benefits for medium-sized companies that face significant potential risks from one line of insurance, such as Workers Comp, General Liability, or Auto Liability.

Basic alternative risk financing methods include:

• Guaranteed cost insurance - the company pays a premium based either on a rate, such as payroll or property values, or a flat amount.
• Incurred loss retrospective rating plans ("retro) - use a standard premium adjusted after policy expiration based on loss experience.
• Large-deductible plans - the organization assumes a substantial (often $50,000 to $250,000) per-accident or per-occurrence deductible.
• Self-insurance - the firm retains its loss obligations and pays them as they become due.
• Captive insurance - this variation on self-insurance pre-funds risks through an insurance subsidiary ("captive") usually owned by the parent company.

Because each of these methods has advantages and disadvantages, your choice should depend on the situation and needs of your business. For example, a guaranteed cost plan minimizes the upside risk, but won't help your cash flow; while a captive usually costs the least to finance, but can be expensive to administer.

Whichever alternative risk financing option you choose, make sure your accounting and human resources departments educate managers on their responsibilities in daily hands-on administration of the program. The more widespread their "buy-in," the stronger your bottom line.

We'd be happy to help you select and develop an alternative risk financing program that's tailored to your needs. Just give us a call.

STORMY WEATHER: SAFETY PAYS!

Spring is here - and that means it's time to make sure you're prepared deal with potential threats to your business from tornadoes and thunderstorms. The planning process should focus on keeping your employees safe, so make sure to explain it to them and do reviews at regular intervals.

Tornadoes

Although a brief warning period usually precedes a tornado, you probably won't have time for measures to save the facility - which means employee survival must be your top priority. If there's a tornado watch, have someone listen to the Weather Channel, NOAA Weather Radio, or a local radio station. In the event of a tornado alert, first post an observer; then have employees proceed to the lowest level of the building ( preferably underground), without taking the elevator, get under sturdy tables, stay away from windows, and cover their faces.

If you have employees working outside, develop special safety instructions for them. In case of a tornado watch, make sure that these workers stay informed; when the tornado is about to occur, have them get indoors and take shelter.

Thunderstorms and Lightning

In addition to spawning tornadoes, thunderstorms can cause flash floods, produce damaging hail, create strong winds - and discharge lightning.

Chances are that your business facilities are built, or can be designed, to withstand significant damage from thunderstorms, wind, rain, hail, and - to a lesser extent - lightning. When it comes to machinery, make sure all important electrical devices are connected to surge protectors, and have UPS (Uninterruptable Power Supply) units for critical equipment. In addition, power down and disconnect all electrical machinery before a severe thunderstorm strikes.

For guidelines on developing, and implementing a weather safety program for your business, please get in touch with us at any time.

USE SOCIAL MEDIA AS A RISK MANAGEMENT TOOL

Given the dramatic impact of social media on the speed and delivery of news and information, it makes sense to make this fast-growing technology part of your risk management program.

More and more reputational crises — such as the recent stranding of the Carnival Triumph cruise ship — are born on social networking platforms and can grow exponentially if mishandled. Consider how Apple Inc. responded to consumer displeasure with the iPhone 4 shortly after its 2010 introduction. Negative comments about the product spread quickly over social media channels, but were largely ignored by Apple executives until mainstream news outlets began reporting on its flaws.

Failing to actively engage social media users in conversations about crisis or business practice of your company means losing an invaluable opportunity to protect your reputation. Otherwise, you risk having other people tell your story.

Social media participation gives you a way to enhance this reputation through regular interaction with customers, business partners and the public. Using this tool to develop relationships and help people, rather than just sell products and services, can create some valuable allies.

Encouraging your employees to participate in social media offers a great way to use them as advocates for your company. A 2012 poll of more than 1,000 registered voters by Hill+Knowlton Strategies found that a corporation's employees are the second-most trusted source of information about its business practices, second only to friends and family members.

RISK MANAGEMENT: KEEP SAFETY IN THE FOREFRONT

Once employees have gone through safety training, make sure that they use what they've learned. When every worker knows and chooses the safe way on a daily basis, you'll have a workplace with less chance of accidents and injuries.

This four-step approach to job safety will pay dividends:

1. Team up to solve problems and improve safety. Create employee teams in every department to gather information on potential hazards, analyze problems, develop and test solutions, and implement and monitor results. Being part of a team makes workers feel that they share responsibility, which keeps your safety message top of mind.
2. Talk up safety every day. Update employees on information that affects their safety. Provide ongoing feedback, praising safe performance, correcting unsafe behavior, and pointing out areas for improvement. Make sure that communication flows both ways. Urge workers to offer suggestions, identify problems, and pose questions - for example, through a safety suggestion system.
3. Encourage employees to become hazard detectives — and reporters. Make every worker responsible for finding hazards. Create an effective system for reporting problems, and respond promptly to correct hazards that employees identify. This is harder than it sounds because it means that management has to listen when workers discuss safety concerns.
4. Create a "want-to" safety culture. Encourage your workers to do the safe thing, not because they have to, but because they want to avoid injuries. Remind them of how many safety-related decisions they make every day - and how one bad decision is all it takes to get hurt.

For professional advice on creating or updating your workplace safety program, just give us a call.