What do reputation, government compliance, IP protection, malicious cyber attacks, non-malicious cyber attacks, have in common? They are some of the emerging risks that are changing the face of risk management.
5 years ago, these items were not even recognized as risks that would be worthy of management time and attention. Yes, we had awareness of the terms, but all of these items are not priority issues and high risk potential items.
They have the real possibility of costing a business a lot of money in an instant.
So, what has changed? Well, speed of information, growth of technology (not slowing down any time soon), and government intervention (happens any time economies decline).
We are in a new generation of risk management. If emerging risks are not part of your strategic planning in business, you are probably going to see a big expense come your way.
What to do? Find a partner that is studying and staying on top of emerging risks. That is the first and most important priority. Most businesses don’t have the time to keep up with all the reading. A Risk Advisor who specializes in emerging risk awareness and research, is worth his/her weight in gold. The second thing you do is make sure emerging risks are strategically planned for in your business. Have a prevention strategy, mitigation strategy, financing strategy, risk transfer strategy, and a strategy to assume the risk that you don’t catch or self fund it.
How to Address Reputation Risk
Prevent – Train employees on social media, brand awareness, and ways to not get caught doing something inappropriate in front of a cell phone camera! Also, have written policy and procedures in these areas for employees to sign.
Mitigate – Have a PR firm on call in case of a reputational issue. If they already know you, they can respond quicker. Speed is the key if your reputation is at risk.
Finance – Look at all forms of financing. 831b captives and some traditional markets can help you with this risk.
Transfer – Look at outsourcing some of what you do. If you are transporting items, it may be worth eliminating the reputational risk by having someone else do this for you. Look at all areas of the business where your reputation could be damaged. Think of the cost of risk/reward in all circumstances.
Assume – You may be willing to take high deductibles on insurance and assume some initial dollars. You may want to self insure. You may look at how an 831b captive can allow you to use assumption models and financing combined.
At the end of the day, assuming is the most expensive and financing is the second most expensive way to manage emerging risks. Make sure you are doing all you can to manage emerging risks. It may keep you in business.
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