Phillip L. Luecht Jr. focuses on large and complex institutional clients, with an emphasis on the construction, real estate, retail and technology industries. He has more than 25 years of industry experience in client-facing senior leadership positions in Newport Beach, Los Angeles, Boston, New York and London.
Q. How can a company analyze the risks it faces?
The first move a company should make is to inventory its risks. Assemble an internal team, including the CFO, treasurer, risk manager and general counsel. Then, in combination with your risk adviser or insurance agent, begin an in-depth identification, assessment and prioritization of the risks inherent in the business today. Don’t stop there. Make sure you consider your growth plans over the next three to five years, too. The risks faced by an organization will change radically if you plan to grow by acquisition versus organically.
Most firms only think in terms of traditional hazard risks fire, employee, professional liability, etc. However, a comprehensive risk inventory includes financial, operational and strategic risks, as well, so it is essential to inventory all organizational risks. With an inventory complete, assess the likelihood and severity of each risk and map/graph the results. This is an interesting way to view the holistic risks your organization faces and helps to prioritize which risk to work on immediately. Then, review your past loss history and have your risk adviser compare your results to those of peer companies. Determine if your performance is better or worse than your peer group.
Q. How can a company create a risk management plan?
With a comprehensive risk inventory complete, the organization should evaluate the potential impact each risk could have on the organization, then determine the most effective way to deal with the risk. A risk management plan will include effective techniques to avoid, control, mitigate and transfer risk.
Q. How can risk management help the proverbial bottom line?
Think of risk as opportunity. Embracing risk will create new opportunities for your firm, new sources of revenue and potentially profit. Just as with any other aspect of your business, the more proactively you can manage risk, the better the results you’ll achieve.