The Link Between Risk Management and Insurance

In risk management, the organization has to attempt to foresee all sorts of potential risks
and hazards that could impact on its future operations in various ways (financially,
physically, and others.) Risks and hazards have to be at least minimized (if not completely
eliminated) so that the organization can function effectively and efficiently throughout its
lifetime. One way that planners of the risk management program of the organization can help
is by selecting the right kinds of insurance coverage for the members of the organization,
and the organization itself.

In light of the 9/11 terrorist actions against US institutions, organizations now have to
contend with additional risks such as terrorist attacks, aside from natural disasters and
technology-related accidents. Even previously-anticipated risks have to be covered by
insurance as well, because of the potential harm to valuable organizational assets such as
employees and managers, physical structures, and technological systems, among others.

Under a properly implemented risk management system, an organization should be able to:

– secure appropriate insurance coverage
– make use of loss prevention and loss minimization policies
– look into and process insurance claims satisfactorily
– monitor litigation of claims and their related expenses
– cooperate with divisions within the organization on securing insurance requirements
for contracts, agreements and licenses
– assess the potential liability of the organization for future claims due to
perceived risks
– inform the organizational community on the insurance and risk management program
being implemented.

In an ideal world, people would cooperate with one another and live in harmony. However,
these are treacherous times for people to live in which is why the costs of risk management
and insurance become necessities rather than luxuries for any organization to shoulder. In
the end though, the costs are worth it since they help the organization to survive under
threatening conditions, and eventually thrive.

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