15 Points for Risk Management

Article excerpt

Speaking at a series of seminars for executives and graduate students in Japan, Robert Abrahamson, executive consultant with A&L Risk Management, Ltd. in Eden Prairie, Minnesota, presented the following 15 points for risk management. Mr. Abrahamson's suggestions were adapted from the 14 points for organizational management developed by Dr. W. Edwards Deming, the statistician and management guru widely held to be responsible for Japan's post-war economic recovery. In his work, Dr. Deming stressed that management exists to improve processes so products and services can constantly improve.

The 15 points for risk management are:

1. Create a constancy of purpose toward the improvement of risk management standards and practices. Strive to assist in the development of internal risk management controls and strategic planning guidelines for the organization.

2. Adopt a philosophy of continuous improvement and assign a high priority to implementing it.

3. Cease an inordinate dependence on suppliers of insurance and other external services or advice to achieve internal risk management goals and objectives Establish a proper balance between internal and external expertise so you can maintain control of the risk management process.

4. Reduce the organization's dependence on insurance by improving risk analysis and, if appropriate, considering alternative risk financing techniques.

5. End the practice of awarding your insurance business on the basis of price or long-term relationships. The cost, while important, must be combined with the overall design of a risk management program. Work with selected service suppliers to minimize the organization's overall cost of risk (not just its initial insurance cost).

6. Constantly improve every risk management-related activity in the organization to increase the department's overall effectiveness.

7. Implement risk management training and education for key employees, including operating and senior management, since their support is necessary for the success of the program.

8. Improve departmental operations to demonstrate the value of risk management and to help employees do a better job of protecting the organization's assets. …