Risk management is a vital function for any organization that wants to achieve its strategic goals and protect its reputation, assets, and stakeholders from potential threats. Risk management involves identifying, assessing, prioritizing, mitigating, and monitoring risks across different domains and levels of the organization.

 

One of the key tools for effective risk management is conducting risk surveys. Risk surveys are systematic and structured ways of collecting information and opinions from relevant internal and external sources about the nature, likelihood, impact, and mitigation of various risks. Risk surveys can help organizations to:

 

– Gain a comprehensive and holistic view of their risk profile and exposure

– Identify emerging and evolving risks that may not be captured by other methods

– Assess the effectiveness and efficiency of their existing risk controls and processes

– Benchmark their risk performance against industry standards and best practices

– Engage and communicate with their stakeholders on risk issues and expectations

– Foster a culture of risk awareness and accountability across the organization

 

Risk surveys can be conducted at different frequencies, scopes, and depths depending on the objectives and needs of the organization. For example, some organizations may conduct annual or quarterly enterprise-wide risk surveys to monitor their overall risk appetite and strategy, while others may conduct more focused or ad hoc risk surveys (as advised by the insurance company or industry regulator) to address specific issues or events i.e., following a large loss.

 

However, conducting risk surveys is not a simple or straightforward task. It requires careful planning, design, execution, analysis, and reporting to ensure that the results are valid, reliable, relevant, and actionable. Some of the challenges and best practices for conducting risk surveys include:

 

– Defining clear and specific objectives and scope for the survey

– Selecting appropriate and representative sample of respondents i.e., site engineer, Manager…

– Designing clear and concise questions that cover all aspects of risk

– Using a consistent and standardized scale or format for responses

– Ensuring confidentiality and anonymity of respondents

– Analyzing and interpreting the data using appropriate statistical methods

– Presenting and communicating the findings in a clear and compelling way

– Integrating the survey results with other sources of risk information

– Acting based on the survey results and following up on progress

 

Risk surveys are not a one-off or standalone activity. They are part of a continuous cycle of risk management that requires regular review and update. Organizations that conduct risk surveys regularly can benefit from:

 

– Having a more accurate and timelier picture of their risk environment

– Being more proactive and responsive to changing risk conditions

– Enhancing their risk culture and governance

– Improving their decision making and performance

 

Risk surveys are a powerful tool for risk management that can help organizations to achieve their strategic goals while managing their uncertainties. By conducting risk surveys effectively, organizations can gain valuable insights into their risks and opportunities and take action to create value and resilience hence (re)insurers usually recommending 3-5 years periodic risk surveys or ad hoc risk surveys especially following a large loss or when the risk has significantly changed.

Risk surveys form a basis of material facts while underwriting and can guide a prudent underwriter while determining the Estimated/Probable Maximum loss (EML or PML) hence being able to retain more on the net account and reducing on the would have been ceded premiums to reinsurer.

References

Claptek. (2020, December 10). How can insurance companies benefit from risk management? Claptek Blog. https://claptek.com/blog/how-can-insurance-companies-benefit-from-risk-management/

Society Insurance. (2020, December 1). How your business benefits from a risk control survey. https://societyinsurance.com/blog/how-your-business-benefits-from-a-risk-control-survey/

V-Comply. (2021, October 18). The importance of risk assessment and risk management. https://www.v-comply.com/blog/the-importance-of-risk-assessment-and-risk-management/

M93. (April 2022). Commercial property and business interruption insurances.

 

Author

Calvine Tugume