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Risk management refers to a process of identifying, analyzing and taking into account quick measures of intervention to reduce and eliminate various business risk that are incurred bringing about high business costs (Head,1996). The process of risk management focuses mainly on insurance as a major tool to counter major business risks such as fire, theft, injury, floods, accidents, legal liability which can easily lead to massive reduction of a business in terms of outputs thus affecting its growth, profit levels, production levels, and human welfare among others. Therefore risk management entails development of risk control systems that appropriately addresses all the business risks such as strategic risks, financial risks, operational risks, compliance risks and environmental risks (Head, 1996).
Among many businesses, heavy and hectic costs are incurred day by day as a result of emerging risks, thus there is an urgent calling for adjustment of business models to incorporate risk management in business operations (Butler, 2002). Risk management will help a business to meet and achieve its goals and objectives same time remaining resilient to risks thus ensuring there is proper business continuity through seeking a clear business costs reduction strategy in the management. This is through development of risks mitigation measures, evaluating risks impacts and cost efficiencies, developing business contingency plans, seeking cost saving methods. Risk management strategy greatly contributes to reduction in the overall business costs by identifying responsibility and reporting strategies of risks, ranking risks, development of a response strategy for the risks and ensuring regular monitoring of risk
Risk Management and Workers Compensation
Risk management in various businesses comes along with workers compensation. Costs that arise from risk factors contribute towards emergence of losses from occupational ill health from events such as illnesses and injury at work (Sullivan, 2002). Therefore these risks factors need to be clearly identified, analyzed and tracked through a comprehensive program that assesses the likelihood of workers compensation incidences and consequences. Workers compensation risk factors can be controlled in order to reduce a business from incurring a lot of costs through a holistic approach that involves planning, directing, organizing various resources of a business to avoid risks occurrence and reduce human monetary costs of compensating workers cases.
The development of workers compensation risk management program within a business contributes to increment of profits as it is able to eliminate compensation cases. Additionally this helps in catering for employees well being whereby it tries to avoid incidences such as pain, disability, suffering among many incidences that the employees face. Business risks events normally interfere with the operations of a business thus leading to under achievements of its goals and objectives thus risk management is very vital in determining their probabilities of occurrence (Willie, 1999). Therefore in implementation of the plan, it is important for all the managers to understand that there exists a relationship between these risks and workers compensation thus need to work closely. Therefore they should focus on minimizing risks occurrence since they reflect on workers compensation costs from incidences such as work place hazards, permanent impairments, medical expenses, cost related to non compliance with the law and by so doing they can reduce these costs. The undertakings of a Workers’ Compensation, a cost control program should be included as part of Risk Management Program (Sullivan, 2002). This program aims at protecting the health and safety of all the employees and it is achievable through certain elements such as risk avoidance, loss reduction and loss prevention that focus on bringing uniformity and standardization on business risks thus reducing emergence of expenses.
Risk managers and Human resource managers should be at the forefront in ensuring that employee’s interests are safeguarded and this is through developing a viable corporate workers compensation program that should be integrated in the risk management plan (Butler, 2002). They should ensure that the program comprehensively include planning, monitoring and assessment criteria for all business activities in order to ensure that risks are identified and control measures established. The managers should ensure that safety and health of workers is maintained for their business to achieve its goals and objectives. Therefore through adapting regulatory guidelines, each and every individual involved with workers health and safety should act in accordance to the mandated responsibilities to ensure there is a reduction in emergence of risks. This can be implemented by incorporating some programs such as loss prevention, risk avoidance, and loss reduction which can all be put into practices through education, awareness and training of all the employees.
Employers should include the employees as part of risk management team to increase participation and implement the risk management program. This is because the workers are the ones most exposed to work place risks and hazards and this brings multiple ideas for incorporation and also enhances employer’s commitment to workers safety. Risk managers should be at a point of evaluating and auditing incidences of risks occurrence to be able to know the extent to which a company is being affected. Additionally the risk managers should work closely with an insurance company to safeguard both the business and the employees just incase of an incident occurrence.