6 risk management strategies from the coronavirus crisis
March 20, 2020
As news of COVID-19 grips the world, here are steps that insurance industry professionals can apply in the midst of the crisis.
The news is dominated by discussion of the coronavirus, the impact it is having on the economy and how we are conducting business. An increasing number of companies are restricting employee travel, and many are ordering their employees to work from home.
This article will not offer any guidance about what measures to take to deal with the coronavirus; I have neither the experience nor expertise to offer anything of value. Besides, there is an overabundance of information available on this topic from a variety of reputable sources. What I can offer is my observation that there are positive contributions we as insurance professionals can learn and apply from this crisis. Here are six takeaways:
1. Remember that risk management is the focus of our insurance industry.
We may be insurance professionals, but insurance is just a subset of our broader risk management capabilities. Our job is to help our clients find ways to identify, prioritize and manage the loss exposures they face. In other words, we help to protect our clients from catastrophic loss exposures that can cause them serious harm. Speaking as a financial planner, that is the most important financial planning priority that any economic entity (individual, family or business) must get right. Failure to establish risk management as the top financial planning priority jeopardizes the possibility of all other objectives being accomplished, no matter how effective the planning has been for those other objectives. Embrace your role of risk management professional and never stop emphasizing the critical role you play in helping businesses find success.
2. Be a reliable source of information in every crisis.
One of the major criticisms we are hearing in the face of the coronavirus crisis is that various governments have not been accurate or timely in providing information about the threats faced by their citizens. This is not meant to be a partisan comment, because governments of all political orientations face this challenge. My point is that it’s important that we, as risk management professionals, must always be perceived as “honest brokers” of information, explaining, in a fair-minded way, both the costs and benefits of alternative risk management strategies. Our credibility is a powerful way to attract and retain customers but it is (rightfully) always on the line. Constantly be looking for ways to bring value to your clients in terms of helping them manage risk.
3. Conduct fire drills to test your clients' health and resiliency.
Health experts claim that a vital way to manage the coronavirus outbreak is by testing those at risk as early in the process as possible. I find this analogous to identifying those aspects of our clients’ business operations that may be at risk. It could be the viability of their supply chain, or safety measures on their factory floor, or the competence of their fleet drivers.
Identifying potential risk management weak spots early can help prevent or mitigate loss. This is why the thoughtful, comprehensive preparation of a business-resiliency plan is so important. How will the business cope with various contingencies that can threaten its operations? The time to find out is not when the crisis is upon you; it’s well in advance of that. I might add that credible, robust business-resiliency plans pay off in other ways as well — like more favorable underwriting decisions across a broad range of coverages.
4. Make risk management part of the organization’s culture.
Health experts are also saying that at least one major positive outcome has resulted from the coronavirus crisis: People are more focused than ever on washing their hands regularly and properly (at least 20 seconds). The easiest way for germs of any kind to spread is when we touch our face, mouth or eyes with our hands. In fact, according to the Canadian Centre for Occupational Health and Safety, hand hygiene is the single most important means of preventing the spread of infections.
For most people, this has not been a major inconvenience; rather, most now accept it as the “new normal.” So help your clients identify the types of activities their employees need to regularly and habitually engage in to better manage risk. Examples include the regular use of safety goggles or learning how to avoid phishing attempts that can infect a company’s IT system with malware.
5. Don’t panic buy.
Suddenly, in the midst of the coronavirus crisis, there is a run on hand sanitizer and masks. Price increases of 500% to 700% are not uncommon as people try to stock up. For businesses that sell products and must maintain inventory, the temptation to buy raw materials and products that may be subject to scarcity or supply volatility caused by a health crisis can be significant. Corporate panic buying can also happen and have considerable negative “bottom line” consequences.
6. Don’t panic.
“Keep Calm and Carry On” was the slogan developed by the British government during World War II and communicated widely via posters and billboards to prevent public hysteria in the wake of massive bombing campaigns by Germany. The coronavirus crisis will pass. It will take, among other things, leadership to provide the guidance and information necessary to help people cope. We as an industry are in a position to help provide that leadership.
As always, I would love to hear from you. Email me your comments and suggestions.
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