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Managing your Total Cost of Risk

Managing total cost of risk (TCOR) is crucial, as your TCOR measures the cumulative expenses incurred due to risk, and actively tracking it is essential to mitigate liability. With the average cost of risk rising by over 2%, monitoring TCOR becomes even more important.


Effective administration involves identifying and quantifying threat components, implementing control measures to reduce claims-driven expenses, determining risk transfers or financing options, and managing current and future exposures. By implementing these measures, you can protect your business, make informed financial decisions, and ensure long-term success.



The Detriments of Regret


Neglecting the management of TCOR can lead to catastrophic problems. Many companies fail to actively address it, exposing themselves to increased liability. With rising average costs of risk for businesses, overlooking TCOR becomes an even greater problem.


Increased Liability: Failure to manage these hazards exposes your business to heightened liability. By not tracking and quantifying different exposures, you risk underestimating the financial impact of potential pitfalls. This can result in unexpected expenses, legal battles, and damaged reputation. Your business may be ill-prepared to handle the financial consequences and face severe repercussions.


Financial Losses: Without proper control measures, claims can skyrocket, driving up commercial insurance expenses. Neglecting risk-reduction strategies and employee-safety education leaves your business vulnerable to accidents, injuries, and costly claims. The resulting financial burden can drain your resources and hinder growth and profitability.


Operational Disruptions: Major catastrophes like natural disasters or cybersecurity breaches can have devastating consequences. Without a comprehensive business continuity plan, your ability to maintain operations, serve customers, and generate revenue may be compromised. Many businesses cease operations within a year following such catastrophes, highlighting the importance of managing TCOR to ensure resilience.


Missed Opportunities: Neglect means missing out on valuable insights and improvement prospects. Hidden risk costs may go unnoticed, hampering your chances of informed financial decision-making. Failing to prioritize TCOR can lead to missed openings to negotiate better insurance prices or explore alternative-risk transfer options. These missed opportunities result in unnecessary expenses and limited financial flexibility.


Dollars and Victory: Managing your TCOR


Minimized Legal Exposure and Liability: By tracking and quantifying risk components, you can accurately assess potential financial impacts. This enables effective resource allocation, mitigates risks, and avoids unexpected expenses, and legal clashes. A comprehensive risk management program prepares your business to handle risks while ensuring legal compliance.


Financial Stability: Implementing control measures reduces the percentage of commercial insurance expenses driven by claims. Through employee safety education campaigns and anti-fraud tactics, you minimize accidents, injuries, and costly claims. This frees up resources that can be allocated to other areas, enhancing profitability and overall financial health.


Operational Continuity: A comprehensive business-continuity plan safeguards your ability to serve customers and generate revenue, even during major catastrophes. Addressing current and future exposures minimizes disruptions, providing the resilience necessary for long-term success.


Informed Decision-Making: Identifying hidden risk costs allows strategic adjustments to soften consequences and optimize resource allocation. Tracking TCOR enables negotiation of better insurance prices based on your business's risk profile. Exploring transfer options ensures flexibility and cost savings, giving you a competitive edge.


Continuous Improvement: By actively monitoring and adjusting TCOR, you respond to evolving risk-related needs, leading to long-term savings. Emphasizing claims handling and leveraging risk management software streamline operations, decrease costs, and elevate practices. This dedication to enhancement positions your business for enduring prosperity.


Let’s find a minute to talk about how you will reap a multitude of benefits from proficient TCOR oversight and lay the groundwork for continued prosperity. We can help you with a holistic risk management program and employ the strategies outlined to skillfully manage your TCOR and safeguard your business.

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