Chief Executive Officers of small to medium size companies have broad responsibilities including insurance and risk management. In many instances, there is a gap in expertise in this area. CEO's in this position place most of the work and responsibility on their brokers. This can potentially place the company's balance sheet at risk from uninsured losses or exposures retained unknowingly.
Chief Financial Officers often find themselves assigned the responsibility of Risk and Insurance Management. While almost all are familiar with financial risk, operational risk is usually not something many have had to manage. Yet this operational risk poses a threat to all the financial statements that are a CFO's main focus.
General Counsels are responsible for the legal documents of the company and thus are often assigned the responsibility of Risk and Insurance management, since insurance policies constitute contract documents. However, most GCs are not trained to be insurance counsel and are not familiar with the machinations of the process by which these critically important documents are procured and then managed. GCs also may not be familiar with the assessment of operational risk arising from the company's day-to-day activities, yet this risk poses a significant threat to the financial health of a company and often will lead to litigation that will also end up in the GC's area. Transfer of this risk is possible, however; it takes expertise to optimize the company's cost of risk.
HR professionals are often tasked with Insurance and Risk management responsibility as a tie-in to the benefits plans they are trained to manage. However, health insurance is but one element of the insurance needed by companies. Financial lines, Property and Casualty insurance are all important risk transfer tools for the company. Additionally, some risk cannot be transferred and must be retained. It is critical that all of management be aware of these risks so as not to have a surprise loss that harms the company's balance sheet. Many HR professionals simply do not have experience in this area.
The Sole Proprietor is responsible for everything in his or her company. Many have spent their lives building their business, and sometimes it is a business started by earlier generations of their family. All this personal investment can be wiped out by one major uninsured loss. Insurance is an area the Sole Proprietor knows he needs, but his broker (often a friend) is taking care of it. The Sole Proprietor needs to focus on his business, not insurance. This unfortunately is a story that has been told too many times. Small businesses are at significant risk if they improperly manage their insurance placements. But if you cannot rely on your friend the broker, then what are you to do?
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