Understand Insurance risk management

Risk comes inevitably as a potential of having adverse event from business in fulfilling the objectives or having financial loss in any aspect of life. To minimize or reduce that risk, risk management is needed. It can identify, evaluate, and control the risk clearly and structurally, so the appropriate action can be taken. Then insurance is a form of risk management as a result to ward off the risk. So that insurance risk management offers many benefits.

Correlation within insurance risk management

As mentioned before, risk is such a probability of financial loses. Then, risk management, on the other hand, is the solution of any risks. It can manage the risks including physical risks, legal risks, intellectual property risk, financial risks, market risk, and other risks. The insurance is part of management risk that becomes a result from the strategic of risk management. Even the insurance risk management aims at managing the risk, in fact it stands on different terms.

Actually, risk management and insurance have their own characteristics. Risk management more emphasizes on the process in identifying and assessing the risk. It functions on just giving the evaluation for any form of risks including insurance. Then, the decision of risk management influences greatly to the business operation. On the other hand, insurance just manages the certain risk and functions to handle the transferred risks. The decision in insurance has limited influences.

Benefits of Insurance Risk Management

Insurance risk management offers many benefits over the business operation. First, it can guard against the valuable resource losses and decreasing the responsibility of adverse event. Then, it can prevent and minimize the financial losses by reducing the premium cost. It can protect the business image when it goes down. not only the business that are protected, but the customers, stakeholders, and shareholders are also protected. Therefore, insurance can promote the continuity of business.

Other benefit offered by risk management and insurance is the capability of risk sharing. When a business operation gets the profit loss, the insurance can help to rescue it. The insured business or company will have sharing risks between the company itself and the insurance providers. Therefore, either company or insurance provider can make the business run again collectively. In any case, the debtors also come as a risk that should be avoided. The insurance can help in protecting the business against the debtors.

Then, the effectiveness of using the resources is also the benefit offered by insurance and also risk management strategy. Promoting the best use of resource can help the business run effectively. For example, health insurance for the company employees can ensure them in showing their best in their work performances though.

By far, insurance and risk management is beneficial in protecting the business running. Even the insurance and risk management strategy have the different characteristics but both have the same purpose overall. Therefore, applying risk management strategy by which purchasing any insurance is such a best way id deciding the proper action of business operation.

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