Risk management is an act of identifying, evaluating and taking steps that can be incorporated to reduce the exposure to loss faced by a company or an individual. It is a good approach in an organization as it is meant to cut down the amount of possible challenges for the business and the market as a whole. Moreover, the process is concerned with distinguishing, assessing and mitigating of uncertainty in investment decision making approaches (Koller 2007, pp. 34-37). Insurance is an arrangement that serves as a guarantee of compensation in the case of loss or damage. A risk manager is an individual responsible for predicting risks and enacting measures to control or prevent losses within an organization. Consequently, the purpose of the essay is to illustrate in detail how a risk manager can utilize the insurance as a part of an overall risk management strategy in a company. The steps needed to be taken by such a specialist will be analyzed so as to clearly show what has to be considered for a successful implementation of the idea.
Actions That a Risk Manager Should Take
From the above stated definition, it is apparent that a risk manager is a very essential person in an organization in terms of predicting, evaluating and dealing with a possible risk that a company might face. Therefore, this individual has to take into consideration a number of measures in order to ensure that insurance is utilized appropriately as a part of an overall risk management strategy. The main step that have to be initiated are identifying the risk, evaluating them, drafting a recommendation, notifying the general manager for approval and registering with the appropriate insurance cover (Leautier 2007, pp. 11-14). The above mentioned actions are vital in the case of using the insurance as an element of the general risk management strategy because they uide the risk manager towards what needs to be done to attain effectiveness.
Identification of the Risk
The determination of the risk involves researching the possible consequences that might arise due to the issue that might affect the normal management of an organization. The study will involve the use of both qualitative and quantitative methods as ways of making certain that what might take place is concrete. It means that the risk manager will be sure that what he is predicting is a possible risk. The approach will entail the presence of the risk manager and his subordinates and other stakeholders. The research can be done based on a team work perspective so that proper conclusion can be made (Koller 2007, pp. 26-30). The outcome of the investigation on the issue at hand will make it possible for the risk manager to come up with feasible solutions.
Evaluation of the Risk
After the identification of the issue, the risk manager is left alone to analyze it before taking any other steps. The evaluation process will entail the professional looking at the problem from his/her own point of view and that of the organization in general. It is the period where his skills are tested to the fullest degree as it is up to him to determine what needs to be undertaken so as to ensure that the risk does not affect the firm (Merna & Al-Thani 2011, pp. 7-9). Fundamentally, it is a span of time when the risk manager decides on what is best for the organization’s future, employees and the market. The rationale here is based on his ability to predict, evaluate and utilize insurance measure that will counter the challenge.
Drafting a Recommendation
The risk manager is in the position of drafting a recommendation meant for the chief executive officer only when he or she deems fit and appropriate. Obviously, thhe preparation of the proposal will be based on the outcome of the research and the possible consequences of the risk. Thus, it is where a conclusion is made based on the risk pending the approval of the CEO (Chew 2012, pp. 17-19).
Notification of the Chief Executive Officer
As it was stated previously, the risk manager can take the proposal to the general manager for approval. In such instances, the latter can either accept or refuse from the recommendations depending on the cost, and likely outcomes. Thus, it is during this stage that the risk manager convinces the manager on the possible challenges if the risk is not coped with within the time frame proposed (Merna & Al-Thani 2011, pp. 45-48). In case the suggestions are approved, the risk manager is able to undertake the necessary step of utilizing insurance as the optimal risk management strategy.
Registration with the Appropriate Insurance Cover
From the above mentioned step, it is apparent that the approval of the recommendations by the Chief Executive Officer often permits the risk manager to register with the appropriate insurance cover so as to deal with the possible risk in question. This is the part where the risk manager interacts with the insurance managers on what the organization needs in order to cover its services from the predicted risks. The risk manager, at this point, is able to provide the reasons for the need for the cover to the insurance company. Additionally, it is a period when a contract between the risk manager and the insurance firm is signed. Undoubtedly, the risk manager acts on behalf of the firm he/she works for (Chew 2012, pp. 11-13). Fundamentally, the insurance cover is meant to ensure that everything in the organization runs in the right way, and in case of an issue, the insurance cover is supposed to compensate the losses.