Have you managed the risks in your business?

Is your business insurance helping you successfully manage risk? It is a question worth asking, says local Elders Insurance agent John Azpiri.

There are several methods of risk management - how best to integrate them will depend on each farm or business owner's circumstances.

Avoidance

Mr Azpiri, from Elders Insurance Townsville, says businesses can eliminate risk by completely avoiding activities that generate it. The flipside of such a tactic however, is that any potential gains are forfeited in the process.

The competitive nature of commercial activity means steering clear of risk altogether is not a reality for the majority of businesses.

Reduction

Mr Azpiri says this involves minimising the likelihood of loss occurring and the extent of that loss, should it occur.

An example would be installing water sprinklers to mitigate the damage caused by fire or ensuring employees receive the correct training to operate machinery.

Risk reduction strategies need to be practical, however. Building a monumental glass dome may help protect your crops from extreme weather conditions, but the installation bill alone could put you out of business.

Transfer

Transferring risk most commonly means buying an insurance policy. The actual risk remains, but the financial impact of loss is covered - though to what extent is your decision.

Mr Azpiri says with a tailored business or farm insurance policy, you can give yourself cover in the event of potential losses that you have identified as pertinent to your activities.

Acceptance

Accepting risk may be a viable option if the cost of insuring is a lot more over time than what your business stands to lose. This can depend on your circumstances.

Having had many years of insurance experience, Mr Azpiri says that underestimating the potential losses posed by risks is a common mistake, as is underinsurance in general.

"A lot of people are underinsured because they don't believe that it's going to happen to their property," explains Mr Azpiri.

Making sure you have enough insurance cover could be critical in successfully managing the risk involved in your commercial activities.