Business Risk: The Final Frontier

One of the biggest misconceptions in our industry is around the concept of “Risk.” As insurance professionals, we believe the term risk to mean simply “hazard” risk to people, places or things. We assume that all of our clients and prospects find these hazard risks to be high priority problems. So, we deluge them with all our diatribes about our unique ability to handle and mitigate risk. We couldn't be more wrong!
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One of the biggest misconceptions in our industry is around the concept of “Risk.”   As insurance professionals, we believe the term risk to mean simply “hazard” risk to people, places or things.  We assume that all of our clients and prospects find these hazard risks to be high priority problems.  So, we deluge them with all our diatribes about our unique ability to handle and mitigate risk.  We couldn’t be more wrong!

Have you ever asked a CFO or business owner what their greatest risks are?  The answer will surprise you.  The astute ones will rebut your question with one of their own.  They will ask, “Are you talking about my insurance risks or the biggest risks to my business?”

When you confirm that you are more interested in their “Business Risk”, you will watch their eyes change.  They will then tell you about the competitive, financial, operational and productivity challenges they are facing.  They will also give you a perspective on the importance they place on the intellectual value of their human capital.  They will take the term risk and apply it inside their business model by discussing how it affects every major decision from choosing a new product, moving into new territory, adding new customers, and increasing capacity in a difficult business environment.

Why will they open up on these issues?  Because that is the reason they are in business; to generate profits by reducing the impact of Business Risk to their capital.

Every client you have, or prospect you call on, has five areas of Business Risk.  Your role as a Consultative Broker™ is to not just help them identify these areas, but to also show them how you can help reduce their impact.  These are the Five Points of Business Risk.  For you to be successful in the future, you must be knowledgeable about how these Five Points interact inside a client’s operation:

  1. Hazard Risks – The traditional insurance risks that we have all been trained to spot, mitigate and compete for by offering less expensive or more comprehensive insurance programs.
  2. Financial Risks – The various risks that can affect a client’s profitability.  Financial Risks include currency exchange, asset devaluation, accounts receivables, non-payment of contracts or banking lines of credit.  They directly impact a client’s profitability.
  3. Operational Risks – The risks a client experiences regarding their productivity.  Such risks include such things as their geographic environment, maintaining or improving their equipment, acquisitions, and supplier inefficiencies.
  4. Strategic Risks – There is a direct correlation between strategic risks and competiveness.  These risks include the loss of key customers, improper product positioning, regulatory hold-ups or customer pricing pressure.
  5. Human Capital Risks – Whether in good or bad economic times, a business’ most important asset is its people.  This is the intellectual capital that keeps everything else going.  The risk of loss includes not just the health of the workers, but their ability to contribute.  Such things as lay-offs or poor morale contribute to this risk.

Here are some final thoughts on the subject of Business Risk.  When you look at the Five Points of Business Risk above, there should be no doubt about their importance (If you don’t believe me, ask one of your clients or prospects.)  Why is it that most Insurance professionals focus primarily on Hazard Risk while they ignore their client’s most critical Business Risks?

There are several reasons:

  1. They are unable to carry on a business conversation with an astute client, so they focus only on what they know... the insurance program.
  2. They are unable to deliver a true Value Proposition through the application of TCOR (Total Cost of Risk) and Resource Capabilities.  Without a legitimate Value Proposition they will fail to provide funding alternatives to offset the client’s Business Risks.
  3. They are unwilling to learn the important business techniques that will allow them to generate and retain larger accounts in any business climate.
  4. They see themselves as insurance people, rather than as business consultants.  They are not capable of showing a client how to improve their financial position and business model.

Thank goodness that Consultative Brokers™ are able to ask a business executive the important question… “What are your biggest Business Risks?”  It usually leads them to a deeper discussion, a long-term relationship, and a quality client for many years!

- Rob Ekern 

For more information on how to quantify TCOR, manage projects, build a value proposition, and consistently deliver stewardship reports and new business presentations to your customers, check out the Major Account Development System (MADS), an on-line consultative broker's toolkit. Available now!

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To learn more about C.R. Ekern & Company, please visit our website

 

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