Here are the note of a talk I gave recently on the risks facing businesses in the 21st Century.
It often seems that most managers either ignore certain risks or fail to take them as seriously as would be advisable, for three quite understandable reasons.
· Awareness. Most people manage most effectively the risks they are most aware of. These usually relate to things which happen fairly often or which are drawn to their attention by the insurance industry, the media or by the relevant regulator. These factors are generally not related to the likely seriousness of the event in question, and not always to its probability either. So minor thefts and vandalism tend to be overrated.
· Probability. Most people greatly underestimate the probability of relatively unlikely events. I was surprised to learn how many people are actually struck by lightning each year and have recently met someone who has been struck twice!
· Severity. Most people underestimate the potential severity of their most serious risks. Thus, loss of data and loss of reputation are very often underestimated, resulting in inadequate control measures being in place.
So do not be surprised if you are one of the majority, but have a look at this list and ask yourself how each risk might apply to your business and whether you are putting your efforts into controlling the most or least important ones.
There are at least 12 major categories of risk and I will be writing about them in the near future.
How much do you need to foresee?
At the races foresight ought to make you a lot of money, but in this case lack of it cost someone £58,000.
Hide v. Steeplechase Co (Cheltenham) Ltd (Court of Appeal) 2013
Mr Hide was injured when he came off his horse and landed on a guardrail post 4 feet from a hurdle. He blamed the racecourse owners because the post was not padded enough and was too near the hurdle. The case turned on whether it was foreseeable that an accident of this kind would happen. Mr Hide won on appeal when it was held that the accident was not unforeseeable nor unavoidable. The lesson for all property owners is to try to foresee what accidents could happen and how to prevent them. The design and construction need to be considered as well as repair and maintenance. Sometimes the adaptation needed can be a lot cheaper than a potential claim. Try to exercise your foresight!
If a claim arises you will need to be sure whether the place where accident happened was your responsibility or that of your neighbour, tenant or other party. And accidents often happen in entrances, on boundary fences or on forecourts. Knowing the boundaries and the terms of any leases or contracts is usually essential. You also need to be able to produce proof of these limits whenever needed. So be prepared. Do not let searching the records eat into the 40 days allowed for handling a claim, and make sure you are sure! Do not waste time and legal costs trying to deny what is in the end undeniable.
Most property owners are aware of the risks of fire, storm, flood, theft, vandalism, and lots of other things that can cause loss or damage, but there are five kinds of risks it is easy to forget about.
1. Continuity Risk. This is the risk of your business being unable to operate while the damage is being repaired. This can mean not only the loss of sales at the time, but also the loss of clients, or key employees, if the business is closed for long.
2. Third Part Risk: Personal Injury. This is the risk of someone bringing a claim against you because they blame you for an accident where they have been injured. Alleged defects in your property, such as tripping hazards or sharp features, are often to blame for this. It is also important to prevent public access to work areas.
3. Third Part Risk: Property. This includes the risk of damage to other peoples property if a fire, flood, etc. spreads to their property because your prevention measures were not good enough. This is especially common where empty or derelict property is concerned.
4. Tenants’ Property Risk. This is when one tenant blames you for losses caused by workmen doing maintenance in the premises or for another tenant’s failings in allowing fire or water to spread to their property.
5. Rights of Way. Where these exist you have a special duty to ensure the safety of people using them. Where they do not, you need to prevent any being created, by blocking off at least one day a year any unofficial paths through your property.
It is important to consider your insurance cover for these risks and also to have a recovery plan for major incidents. You also need a good claims handling system to enable you to defend claims or settle them at least cost, taking into account the recent changes in the legal system limiting you to 40 days to deal with certain claims.
In some recent years the number of motor claims went up although the number of accidents went down! This is probably because more people were claiming for injuries even in minor accidents. Some of these claims could have been genuine! A motor fraudster may target an insurance company or another motorist or both.
Common types are:
- Accidents which never happened
- Exaggerated damage or injuries from a real accident.
- Staged accidents involving an innocent victim
- Staged Accidents between two fraudsters
- False or exaggerated claims for hired replacement vehicles.
Pro or Am? Some fraudsters are “amateurs” – ordinary people who see an opportunity for a quick profit – but types 2 and 3 are usually committed by “professionals”, who are organised gangs and often involved in other crimes. When accidents are staged they usually pick a victim travelling alone so there will be no witnesses and so they can intimidate him or her into agreeing to what they say, or to not taking photos. Challenging them can be dangerous and any suspicions should be taken to the police and/or your insurers or official investigators.
A recent example of a series of type 4 and 5 scams involved a broker who used to add items to genuine claims and get the insurers to pay him before he paid the motorists for what they had actually claimed. A doctor was also involved, writing medical reports on people he had never seen, who were usually unhurt. They always dropped the claim if it was to be investigated, and usually kept the amounts low enough to be paid without question. And they knew which insurers were the easy targets. The police investigation was started as a result of a claimant’s suspicions being aroused when he contacted his insurers direct and learnt about all the payments they had made to the broker for things he had not claimed.
National trends? Type 2 is more common in the USA whilst type 3 is more common in the UK.
What can you do? Always keep a camera in the car. The one on your mobile will do. If you are involved in a motor accident (or any other kind now I think about it) take lots of photos.
- Take both/all the vehicles and take the number plates.
- Take the other driver(s) and any passengers or others involved so they cannot say they were not there and so nobody else can take the blame for them. And the claim may be made by someone who was not there but did have some injuries caused in another way).
- Take the overall scene to identify where it happened.
- Take the scene showing the position of the vehicles in relation to each other to give some evidence of how it happened.
- Try to make notes as soon as possible while you still remember everything.
- You may want to just be left alone and get home as quickly as you can, but that is probably what the other driver is counting on if they are dishonest.