Last week I did a Facebook Live, where Krystal Hobbs interviewed me as part of a series she’s doing for her company, Reflective Marketing. You can watch the video here, https://www.facebook.com/optimizedinsurance/posts/1473430189340372.
Krystal: Tell us more about yourself and Optimized Insurance.
Craig: I've been in the risk/insurance business for 27 years. I started ClearRisk 10 years ago to provide more accessible and more affordable Risk management software for medium to large enterprise and the public sector. I started Optimized Insurance 3 years ago to create a better insurance broker business model, more similar to tech companies that are lean, innovative, more customer focused, specialized, with deeper expertise.
Krystal: What is risk management?
Craig: Risk Management means different things to different people but in business there wouldn't be profit without risk. Risk Management helps maximize the upside of risk and minimize the downside which means more successful ventures. Basically anything a company does to assess or calculate which risks to take and how to take them in a way that has the highest likelihood of success. Insurance for example is only one way to financially transfer a portion of certain risks. But that's really just the safety net. In risk management the priority is making sure you don't fall off the wire in the first place. So things like safety, contractual risk transfer, contingency planning, hedging, etc.
Krystal: What are some common risks that small businesses face?
Craig: The insurance industry traditionally only thinks of risk as negative. What can go wrong? Business people think in terms of upside. And the traditional insurance risks like a building burning down aren't what keeps business people awake at night. Business people care about risks like cash flow, market share, succession planning, employee attraction and retention, and the most important risk of all, reputation. Because your brand is your most valuable asset. Most businesses know they need property insurance and general liability. But for many, the bigger risks are ones that they are commonly not insured. Cyber risk is among the biggest, but also things like business interruption and employment practices.
Krystal: What risks should we consider when it comes to social media? How do we mitigate these risks?
Craig: I mentioned reputation risk and cyber risk. This is where they converge. Nowadays a company's public profile, its reputation is not static like it used to be. Now every single customer and employee has instant and global access in their pockets to damage or ruin a brand. So the way that a company handles and oversees its social media is critical to brand protection. Mitigation involves having a social media policy. What staff can and can't do/say. Who speaks for the company, how are complaints handled? Having security in place to ensure that social media channels aren't hijacked. Having an expert like Krystal monitor social media and create a strategy to create positive brand experiences that will drown out any negative.
Krystal: How does risk evolve as a business grows?
Craig: This is one of the biggest vulnerabilities we find as business insurance experts. Companies grow, increase staff, add locations, new products, new operations, new markets, yet no one takes the time to stand back and look at the big picture and what the risk profile looks like as the company evolves. In general terms the more business activity you have the greater the risk. More specifically, if you have one employee, chances are you won't get sued for wrongful dismissal. If you have a hundred that's now a significant risk. On the flip side if you have only three customers and you lose one that can kill you. When a company is more mature they likely have more customers and fewer eggs in one basket, therefore less vulnerable to large shifts in revenue due to the loss of a customer or a customer who doesn't pay. There are great coverages out there for employment practices liability and accounts receivable. A good broker should be business savvy and constantly inquisitive to stay on top of evolving business risk. There can be huge gaps in coverage if you're not careful.
Krystal: What's the relationship between risk and insurance?
Craig: Insurance is one of the tools in the risk management toolbox. As mentioned, it's a financial risk transfer mechanism. It's very important to protect against large, unforeseen losses, but it is one of many tools. Take cyber risk as an example. There are great insurance policies evolving to meet this rapidly emerging and changing risk. But if you have a claim you've fallen off the wire. You need to have physical protections as well as security policies and procedures in place to make sure that your data isn't breached or stolen. Insurance can pay for your own damages and costs to mitigate, communicate and restore, and pay third party claims, and for downtime, but the reputation damage and potential loss of customers could kill or severely hurt a company, so you can't rely on insurance alone.
Krystal: Tell us about your book!
Craig: I wrote a book over 12 years ago called Insurance Premiums Are Killing My Business. Not exactly a book that you’d think an insurance broker would be promoting. I wrote it when was a full time risk manager, which means among other things, I bought the insurance for a very large organization. As a “professional insurance buyer”, it occurred to me that there were many things that risk managers did in buying insurance that small to medium sized businesses didn’t know because they weren’t big enough to hire a professional. I wrote the book to help them gain the same advantages. Even though I was on the buy side then, and am a broker now, I still believe the things I said, and still stand by them. You can find it at www.optimizedinsurance.com