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It All Ties Together: How People Make the Difference in Your Total Cost of Risk

Feb 07, 2019 Decorative image: truck driver and supervisor

The total cost of risk (TCOR) goes far beyond insurance costs and claim occurrences. Managing the TCOR requires the involvement of almost every person in an organization.

For example, according to Brad Croce, senior vice president at Hylant, there’s a strong correlation of engagement in the workplace and the frequency and severity of loss incidents across all industries, Smart Business article by Jayne Gestfrom a manufacturer’s production line, to the drivers in a fleet safety program, to the security of a company’s data from a cyberattack.

Smart Business spoke with Croce about TCOR and how employers can encourage their people to help keep risk costs low.

Have executives today become more interested in the need to address risk in their businesses?
There has been more awareness of the need to improve risk management and thus the TCOR. Since the Great Recession, company executives have increasingly focused on this from a cost containment standpoint as well as a management tool.

When a company is managed with a strong foundation for ethical behavior and compliance, it creates a corporate culture where managing risk is at the forefront for employees.

This foundation begins at the top of the organization, where all executives are aligned and committed, with an emphasis on risk identification, mitigation and correction.

Not only does this result in a reducing TCOR, it also makes a workplace more attractive to prospective and current employees.

How should risk management work to keep the TCOR down?
Although each company is different, well-run organizations focus on risk identification and prevention, which include strong safety and security procedures, resulting in loss avoidance. Along with this approach, data shows that the ancillary administrative costs decrease as well.

In addition, when insurance company underwriters consider culture, management style, employee engagement, etc., in their due diligence and assessment, the resulting judgments they make when providing pricing and terms and conditions back to the insured can derive an additional financial benefit.

What are some best practices for minimizing the TCOR in your organization?
A TCOR review by the entire company management is a good starting point. It helps the company understand the full extent and cost of all risk management activities and expenses.

Another benefit of this exercise is that management has the ability to better align risk mitigation actions with the corporate strategic goals and objectives. TCOR also can be benchmarked against industry peers to accurately measure performance and identify opportunities for improvement.

Another best practice is involving employees to assess the current behavioral issues and what could be done to improve them, which then facilitates the implementation of any changes or improvements. For example, if a company has a fleet of vehicles — even if they’re not the core business — it could screen and/or survey the drivers to identify links between attitudes, beliefs and behavioral tendencies with the frequency and severity of accidents. This type of analysis could result in more enhanced driver training while also helping employees feel involved and valued.

In addition, whatever gets measured seems to be what gets done. If a safety committee is then formed, it brings together people from different levels of the organization, where the expectations around it are clearly communicated and followed up with documentation, which then holds people accountable.

To learn more, contact:
Brad Croce
Senior vice president
(216) 674-2480