Author(s):
Lawrence E. Ritchie
Oct 27, 2014
The following are some of the specific benefits of a preventative risk management program:
- See risks that are not apparent. Many of the real risks facing an organization cannot be gleaned from a textbook. A comprehensive preventative risk management program leverages a team of experts to identify and provide a deeper understanding of all types of risks.
- Provide insights and support to the Board of Directors. Board members may find it difficult to identify risks outside their areas of expertise and experience. Providing resources and advisory services to the Board and its committees charged with risk management will make them better able to discharge their duties.
- Get credit for cooperation. Many regulatory agencies have policies where they “give credit” to companies under investigation for having a compliance or a risk prevention program in place. While it is impossible to avoid risk and the manifestation of risk into potential problems, regulators want to see that an event is not due to a systemic breakdown and that the company has measures in place—such as proper leadership, training and certification—to prevent such activity.
- Build a better defense to class-actions. Plaintiffs in class actions and other downstream litigation often rely on their ability to convince triers of fact that the defendants have been negligent. This is harder to prove when the company can point to a preventative risk mitigation program that is in place to minimize these risks.
- Reduce business liability. Regulators and shareholders increasingly view litigation risk as a business liability. Reducing litigation risk upfront makes the company a more attractive investment.
- Frame regulatory issues. Preventative risk management programs provide greater insight into insurance, indemnity and liability issues and allow the company to better focus and structure its inquiry.
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