captives and business growth

Risk Management Isn’t just for the Big Guys

Growing a business is tough. You get so mired in the day-to-day that you forget to stop, pull in some oxygen, and take a really good look at how far you’ve come. We meet with a lot of business owners who, once they set aside their worries and frustrations for a little while and take the time to really look at what they’ve accomplished, are surprised to see how much progress they’ve made.

Sometimes, I think it is human nature to forget that you’re growing, and with growth comes change. We meet with a lot of business owners who either underestimate their real value, or think that they’re not yet big enough to worry about risk management. “Risk management?” a client said, looking at me quizzically when I started talking with him about it, “That’s for the big guys, not me.”

But the truth is, as your business begins to mature, you really have to take a look at the amount of risk you’re self-insuring and find ways to cover that risk so that you can move the business forward. In fact, the people who fund you – the banks and investors, the shareholders – will want to know that you are managing risks appropriately, that you’re insured properly, and that you are thinking strategically about your assets, the amount of risk you’re taking on, and the way you manage that risk.

Benefits of risk management

Risk management isn’t just about buying more insurance. Certainly, there are a number of situations you want to be prepared for – liability issues of all kinds, including employment issues, product liability, property damage, even bank deposits. Risk management, when done appropriately, helps to insure you against the worst case scenario, providing a buffer if the worst happens.

But it’s not enough, sometimes, just to buy insurance. Depending on what type of business you’re in, you may not be able to get reasonable deductibles, leaving your business exposed to a loss that’s bigger than you’re comfortable with. You might not be able to purchase insurance on certain types of liability at all. Consider flood insurance in lowlands areas, or kidnapping insurance for executives who are working to build your company’s profile globally.

Proper risk management will help your company absorb the costs of the worst happening. Your business will also have the benefits of lower overall insurance costs and a better financial structure during good times – and bad – to support long-term growth.

Risk management strategies

Reconsider the idea of risk for your business and reframe the idea with a series of buffers that are available to you – the smart people you’re hiring to move the company forward, the support you have from investors and board members, and the financial mechanisms that are in place to carry you over the rough patches.

Meet with your insurance broker regularly to go over updates and changes your company is going through and find out how your broker can help you reconsider your insurance in the same way that your bankers and brokers help you grow your investments. Updating policies, purchasing new policies, and restructuring payments are all ways to responsibly manage risk. When you reach a point where insurance is difficult to buy for a certain type of coverage, or where the deductibles are prohibitively high, your broker may suggest an enterprise risk captive. Once thought of as a tool for “the big guys”, captives are now much more accessible to – and right-sized for – mid-sized companies. With a captive, you can zone in on risk planning that you need to do for your company, and insure those risks that are difficult to find policies for on the open market. We work closely with your company to underwrite, manage, and meet all state and federal regulatory and tax guidelines associated with the captive, so that you can feel confident that the captive is working efficiently for your company.

If you’d like to consider a captive, talk with your broker, or contact us to find out more about how captives work. I promise, they’re not just for the big guys.