Should Business Plans Include a Risk Plan?

Tally Kaplan Porat

In the past I have held senior positions in marketing, business development, and investor relations and it always surprised me how corporations and even investors focus on what they are used to seeing: a regular business plan. The focus is on marketing, sales, revenue generation, market growth, go-to-market strategy, and other buzzwords we all recognize. Never have I been asked about a risk plan.

Come to think of it the only side of the business that has an actual integrated risk plan is the cyber team, as well as the cloud infrastructure that has what they call a disaster recovery plan. Business plans, however, generally focus on marketing, sales and R&D rather than risk.

When businesses conduct their SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis, it’s usually with reference to the market. I believe a broader perspective is called for.

As in your corporate SWOT analysis, have you identified the specific risks related to your business? What are your key business activities? What services or products do you provide? Now consider what can dramatically affect these, including illness, pandemics, power outages, wildfires, floods, natural disasters, strikes, etc. Can you continue to operate under such circumstances?  If so, how? Has your business allocated a budget for risk management and recovery?

Let’s drill down further. Consider a “what if” approach. What if your supplier went out of business? What if your overseas manufacturing facilities shut down? What if the internet goes down? Can we live without the things we take for granted? If so, how?

If the last two years taught us anything, it should be: prepare for the unexpected no less than the expected. Now that you have determined the risks involved in your business, have you formulated a procedure and strategy for each scenario? Is management part of your plan?

Having a risk plan confers so many benefits that it baffles me how many businesses neglect it. If anything, a risk management plan makes a company more resilient. A resilient company is more financially stable, making it more desirable for investors.

Efficiency is another added value of a risk management plan that directly affects businesses’ bottom line. Once you start digging into how your business operates today versus how it can operate with a risk management plan, chances are you’ll discover a lot of savings along the way.

The Role of Insurers and Reinsurers in Business Risk Plans

Once you have mapped your risks, insurance and reinsurance companies can measure and rate them. This process has two main objectives:

  1. Manage the business’ or organization’s exposure to potentially volatile capital and earnings.
  2. Maximize the value for the organization’s stakeholders.[1]

It is important to note that having a business risk plan that enables insurers and reinsurers to tailor a solution that fits your organization’s needs does not eliminate risks. It does however increase certainty and provide clarity as to how to conduct business in times of exposure.

Some key elements that are usually covered in business risk insurance and reinsurance policies are credit, market, underwriting, operational and strategic aspects[2], property damage and personnel. Rating these categories is based on in-depth analysis of the organization’s balance sheets, SWOT analysis, decision-making processes, financial management, and more.

Business Risk Plan Vs. An Evacuation Plan

Every office building has an evacuation plan in the event of catastrophe. We all need to know what to do in case of a fire. Remember school fire drills? Even today, I believe fire drills are among the ISO compliance requirements. Most HR departments have been briefed on the premise’s evacuation plans, and in some countries these also apply to wartime to inform people exactly where the nearest shelter is, how to get there safely or what to do in cases where shelter is not available. Such evacuation plans are intuitive, and I urge you to think of your business risk plan as your “business evacuation plan” in the sense that your business escapes a crisis to continue safely.

Your insurer and reinsurer are your partners in business safety. Having the relevant technology and insurance platform to implement an effective and efficient business risk plan is mandatory. Make sure you have chosen an insurer and reinsurer that have the right tools.

Sapiens PolicyMaster

Risk management is complex and needs to constantly adapt to an ever-changing landscape. One of the many features I appreciate in Sapiens PolicyMaster is their “what if” approach.  They have a complete quote, bind and service functionality, including scenario-building options. Sapiens Policy Master is designed to change and grow with your business, taking risks into consideration and creating sense and order in times of crisis.

Additional features include:

  • Support for internal users as well as agents and direct-to-consumer channels
  • Quick quote and full-application data-capture flows
  • Support for role-based processing
  • Configure straight-through processing
  • Full policy life-cycle management, including new business issuance, changes, cancellations, reinstatements, renewals and comprehensive support for out-of-sequence transactions
  • Complete historical view of information, with full audit capability
  • Advanced rule capabilities
  • Ability to handle complexity with a unique blend of flexibility, functionality and intelligence that empowers insurance to turn highly complex situations into opportunities for sustainable growth

Read more about Sapiens PolicyMaster.

[1] Risk Management and the Rating Process for Insurance Companies

[2] Risk Management and the Rating Process for Insurance Companies

  • policy administration
  • risk
Tally Kaplan Porat

Tally Kaplan Porat Corporate Marketing and Marketing Communications at Sapiens. Over 20 years of strategic marketing and communications experience with proven track record in brand transformation, managing teams and global marketing programs from development to execution.