What is Cost of Risk? (COR)
The technical answer:
COR is the total cost of both direct and indirect expenses related to risk.
Examples of direct expenses:
- Fire extinguishers
- Vehicle repair and maintenance
- Safety consultant expense
- Insurance premiums
- Payment of insurance deductibles or uninsured incidents
- Staff time spent in training
- Time spent in crisis management or "putting out fires" when it relates to risk.
- An auto collision
- Employment litigation or resolving issues
- Windstorm damages
- Employee injury
- Accusations of consumer abuse, molestation or neglect
Reducing an organization's COR
There are multiple areas for an organization to target and plan for significant reductions of COR expense. For the purposes of this website page, two areas are targeted.
1. Property & Liability Insurance Premiums
Most insurance agents begin by talking about saving the organization premiums. Their hope is that a bidding process will give them an opportunity to replace the existing agent with their insurance services. (Read on about selecting a broker.)
The trouble is that the bidding process rarely achieves the savings the organization should be targeting. Assume that the organization has in place, or is implementing a behavior based performance management system rooted in the Behavioral Sciences. Learning insurance math, the organization should be targeting far more than anything achieved through a bidding process.
Hulse/QM® adds an additional feature to its partnering with an organization: Transparency. With Hulse/QM® , an organization will know:
- What commissions does Hulse/QM® gain from their insurance premiums?
- What services will an organization expect from Hulse/QM®,s commission revenue?
Crisis Management is "putting out fires" in the day to day operations of the organization.
Crisis Management is lost opportunities. It is a waste of valuable resources of the organization. It is a clue as to how effective is the organization's Performance Management System.
One of the measures of the organization's 2nd tier performance management is the nature and size of its crisis management. With the right practice of the right behavior based Performance Management System, crisis management should be negligible.
An all pervasive behavior based Performance Management is the key to reducing the organization's COR, to the significant improvement of the organization's expense budget.