Why Risk Management is a Priority in Manufacturing
Apr 08, 2022
Let’s own up to a risk management truth: even though most articles in the trade press seem to dwell on emerging risks, the daily reality of risk management in the manufacturing industry centers around long-standing challenges such as workers compensation, safety management, product liability and motor vehicle risk. If you don’t get those right, the other things might not matter much.
But this doesn’t mean “traditional” risks should be managed in the same old ways. In fact, inefficiencies and missed opportunities are plentiful within the typical risk management operation. Apart from hidden costs and lost opportunities, this represents a clear competitive disadvantage. And, these shortcomings are a reason why more time isn’t spent on other risks that are surging in their collective importance.
Why should risk management be a priority in manufacturing? Here are six good reasons.
- Risk is a significant controllable expense. In an environment where it remains excruciatingly difficult to pass cost increases on to customers, and even the best providers fight commoditization, relatively few cost categories are both material and amenable to cost reduction through innovative management. By improving your reaction to incidents and prioritizing how they are addressed, risk as an expense can be mitigated.
- Traditional metrics aren’t capturing the entirety of the total cost of risk. Operational discontinuity, supply chain disruption, quality control issues and administrative overhead are just some of the additional costs that accompany the identifiable direct expense. Think of the opportunity costs that eat away at your bottom line or affect the morale of your employees.
- Risk management is necessary for safe growth. As organizations gain experience in a given area of business, they become more effective at identifying and successfully deploying optimizations such as learning more about the causes of accidents and how to prevent them. But the newcomer enjoys no such advantage. Safe, profitable growth requires that the learning curve be sped up and that loss causes be anticipated before they even arise.
- You’ll live with your record. Insurers are heavily invested in sophisticated analytics that help them identify, stratify and price their policies more precisely than ever before. This, combined with an unfavorable trend in market pricing and the long-standing workers compensation experience rating system, means that companies with relatively unfavorable loss experience will be unattractive to best-in-class insurers and will pay much more than those with favorable records. More than ever before, companies can’t just buy their way out of risk problems, not to mention the public scrutiny litigation could bring.
- Talent is scarce and expensive, and it demands safety. It’s unlikely that anybody is walking into the human resources office to submit their resignation specifically due to lack of advanced safety technologies. But make no mistake, safety is a basic non-negotiable expectation of today’s workforce. Organizations that don’t keep their people safe will experience fewer warm referrals for job openings, less engagement on the part of their workforce, a greater willingness on the part of their staff to accept cold calls from recruiters, and adverse testimonials in social media.
- There are new and creative ways to manage risk. Tools such as safety wearables, telematics, workflow management tools, mobile-enabled safety identification platforms and do-it-yourself advanced analytics mostly didn’t exist until now. Today’s risk management technologies are practical to adopt, and not just among corporate staff but throughout the organization. They require minimal user knowledge, put newfound power in the hands of daily operators and can change the very risk culture of an organization. Adoption of these tools has reached the point that those not on the bandwagon have put their organization at a substantial competitive disadvantage.
Is now the right time for your organization to explore new ways to keep people safe and reduce the cost of risk? Aclaimant’s coverage-agnostic approach will empower the risk manager to prevent accidents before they happen, realize drastic productivity efficiencies, secure better case outcomes and identify the things that matter most.
For more information please visit Aclaimant.com or contact us to arrange a discussion and demonstration of Aclaimant in action.