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Our approach is
simple. We study the elements that drive your business to
understand and quantify your organizational risk. Risk optimization, rather
than risk minimization is the name of the game.
ARI's practice is a formal approach to the risks
an organization faces. Its components include risk identification, loss
control, risk transfer and risk financing. The process logically approaches
risk and quantifies it so that its treatment can be, ultimately, a
financial function with losses budgeted and probability of financial shocks
remote.
RISK IDENTIFICATION: The objective is to uncover and
quantify where possible all the risks which the company faces. At the end
of the process, some risks will be retained as a conscious decision, but
ideally no risks should be retained because of ignorance of their
existence!
RISK CONTROL: After identification, some risks will
be subject to treatment via loss control. This involves steps to control
the physical or operational environment to prevent or reduce loss. Simple
examples would be installation of sprinkler systems to reduce damage by
fire, or computer firewalls to prevent unauthorized access to your systems.
RISK TRANSFER: Some of those risks that are not or cannot
be fully treated by loss control can be transferred to other parties via
contract. This can be an effective means to legally shift risk to other
parties to create competitive advantage. It is our experience that success
of this strategy depends to some extent on custom and practice in your
particular industry and to the relative bargaining power between the
contracting parties.
RISK FINANCE: Finally, risks that remain must be
financed. Low severity losses are usually best financed out of cash flow,
but potentially large or concurrent losses must be subject to a financing
method such as insurance. Self-insurance (as distinguished from
"non-insurance") is a formal financing method that can be
utilized to capitalize on the net present value of loss costs and/or
enhance stakeholder value. Stakeholders are the biggest “insurer” of any
business, because when the organization encounters unplanned risk,
stakeholders pay the “premium”.
At the
end of the process, as many potential losses as possible/practical will be
identified and quantified for frequency/severity. Once stratified, these
risks will be prevented, reduced, retained, transferred or financed. The
ultimate goal is to develop a risk management program that protects the
organization from identifiable risk and affords you sustainable competitive
advantage in your business.
Since
our distinctive strategies continually enable our client/partners to
leverage risk as a tool to gain competitive advantage, we have become
trusted business advisors. Trust, insight, execution and results are the
cornerstones of our business.
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