As Economy Improves, Risk Profiles Can Worsen

March 17, 2011

Slowly, but with growing certainty, the economy is recovering. Improving economic vitality is certainly good news, but companies need to be aware that their risk profiles are likely to change for the worse as business activity picks up, according to a report from Advisen Ltd.

“Greater activity naturally means more claims,” said Dave Bradford, Advisen’s executive vice president and the author of the report. “For example, more trucks driving more miles inevitably results in more accidents. But, more importantly, risk profiles can change disproportionately in many areas as business activity increases.”

Areas identified by Advisen where critical changes to a company’s risk profile can occur include:

  • Workers’ compensation claims can surge as companies add less experienced workers;
  • The likelihood of lawsuits caused by employee errors rises;
  • Temporary workers may trigger liability claims that are not covered under most insurance policies;
  • Companies are more likely to be charged with labor law violations; and
  • As merger and acquisition activity picks up, the probability that company directors will be sued by shareholders increases.

“Concerns about increased risk should not keep any company from taking full advantage of an improving economy,” said Bradford. “On the other hand, companies should not let growth overwhelm prudent risk management. By understanding where within their organizations exposures are likely to increase, business owners and managers can take steps to keep risk in check without dampening growth.”

The report outlines how companies and their brokers can identify areas of increased risk, and recommends steps to mitigate and manage increased exposure to loss.

Was this article valuable?

Here are more articles you may enjoy.