Importance of having a risk management plan concerning your investment

Importance of having a risk management plan concerning your investment


Currently in Ecuador, a culture of risk management or risk control is practically non-existent since –generally speaking- Corporations consider it an expense rather than an investment.  Even more, Ecuadorian laws are not aimed to strengthen compliance, verification, or control of the existence and implementation of a plan under a Health and Security department to look after the safety of workers and business investment. Despite all this, in a small number, we have a couple of companies (mainly private) that meet high standards of safety and risk control, given that they are international companies and they invest heavily in security in the countries where their subsidiaries are operant.

A Health and Security Department should be responsible for managing and persuade company’s owners and / or partners on the importance of creating a risk management plan to protect their investments. Furthermore, if developed correctly, it will bring great benefits in terms of company’s unexpected expenses, both in the productivity and in the Insurance area.

The benefits in business productivity due to the implementation of an appropriate risk management plan lie mainly in: avoidance of unscheduled stops, avoidance of accidents, reduction of liability (lawsuits) concerning injured employees, extend life span of equipment and machinery, and improve annual utility in the companies.

The benefits concerning insurance lie mainly in reducing accidents and thus reducing premiums (insurance costs), reduce the impact in case of a catastrophic event and become a very attractive business for reinsurers.

Initially, the implementation of a risk management plan will imply a business investment, but, in the long run, this investment will be recovered with improved productivity and cost reduction as a result of an appropriate administration.