Operational risk identification is a dynamic process whose ongoing success depends on timely and accurate communications between the parties involved as business operations or processes begin, end or change in scope. It entails gathering detailed information about a business’s operations and processes as a basis for managing the risks associated with the business.
"Clients work closely with us to explore their organization for risk in order to ensure the best results in this important phase of the risk management process. Further, we encourage clients to fully involve our staff in the planning of future processes and operations so that we can identify exposures to operational risk and provide input on how to best deal with the exposures. Just as assessments and advice from legal, accounting or tax advisors are added to an organization's decision processes, our clients derive the greatest value from our services when we are able to add our assessments and advice on risk issues to their decision processes."
Operational risks, once identified, must be examined to determine if they can be mitigated or avoided entirely through:
"Risk avoidance imperatives must coexist with business imperatives. We work with clients to design risk avoidance strategies that achieve risk avoidance goals with minimal impact on clients’ business operations and processes."
Subsequent to implementation of appropriate operational risk avoidance strategies, risk retention and transfer analysis can begin. Insurance and/or other risk transfer programs must be designed and associated costs established. After costs for risk transfer are determined, evaluations of various levels of retention or transfer of operational risk are performed. Informed decisions can then be made relative to which operational risks should be retained, the level at which they should be retained, and how to best transfer the operational risks which should not be retained.
"We design and determine the costs for insurance or other risk transfer vehicles and then assist clients in making informed decisions regarding appropriate levels of retention or transfer of operational risk. Eustis Risk Management Resources maintains strong relationships with leaders in the insurance industry. Where insurance is the appropriate risk transfer mechanism, these relationships allows us to arrange programs for clients which provide long-term cost-effective results."
After implementation of avoidance, retention, and transfer strategies, it is generally a requirement of large and/or multi-divisional organizations that costs of risk be allocated appropriately and equitably amongst business or operating units of the organization.
"Clients are provided with allocations of operational risk costs to business units to the extent required by the individual needs of the client. These allocations are performed on various periodic bases ranging from monthly to annually."
Because claim costs constitute the major component of the total cost of operational risk, oversight and management of the claim handling and claim resolution processes are vitally important to reducing costs of operational risk.
"Our staff remains involved in handling and oversight of claims processes. We work with clients to ensure that claim review processes are in place so that claim facts and specifics are shared amongst all parties involved in the claims process - the client, the client’s insurer(s) and defense counsel, and our staff. This ensures that details and developments of individual claims are known to all parties and that specific claim handling strategies can be developed and adjusted to achieve the best possible claim results."
Given the dynamic nature of claims and claim generating operations, organizations with frequent claim activity must have access to timely, accurate, and organization-specific risk information in order to properly manage their operational risks.
"Clients are provided with risk information tailored to their requirements in order to promote quick identification of risk trends and the implementation of new or adjustment of existing operational risk control strategies."
The effects of Hurricane Katrina on New Orleans and the surrounding region in 2005 have brought Disaster Recovery Plans and Disaster Recovery Planning to the fore. Hurricane Katrina illuminated deficiencies in many Disaster Recovery Plans and, at the same time, resulted in the creation of new strategies for dealing with the aftereffects of major disasters.
"We offer consulting to clients and others who are designing new or updating existing Disaster Recovery Plans to ensure that the real world lessons learned after Hurricane Katrina are properly incorporated into future plans."
"Evaluations of existing risk transfer programs can be provided including analysis of program design, retention levels, and insurance coverages and costs. Areas of particular expertise include Business Interruption and other Time Element coverages, Retrospectively Rated or Cash Flow Liability and Workers Compensation programs, and Executive Protection including Employment Practices and Directors and Officers Liability.”
“We are also able to provide expert evidentiary testimony in legal disputes in all areas of commercial property and casualty insurance."
Eustis Risk Management Resources, LLC
