You can’t manage what you can’t measure
The key to risk management is understanding your risk requirements and using insurance as a financial tool.
This leads to the concept of ‘Total Cost of Insurable Risk’ (TCOIR) – the costs incurred by an organisation to deliver an effective risk management strategy.
A TCOIR provides a sound basis on which to manage, control, measure and compare insurable risk costs and performance.
While risk management was once regarded as a routine functional task of the risk manager, now CEOs and CFOs are under the spotlight and should be working with key stakeholders to achieve the lowest sustainable TCOIR.
When it comes to risk financing, there is a gap that needs to be bridged between understanding what it means to buy insurance, versus what it means to look at insurance and risk within a broader financial management context.
Without an appreciation of your risk needs, you are left buying an insurance product that the markets are prepared to sell, as opposed to selling the insurable risk that you do not want to retain.
On average, TCOIR is 0.5 per cent of an organisation’s total revenue, so having an understanding of as well as controlling and lowering TCOIR can have a substantial financial impact.
For more information on how you can drive down your council’s TCOIR contact Vince Mamone, Aon’s Industry Practice Leader – Public Sector on (07) 3223 7520 or email vince.mamone@aon.com.au
*Copy supplied by AON
