From the point of view of a business entity, insurance is one of the optimal tools that streamline the management of business continuity and risk transfer onto a specialized institution, namely an insurance company. The following argue in favour of the above:
costs – an insurance policy belongs to relatively cheapest methods of protecting the company's interests, due to risk dispersion onto a large number of entities under protection,
scope of protection – the offer of insurance companies becomes ever broader and to a greater extent adjusted to individual needs of enterprises.
Obviously, the scope of protection also depends on the size of a business entity and the area of its operations. Different types of risks will emerge in the case of a trading company, a service company and a processing company. The development of an enterprise is also an important element, since we can encounter different risk groups during different development phases. We need to underline that contemporary insurance companies offer insurance products that cover most risks a business entity is exposed to at different stages of its functioning. The spectrum of insurance protection offered to business entities is very broad and products offered by insurers are ever more refined and tailor- made. This is facilitated by market competition, development of modern risk management mechanisms both on the part of a client and an insurance company and the transfer of know-how in the global scale that allows an insurance company to offer schemes matching client expectations to the greatest extent. A business entity wishing to conclude an insurance agreement needs to arrange the following transaction details with an insurance company: amount of insurance, insurance variants, amount of yearly benefit, method of payment or amount of franchise or own shares. Before signing the agreement an insurer collects information about a given risk. A well-conducted risk assessment becomes a basis to present an insurance offer, including the calculation of an insurance amount, and to conclude an insurance agreement. However, we need to remember that the risk management process on the part of an insurer takes on a different form than of a business entity. Due to the specificity of activities conducted, not only does it need to cover an internal risk analysis, consisting in identifying, assessing, measuring and analyzing risk-taking methods, but all insurance and reinsurance agreements concluded with clients. Therefore, insurers need to assess risks to insure against on their own, undertake actions
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leading to risk limitation, conduct preventive actions to counteract risks or to minimize their effects on their own and to promote these actions among clients.
5 Summary
The issue of business continuity covers a broad range of matters related to the functioning of an enterprise, which directly and indirectly influence its activities. We also need to note that this is a constant process, depending on an entity’s working conditions in the changing market environment. An enterprise should take into account mechanisms of providing continuity via making use of available tools to monitor and manage risks related to its operations. The use of insurances that allow transferring risk to an insurer and provide an opportunity to compensate for potential losses in the case of risk materialisation is of great importance in this process. We also need to emphasize that initiatives aimed at safeguarding business continuity should be continuous, adjusted to internal enterprise conditions and should take into account changing external factors. Comprehensibility of actions in this scope will undoubtedly contribute to increased security of business activities in a changing market environment.
Bibliography
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Unii Europejskiej”, MIG, Rzeszów, 2010, str. 233 – 247.
[2] Pukała R., „Ubezpieczenie jako narzędzie ograniczenia ryzyka działalności przedsiębiorstwa”, „Эффективное управление предприятием и
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[5] Ubezpieczenia w zarządzaniu ryzykiem przedsiębiorstwa, tom 2. Zastosowania, pod red. L. Gąsiorkiewicza i J. Monkiewicza, Poltext, Warszawa, 2010.
[6] Zawiła – Niedźwiecki J., Ciągłość działania organizacji, Oficyna Wydawnicza Politechniki Warszawskiej, Warszawa, 2007.
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INTEGRATEDRISKANDINSURANCEMANAGEMENT
IN
ANENTERPRISE
Ryszard Pukala
State School of Technology and Economics in Jaroslaw ul. Czarnieckiego 16, 37-500 Jaroslaw, Poland
e-mail: [email protected]
Abstract: Risk is one of the basic economic phenomena. Every market
participant is exposed to it and counteracting risk materialization is one of the elements of efficient corporate management. This article zooms in on risk and insurance management in an enterprise, treating both areas as mutually complementary and supportive.
Key words: integrated risk, risk management, insurance polisy. 1 Business operation risk
“Risk” is a popular term, both in everyday and economic use. It is employed to describe everyday situations, mostly in the context of danger, and to describe one of the basic phenomena of economic life. It is hard to find a univocal definition of risk; however, we can determine it by providing criteria for its use:
the fact that the future result of actions is unknown, but it is possible to identify future states,
probability of particular results in the future is known .
Nevertheless, it seems that the abovementioned criteria are too narrow. For the purpose of this study, we can assume that we can talk about risk when there is some uncertainty both as to the value of future states and their probability. In this context, we should investigate the problem of risk identification and risk management, as these aspects are crucial for the efficient management of the company's future.
Bearing in mind the vast range of potential risks for an enterprise, the issue of risk management gains key significance in optimising business operation. This issue is up-to-date, particularly in growing competition, globalization and cases of temporary global and domestic economic growths and recessions. Therefore, counteracting possible risks can protect an entity (or at least can limit negative effects) from multiple obstacles that disorganize its work. This is a very important aspect also in the context of using risk management instruments in a
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company. As shown by studies conducted in 2011 by AON Polska Sp. z o.o., this is a considerable market problem – see Chart No 1 below.
Chart No 1. Risk management policy in an organisation
Source: „Badanie zarządzania ryzykiem i ubezpieczeniami w firmach w Polsce - Raport AON Polska 2011/2012”, AON Polska Sp. z o.o., Warszawa, 2011, p. 36.
The data show that only 34 % of managers carry out an active risk management policy in their enterprises, whereas 18 % of them do not undertake any actions aimed at preventing potential risks at all. It is hard to understand it all the more, since proper risk management serves as a company protection and increases company and shareholders’ benefits, contributing to the meeting of objectives through:
determining systemic framework, owing to which the operation will be coherent,
reducing the risk of unforeseen losses,
protecting and increasing the property and image value,
making the management, planning and control process more efficient, improving effectiveness of operation,
allowing the efficient use of material and human resources.
Thus, risk management provides stability of company’s operation, regardless of conditions. After all, each decision is related to the forecasting of a given future state. However, it is hard to foresee a direction and magnitude of risk. Change of economic trends, the level of costs and prices, loss of key clients, fluctuating exchange rates or interest rates on loan, tool and equipment burnt in the fire, IT systems breakdown, to name a few, add to a broad range of risks which can threaten a company’s financial liquidity and lead to its insolvency.