How to outsource risk in your business
Risk is a fact of life. Fortune favours the bold, but there’s a big difference between calculated risk with a good chance of reward and sheer recklessness for its own sake.
In business, you need to be taking the kind of risks which pay off, but what if you could mitigate or even entirely negate the possible downsides of a course of action? A number of specialist business services exist which enable you to outsource risk, often significantly more cheaply than dealing with it in-house.
Let’s examine how you can take some of the sting out of your organisation’s bigger gambles.
Day-to-day operational risks: Business insurance explained
Any organisation faces operational risks to be secured against, and insurance is a common solution. In fact, some insurance products are legally required for certain types of organisation.
For example, most businesses with staff need employer’s liability insurance to cover compensation claims from employees suffering injury or illness in the line of work. Public liability insurance performs the same function for injuries to the general public, and is required for most public-facing businesses.
Those providing consultancy or certain B2B services could find professional indemnity insurance essential. In the event that their services damage the client, that client may be entitled to sue, which the insurance will cover.
If legal proceedings do become necessary, after the event (ATE) insurance might help. Usually, this is taken out by claimants to cover the defendant’s costs if their claim is unsuccessful. But as we’ll explore shortly, this is not an efficient option.
These are just common examples. In reality, you can insure against the overwhelming majority of risks faced by an organisation. You can even insure against the possibility of your staff’s lottery syndicate winning the jackpot and all quitting on the same day.
While insurance is a widespread option for outsourcing risk, it does carry the burden of premiums, so there’s still some impact on your organisation. Likewise, you face the worry that insurers may take any chance they get to wriggle out of paying up. So, unless the policy is airtight and the circumstances straightforward, all those premiums might have been for nothing.
Health and safety risks: Assessment services
While insurance rests on the odds of risk, other professional services exist to protect you from occupational risk entirely.
Different industries have different specific health and safety legislation, which you can review on the Health and Safety Executive website. Complying with these laws might involve employing dedicated health and safety personnel, and this might even be a very viable option for larger businesses. However, it still involves the time and resource inherent in expanding your workforce.
What’s more, if in-house risk assessments were found to be inadequate, the buck would stop with your team. In this case ‘the buck’ might refer to several thousand bucks in the form of compensation and litigation costs.
Another option is to outsource this function to a third party. Many organisations exist which help businesses satisfy their compliance obligations in areas like health and safety, risk assessment, construction design and management, and water hygiene monitoring.
The bigger your organisation, the more you could save and the more risk you could mitigate by outsourcing, compared to hiring, training, and maintaining separate teams across multiple sites.
The added incentive here is that, should the worst happen, your organisation could be financially protected, and the third-party assessment company liable for damages via their own professional indemnity insurance.
Legal risks: Litigation finance
Of course, few realities of business life are as daunting as entering into legal proceedings. Things are risky enough for the defendant, either mounting a successful defence or proving a claim is spurious, but it’s not plain sailing for the claimant either.
For sake of example, let’s assume the most airtight case imaginable, one with no chance of failure. It still has to go through the proper processes at a cost of time and resource to your organisation.
A much larger defendant is likely to try to engineer a situation where the claim is strung out for so long that the claimant runs out of funds and must abandon the case.
Commercial litigation funding not only outsources, but effectively eliminates this business risk. Not only is the aforementioned risk to smaller companies removed, larger corporates benefit from freeing up money and management time which would otherwise be tied up by litigation.
Of course, here in the real world, nothing is 100% certain, and perfect claims do not exist. If a claim fails, you could find yourself liable for the defendant’s costs, which is usually where ATE insurance comes into play.
However, third-party litigation funding typically carries the added benefit of an indemnity for the claimant against the costs of an unsuccessful case. To all extents and purposes, this option removes all the risk of pursuing a claim, begging the question of why, if litigation funding is an option for you, would you consider funding a claim by any other means?
At Redress Solutions, we’re committed to helping those with meritorious claims find the justice they deserve. Download our guide to planning a legal claim for your business and take your first steps to securing the right outcome.