CLP Quick Study
Managing risk — an asset oriented approach
Life involves certain degrees of risk, and every person has his own tolerance for risk. Some of us like to climb mountains or sky dive, while others are content to read a good book. Just as we manage, tolerate, or accept risk in our personal lives, we must understand and decide how we deal with risk in our businesses. One way to look at risk in a landscape company, is to use an asset oriented approach, and divide risk into three categories:
• Customer risk
• Personnel risk
• Property risk
The figure above shows some of the typical areas covered in each of these risk categories.
All risk management techniques require that business owners understand what risks they are attempting to mitigate, and then apply one or all of the following three basic strategies:
• Avoid the risk
• Live with the risk
• Transfer or share the risk with another party.
While avoiding the risk may sound like a simple solution, it assumes two critical factors: one, that you know what the risks are, and two, that you can avoid the risk and still stay in business.
Living with the risk also assumes that you know what risks are relative to you, or what the odds are of a risk-specific event having an impact on your company. (Ignorance is not bliss in this circumstance). It also assumes that the owner understands the consequences of those risks, and that business is able to survive through those consequences.
Transferring or sharing the risk is usually thought of as purchasing insurance, but more innovative methods can be applied such as having joint venture partners on high-risk projects, or specific contract terms that can spread some risks to other parties.
One of the major concerns of the landscape industry is customer/public liability for risks such as:
• Injury from inadvertently entering a job site.
• Auto accidents during traffic controlprocedures (or lack of traffic control)around job sites.
• Injury caused by the improper installation of landscape components.
• Slip and fall injuries blamed on poor maintenance, snow or ice clearing.
Applying our risk management strategies to the above risks we could imagine doing some or all of the following:
Avoid the risk:
• Restrict public access to specific areas
• Hire security/traffic control staff
• Ensure that areas are properly maintained especially in the winter
• Post with highly visible signs in winter months.
Live with the risk: (Self Insurance)
• Accept the financial consequences (but make sure you have the financial capacity to survive the impact).
Sharing the risk:
• Liability Insurance
• Co-insurance with property owners.
