Risk management is top-of-mind for many organizations and executives. It seems there is constant pressure to identify and reduce risks, which can be especially difficult if you don’t know where to start. If that’s the case, consider beginning with trend analysis. Trend analysis benefits risk management by highlighting trouble areas, helping you to improve your strategies and lower costs.
Trend analysis improves risk management for a number of reasons. First and foremost, it helps determine the root cause of issues and identify problem areas. Every organization has inherent risks, but trend analysis allows you to easily discover and reduce those that are generally preventable. You may not realize it, but a significant amount of claims may be coming from the same employee, department, or branch. It’s one thing to know that you spent $500,000 on slip and fall claims last year, for example, but it’s another to know that 75 per cent came from the same location. This knowledge means you can dig into that location, figure out what is causing so many slips and falls, and fix the problem at its source.
Repetitive claims cause organizations to pay out on the same types of incidents year after year, in many cases because they’re simply not aware of any issue. After identifying a distinct problem, you can implement a mitigation strategy, which is impossible if you’re not aware of what’s causing the issue, or even that there is one.
This can reduce your annual claims costs and may even help you negotiate lower insurance premiums. It will also enable risk employees to spend time on valuable tasks, such as acting on trend information and improving operations in the long run.
Trend analysis can guide risk strategy and decision making. In an environment with many rapidly changing factors, it can be difficult to know what to do next. Trend analysis highlights key areas that need improvement, so you know exactly what action to take first. It also lets you monitor the effectiveness of any risk mitigation strategies, allowing constant improvement and better preparing you to handle similar situations in the future.
Traditionally, risk management was an isolated department within an organization. Today, however, there is a need to integrate it within the activities of every department. Using trend analysis is an opportunity to educate employees and raise awareness about the value of risk management. You can highlight common issues and explain how much they are costing on an annual basis – holding individual employees and departments accountable for their costs. Often, repetitive claims can be fixed with a simple equipment upgrade or training.
Finally, trend analysis makes it easy to illustrate the need for change and justify upgrades or training to stakeholders. You can begin by revealing the problem trends you have uncovered and your action plan for reducing them. Then, you can easily report on the impact of initiatives and show how much costs have been reduced. This will definitely prove the value of risk management within the organization!
So how can those in the public sector implement trend analysis to achieve these benefits? The most important step may be to begin tracking incidents as well as claims, as incidents are the number one predictor of future claims. For example, say that three people report that a street has dangerous potholes that should be fixed. This likely wouldn’t be entered into your claims system, but when someone else inevitably files a claim for damage to their car, it will be.
If you take the time to monitor incidents, you can eliminate problem areas and reduce associated risks before a claim is even reported. Once you begin tracking incidents and claims, you need to dig down into these occurrences and determine a root cause. Try to build links between incidents, those obvious and maybe not-so-obvious, and compare trends across departments and locations. Consider what is missing or being done incorrectly for these trends to appear. These insights will help you realize where to direct resources. If having difficulties identifying connections, you might try discussing it with employees or other relevant parties who encounter the problems in their day-to-day work.
They may have ideas on the cause that you hadn’t considered. To get the most out of trend analysis, you could consider upgrading your systems. Collecting and monitoring hundreds of incidents will be difficult using manual processes such as Excel spreadsheets. Organizations can now invest in systems that automatically input and organize data and create trend reports based on any information in the system. This will make it easy to identify issues, begin mitigating risks, and reduce claim costs.
You’re already collecting some form of data on claims, and maybe even incidents. Why not use that information to implement real change in your organization and produce results? Even basic trend analysis can provide insight that will greatly benefit risk management efforts.
Rebecca is a writer and student marketing specialist at ClearRisk Inc., a provider of cloud-based risk management software solutions. ClearRisk has 12 years experience helping customers streamline tasks and focus effort on high-value initiatives.