Risk Management – Gonz 101

Insurance is an important aid to commerce, industry, and private citizens, alike. Every small business, large enterprise, or individual can develop a substantial number of risks and uncertainties throughout their life and growth cycles.

It may involve the risk to:

  1. a premises or home
  2. a plant, machinery, or automobiles
  3. raw materials or precious metals
  4. other tangible assets


Property, goods and personal possessions may be damaged or destroyed due to:

  1. Lightning or fire
  2. Hail or windstorm
  3. Damage caused by aircraft
  4. Explosions
  5. Riots or civil disturbances
  6. Smoke damage
  7. Damage caused by vehicles
  8. Theft
  9. Vandalism
  10. Falling objects
  11. Volcanic eruption
  12. Damage from the weight of snow, ice, or sleet
  13. Water damage from plumbing, heating, or air conditioning overflow

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Many of these risks can be avoided by using industry proven techniques known as Risk Management.  The process of risk management includes the practice of identifying and analyzing your exposure to loss and taking steps to minimize these exposures to levels acceptable to your company or you personally.  This often involves methods or procedures that require direct insurance.

There are five basic types of risk management techniques that can be used to handle your exposures to loss.  These include:

  1. Loss Avoidance – This technique involves making a decision to not engage in any activities that expose you to losses you do not wish to assume.  Basically, this means you avoid or eliminate certain activities so that there is a zero chance of a loss occurring in conjunction with those activities.


  1. Loss Prevention – This technique includes those steps taken to reduce the probability or frequency that loss will occur when engaging in a particular activity. Simply, prevention reduces the likelihood of a loss occurring, while still allowing you to engage in that activity.

    For example, developing a strict safety policy and enforcing a strict safety program that requires preventive maintenance and safety checks on machinery and vehicles helps reduce losses caused by defective and poorly maintained equipment.  Most companies have a safety policy, but results come from the enforcement of the safety program that supports that policy.


  1. Loss Reduction – This technique tries to reduce the size and severity of a loss.

    For example, fire sprinkler and suppression systems reduce the size and severity of damage to your building and its contents if a fire loss were to occur. There is always tremendous liability associated with property fires.


  1. Loss Retention – this technique deals with the percentage of loss, in dollars, you can retain without creating undue hardship.  In general, the larger the positive cash flow of both organizations or individuals, the larger the loss (or risk) they are able to assume.

    Deductibles are the simplest example of retaining risk. If you consistently have large cash reserves from income, it may be in your best interest to have a larger deductible, which reduces your annual insurance premium.  This means you may be responsible for the first $1000, $1500 or $2500 of damage to your insured property.  Your qualified insurance adviser helps analyze the cost savings, in premium, determining if there is a reasonable benefit to taking a larger deductible versus establishing a smaller deductible and retaining less risk.

Loss retention

  1. Transfer of Loss to Another – This final technique involves purchasing various insurance policies to cover your specific exposures to loss. This can also mean transference through indemnification or “hold harmless” provisions in a contract. This would include shifting a particular loss exposure to another party, as well as your assuming loss from another party, under the terms of a contract you enter into.

    The most common instances of hold harmless agreements are those used by General Contractors with their many subcontractors.  Subcontractors are subject to the General Contractors dictated limits of insurance that cover the potential losses due to accidents, shoddy workmanship, or unforeseen delays in completing their portion of a project. 


These five principles of risk management are designed to employ the best methods possible to eliminate, prevent, reduce or transfer your risk exposure and avoid losses. Many risks can be avoided by implementing timely precautions, but some are just unavoidable, and beyond the control of a business or property owner. These unavoidable risks should be protected by insurance.

If your Risk Manager or Insurance agent isn’t talking to you about these principles of risk management, I am available to have that conversation with you to verify there aren’t gaps in your insurance portfolio. Get a “second look” for free.  I live insurance and believe in the work I do for my clients.  I’ll earn your trust, every step of the way!


Gonz@conoverbeyer.com, (848)303-5973.

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Happy Independence Day! Many have forgotten it’s true significance.

Independence Day, also referred to as the Fourth of July or July Fourth, is a federal holiday in the United States commemorating the adoption of the Declaration of Independence on July 4, 1776.  (Wikipedia)

Most Americans don’t reflect on the true significance of “the 4th of July”.  I myself was reminded of it’s significance by my priest, Fr. David Stump, SJ, while exiting Mass.  I greeted him with the words “…have a happy 4th of July…”, upon which he immediately replied, “Ahhh…it’s Happy Independence Day!”.  I nodded and smiled, moving on my way with his words resonating in my head the whole afternoon; the same as with many of his lessons.  As the day progressed, all you could hear on the radio, and I imagine see on T.V., were advertisements from various companies (mostly car dealerships and furniture stores), for the “Great 4th of July Sale”, going on “NOW”, at a location near you!  Don’t get me wrong, new cars need to be insured or added too insurance policies and new furniture leads to increases in “personal property” values or the desire to have a better homeowners policy, which my industry benefits from greatly.  But many forget that the freedom to buy a new car or purchase land, homes and property was forged on July 4, 1776 at great personal cost to our first veterans, who helped separate thirteen colonies from British rule.

“During the American Revolution, the legal separation of the Thirteen Colonies from Great Britain in 1776 actually occurred on July 2, when the Second Continental Congress voted to approve a resolution of independence that had been proposed in June by Richard Henry Lee of Virginia declaring the United States independent from Great Britain rule.[5][6] After voting for independence, Congress turned its attention to the Declaration of Independence, a statement explaining this decision, which had been prepared by a Committee of Five, with Thomas Jefferson as its principal author. Congress debated and revised the wording of the Declaration, finally approving it two days later on July 4.” (Wikipedia)

Thanks for reading and feel free to share…

Photos from my trip up the Hudson to see the Macy’s fireworks:

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