Reality is not a guessing game: Risk management

Most people will tell you that in their career they need eyes in the back of their heads, and they're not kidding. Many professions come with liabilities attached, and they're potentially big problems. Risk management is about taking care of business, in the most literal sense. Everything, from health, to income, to just covering basic legal liabilities is risk management.

When starting a new career is a good time for a dose of healthy paranoia, and finding out what the risks are.

A lot of this relates to basic insurance:

Property, fire, contents and equipment

Any property, contents and/or equipment you use in your profession is valuable. If lost or damaged, it will need replacing. That can be very expensive, and can cost you time and business. Insurance is used to offset costs.

Public liability (general)

Public liability is about injuries to people on your premises. It may be your home, your office, your shop, or anywhere you're deemed to be responsible for the safety of the public, including your guests and visitors. It's the law.

It is now humanly impossible to operate any sort of business or career without taking into account legal liabilities. If someone steps on a hot dog wrapper, near your hot dog stall, you're liable. If someone injures themselves in your waiting room, you're liable, even if they should have been looking where they were going.

We're potentially talking about millions of dollars here, so be very careful.

Liability (professional/commercial)

All professions have their own special forms of liability, as well as public liability. This means your insurance has to specifically cover circumstances relating to your business.

(Insurers will tell you what they don't cover. They have to tell you that, but you need to shop around for coverage, because the coverage you get, for what you pay, can be either great or totally inadequate. In some professions they may not even know what sort of coverage you need, too, and you're advised to take out specialist cover in those cases.)

There's a lot of thought involved here, and you need to do your homework. You may actually need an insurance broker, even to find someone who knows how to cover your line of work, what the hazards are, and what you need to look out for in your career.

If you're a doctor, you incur malpractice liability, as well as liability for the safety of the premises where you work. If you're a biologist, you may need coverage for a biological hazard, and try finding an insurer when you need one for that. If you're an industrial chemist, you know what the risks are, but the insurer will need to be told, in detail.

Income insurance

This is a big one, and a tough one. Insuring your income is always likely to be a pest, because the amount covered rarely seems enough, and the insurance covers worrying things like being unable to work. It's a scary process, but a necessary one.

You'll probably find that you can get some respectable level of income insurance. Pick the best coverage available for your outlay.

Health insurance

The health insurance industry isn't flavor of the month, ever, and it's because of the amount of payout relative to costs incurred. Spend some time on this one, because it's something you do need. The best policies come with all payouts visible, meaning you know what you get for what you pay. They all have schedules of payments, so it's no secret, and you need to check it all out before signing up.

Employee insurance

If one of your employees is injured on the job, anything more than a minor injury, you can expect a hefty Occupational Health and Safety (OHS) claim. That has to be covered, because the alternative is full liability for the claim.

These claims are extremely common, and difficult to manage. Legal costs range from horrendous to worse.

Don't employ anyone unless you have good OHS coverage.

(Don't be employed by anyone who doesn't know about OHS, either, if you can help it.)

Professional indemnity

Professional indemnity is for people whose profession incurs a natural legal risk of liability for their services. It really means taking responsibility for your work. Consultants, for example, acting as business advisers, are potentially liable if someone takes their advice, and the advice results in losses to their clients. A structural engineer can give advice, so can an industrial chemist, a botanist, a lawyer or a master builder.

Coverage for these events can be life or death. In the career sense, professional indemnity is pretty much compulsory. Even assuming your own work is flawless, there's probably someone, somewhere out there, who can turn your work into a death trap, simply by getting something wrong when taking your professional advice. When the liability is incurred, you then have to prove that person acted incorrectly when taking your advice or reading your plans, etc.

Living with risk

OK, so there it all is, a lot of outlay for something which may never happen… you hope.

The story here is to get a package of coverage.

You will need, at the very least:

  • Property, fire, contents and equipment
  • Public liability
  • Income insurance
  • Health insurance

These will keep you solvent, and in reasonable financial shape, under just about any circumstances.

The other forms of insurance should be taken out if you need them for your career. Remember, this sort of coverage is necessary to keep you in business.

The good news is that most insurers can provide you with a comprehensive package. Just make sure they know what you need. They need to know a lot about your business, what the hazards are.

They also need to know a lot about your premises, and anything relevant to a possible claim. This is called duty of disclosure, and if you don't give them correct information, they're within their rights to withhold payment until they've sorted out the facts. They're not being nosy, they need to know. Don't get shy, at this point.

Paying for it all

Now, the tough call. How much risk management can you afford?

The answer is, how much can you afford not to cover?

This is extremely important. Your new career can be put through the blender, literally, by risks that aren't under control.

You don't have to like risk management, but you do have to do it.

Getting cover

  • Figure out what you can afford.
  • Decide what absolutely must be covered, no matter what.
  • Talk to a few insurers. Tell them you need a package, explain what you want to outlay, let them work on it. They don't want to miss a sale, and you can get at least some working level of coverage.
  • Shop around, make sure your potential insurers know you're talking to other people. You can try to get a good deal, or at least a better deal, while you're at it.

You can always upgrade your coverage later.

Don't create risks for yourself

Having read this, you've probably already figured out where the risks are in your career. Lots of them, aren't there? Always evaluate risks, and make sure you're covered. The whole idea is to prevent losses. What's the point of making a buck, if you have to pay out a hundred to make it?

The more money involved, the greater the risks. When the big money starts coming in, that's when you must have coverage. The minute you hear an amount of money you can't cover if anything goes wrong, pick up the phone and get on to your insurer, immediately.

Never believe you can go without cover. That's when you're in real danger.