Risk management is an important financial function for all organizations, whether they are public or private, nonprofit or governmental. The process of managing risk, however, can be an expensive and time-consuming one when done internally, which partly explains why many smaller organizations choose, instead, to outsource risk management. This means hiring a risk management consultant, insurance agent or broker. To make sure the right consultant is hired, businesses should ask themselves what they hope to gain and what they intend for risk management to accomplish. They should then follow a proper proposal process.
An organization may want to seek outside help with risk management for several reasons. An organization might be too small to have the proper personnel to handle risk management or to hire an experienced professional to do so. Another reason could be the recent departure or layoff of the former risk manager, which would then leave a gap to fill until the next risk manager was hired. A third reason to hire an outside risk management consultant or insurance professional would be if additional resources are needed temporarily for a specific project. The need for a fresh perspective on how to identify and assess risk might be another good time to outsource risk management.
Whatever the reason for outsourcing risk management, once it is determined that it is needed, an organization should ask questions about their current risk management program. For instance, one could ask exactly how developed or sophisticated the current program is and how it might be improved. Another question to ask is how much the organization can afford or wants to spend on the risk management consultant. Pricing might be determined by whether a company is outsourcing risk management on a full-time or part-time basis and whether it is doing so temporarily or indefinitely. Risk management consultants may also be able to provide services such as risk financing advice, administration, management reporting functions, claims analysis, and loss control.
When outsourcing risk management, a company should be sure to follow its standard request for proposal (RFP) process. A proper RFP process ensures that all necessary factors, including but not limited to price, are considered when shopping around for a risk management consultant or insurance agent. That way, the company can feel certain that they are engaging the right partner to meet its specific risk management needs. If a company already has a current risk management consultant or agent, a new RFP process can serve to improve the services provided by that vendor or to help seek a new partner to provide superior ones.