Facility Management

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Describe the benefits of using the three general methods for managing risk (loss control, loss financing, and internal risk reduction) and how they can minimize the liabilities of operating a facility.

In operating a facility it is important to identify possible risks and manage these factors before they occur. There are three general methods of risk management: loss control, loss financing, and internal risk reduction. States or insurance companies often insist that facilities provide loss control services that are "reasonably commensurate with the risks, exposures, and experience" of the facility's business. The loss control service includes surveys, recommendations, and training programs based upon an analysis of potential accident causes. In addition, qualified personnel and independent contractors must be employed at the facility. Qualifications can be outlined based on level of education or training or years of experience. Outlining these perimeters helps the facility manage risk better as well as serve as a prevention tool. By utilizing loss financing, facilities estimate a certain level of risk, which is unavoidable. This might be in the form of the deductible of an insurance policy. Insurance is the leading form of risk management. Companies pay insurance companies before sustaining losses through premiums.

Companies create special funds to cover these potential losses, sometimes. Post loss financing is the action of obtaining funds after the losses are incurred so a company may need to obtain a loan or issue stock as a way to handle loss financing. This financing serves as a way to control costs of risks that have occurred. Internal risk reductions are the acts facilities take to avoid loss by reducing risk. Facilities utilize this risk management method by ensuring that the workplace is safe, employees are properly trained, and there is a focus on common sense and safety. This is beneficial because risky behaviors are minimized. Internal risk reduction works on minimizing the effects of risks by having systems in place to neutralize the effects of an accident or disaster.

Helpful link: http://www.referenceforbusiness.com/management/Pr-Sa/Risk-Management.html#b

What are the differences between minimizing risk and the cost of risk? Which one of these concepts has a greater effect on minimizing liabilities? Should a facilities manager focus more on minimizing risk or the cost of risk?

Minimizing risk is taking action to identify and understand the risks to which your facility is exposed. Facilities may hire risk managers to evaluate and analyze potential risk, or executives may determine risk internally. Usually all risks which the facility is exposed to be listed. Next, these risks are categorized and analyzed. Alternatives are then examined as a way to manage each type of risk, utilizing the expertise the organization brings in dealing with the risk. Cost of risk is similar, however, it is based upon the type of work the facility does and where, and is typically the amount of dollars utilize based upon the listed risks. The cost of risk includes insurance, risk management department operation costs, legal and claims expenses, uninsured loss costs, and risk improvement costs. Of the two concepts, minimizing risk has the greater effect on minimizing liabilities. This is because the organization is taking an active role in identifying and minimizing risk. This is an important component when considering the cost of risk. Liability insurance takes into account not only the type of work and where the business is located but can also include variable such as the type of vendors the facility is using. For instance, if a facility were purchasing ...