How The Right Risk Management Program Can Help Execs Make Decisions More Confidently

Top executives in the U.S. earn over $100,000 a year on average. And it’s easy to see the reason for their high salaries. The job of an executive is, above all, about decisions. And at any moment, they may be asked to make decisions that can potentially influence their organization’s financial future – in addition to dozens or more lives and livelihoods (including their own).

How The Right Risk Management Program Can Help Execs Make Decisions More Confidently


With such high-stakes, good executives are expected to expertly stride the line between bold, growth-focused, and careful, loss-averse choices. However, even the best execs are only human – and it’s normal that they may allow the pressure of making a mistake to influence their decisions negatively. Additionally, in certain situations, a company’s leadership can be held personally liable for the results of their actions, putting their personal assets at risk.


Steps to Take to Minimize Risks

The HR and People Operations Teams play a major role in providing proper coaching and education to the Executive Team. First of all, it is of utmost importance that a company has an HR policy that clearly states what kind of behavior is expected from every employee, including the execs. It is also essential that every employee follows the instructions and rules provided in the policy and creates a safe work environment for everyone.


Being people leaders, the executives usually need to go through additional training to continually grow and improve their leadership skills. They manage groups of people with various backgrounds, personalities, and social skills, and it is not always easy to lead them to function as a team.


Other parties executives work closely with our investors, partners, and board members. These people expect them to make all the right decisions and keep the company on the right track to success, which often means zero tolerance for mistakes. Even the strongest character has to admit that it is a lot of stress to handle and needs the right support to cope with it.


In addition to working on and developing their leadership skills, there’s another step that executives can take to ensure that they are able to make difficult decisions objectively and decisively. Creating the right risk management program through purchasing business insurance will allow them to make the right decisions without being paralyzed by the possible risks and negative consequences. Business insurance allows companies to transfer financial stress from unexpected losses and unforeseen situations to the insurer.


However, with such complex exposures and potential risks, creating the “right” risk management plan is easier said than done. Let’s break down what insurance policies every management team should consider to protect themselves and have peace of mind when making tough calls:


1. Directors & Officers Liability Insurance (D&O Insurance)

The management team is susceptible to personal liability actions from a number of sources – partners, investors, customers, and regulators. D&O will respond to allegations related to the misuse of company funds, misrepresentations of company assets, breach of fiduciary duty, non-compliance, and unfair trade practices. In such cases, the company’s leaders may be held personally responsible for their actions, or lack thereof – meaning that their personal assets could be at risk.


A preferred D&O policy will provide the management team with means of protection from personal liability and cover the cost and legal defense of investigations, regulatory fines, as well as settlements, offered or judgments awarded.


2. Employment Practices Liability Insurance (EPLI)

Another frequent source of risk for managers comes from employment-related claims. This can include employee complaints of discrimination, wrongful termination, hostile workplace conditions, and many more. Employment claims are both financially draining, incredibly stressful, and can represent a PR nightmare. EPLI will respond to these claims and cover the legal defense costs as well as pay out reached settlements or awarded damages. Most importantly, EPLI will allow the executives to quickly and ethically resolve these potentially painful and damaging situations without having to think about the financial implications.


If employees who bring forward allegations of discriminatory practices are not satisfied with how the executive team handles the situation, they may look to sue them personally. That’s why it’s a good idea to avoid gaps in coverage by combining the D&O and EPL policies into one seamless package called management liability insurance.


3. Fiduciary Liability Insurance

Under the provisions of ERISA (The Employee Retirement Income Security Act of 1974), directors, executives, and managers of companies offering health and benefits plans can be held personally responsible for losses that occur to such plans.


Fiduciary liability insurance will protect the executives and companies if the plan recipients decide to sue in order to recoup their losses – alleging violations of the ERISA statute, mismanagement, or misappropriation of funds. It will pay for the executives’ (and the company’s) defense costs, as well as cover investigative costs, regulatory fines, and any settlements or judgments awarded. This will provide the organization and the trustees the confidence and peace of mind to offer the best possible benefits to their employees – increasing the chances of talent acquisition and retention.


There is no better way to empower the decision-makers to make those decisions confidently than to educate them to act ethically and responsibly and to ensure they feel safe in this litigious world we live in. Risk is an important factor in business and finding the best way to manage it can bring a lot of benefits to a company, both operationally and financially.

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Sean X Cummings

Marketing mastermind and agent of change, Sean X has been looking into the future where brands, technology, and media intersect—and manipulating the present to get there—for more than two decades. He led global marketing for, oversaw digital strategy for consumer leader Amazon Advertising, established an acquisition engine for the financial arm of American Express, and helped Nike and numerous other brands succeed. Sean is currently CMO at Embroker, a digital insurance company reinventing how businesses ensure they can take the risks they need to grow.

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