Risk Management – making it effective from the point of view of industry finance professionals to work in peace
Risk Management – Part 1:
All Risk Policy:
We start with relatively under played policy under the umbrella of All risk Policy namely Portable Equipment policy
~ Generally covers Laptops and Mobiles. This could be extended to other equipment depending upon the industry such as camera, projectors or medical equipment and others.
~ Fixed Assets Register: The equipment belong to the organization and handed over to the employees as tool or enablers to perform the official duties. Thus no. 1 care/precaution an organization needs to do is that it should be capitalized in the books of the company, accordingly has to form part of Fixed Assets register.
~ Unique Number endorsement with the insurer: these equipment come with a unique number, which must be endorsed in the records of insurer else in case of loss the claim would not be made good by the insurer as insurance company does not knows about it as per its records.
~ Negotiation with insurance company on claim value: Insurer would like to minimize the claim amount while our duty as an employee of company is to extract the actual loss. So point of discussion becomes is arriving on this loss amount. And for this it is very important to set the rules in the beginning itself and come to an agreement. The areas of discussions could be:
1. deductions from the claim amount on account of depreciation, implying what would be the depreciation rate that would be levied by the insurance company.
2. whether value will be market value or reinstatement value. this is very important as generally insurance company would be taking the market value in case of electronic equipment. Taking an example say a mobile which in a year’s time is bound to go down by say 1/3rd. So the insurance company would be computing the market value & then would apply the depreciation on it making the claim approved value lot lesser than the actual value. So the negotiation on depreciation rates/deductions becomes important.
3. Negotiation power increases if kitty of insurance company increases: If you are getting other policies also done from the same insurer then the negotiation becomes easier as you can always play on strength of the higher business where in one bucket may give profits to the insurer and in case other gives losses to the insurance company so net net they can still agree to give you the Portable equipment policy on less deductions.
~ Insurance still no insurance: FIR (First information report), Daily Dairy Register (DDR) and No Trace report: the insurance company would insist on either FIR/DDR and No Trace report. And getting no trace report from Police might be a nightmare for a genuine person who lost mobile/Laptop etc by way of theft etc. So effectively it would mean no insurance even if we paid the premium as we would not be able to get the claim. So we must be able to negotiate at-least the waiver of no trace report if not for FIR/DDR and for FIR – online FIR should be made acceptable by the insurance company.
~ Minimum deductibles: this should also be negotiated as it would become important when there is a accident and the screen of say I Phone gets broken and it cost say INR 5000. In case the deductibles are INR 5000 then we would not be getting the claim so again meaning no insurance. So this must be negotiated to minimum level say INR 2o00, hence in case of loss we would be getting INR 5000 – INR 2000 = INR 3000.
There are many other factors which we as a finance professional needs to be careful, of those have been able to highlight few of them as above. Would continue the discussion on risk management further during our future interactions.