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46 www.thejewelrybook.com M A N A G E R I S K B E Y O N D I N S U R A N C E J E W E L R S U N B L O C K E D The management of risk for any busi- ness is much more than simply the purchase of insurance coverage. While insurance is a large part of the risk man- agement equation, it is but one piece of a puzzle that could be a very large percentage, or a small percentage, of your Total Cost of Risk (TCoR). The defi nition of Total Cost of Risk: Total Cost of Risk is a quantifi able, controllable number that can be iden- tifi ed and reduced. Simply put, TCoR is the total cost of your insurance pre- miums, retained losses (deductibles/ uninsured losses) and internal/exter- nal risk control costs. Factors that are often overlooked in estimating the TCoR lie in the indirect losses; down time, damaged equip- ment, overtime, customer satisfac- tion, damage to your reputation, etc. An insurance policy may or may not help cover such losses, but all of this should also be factored into risk man- agement planning. Indirect costs such as these can range from three to fi ve times the actual losses. If you view your cost of risk in its totality, and take it into account in the planning process, you will be much better positioned in the event of a serious claim. A strong safety program is a must in managing TCoR. Employee training and orientation should clearly commu- nicate to all employees that this is a top priority for the company. Everything from job descriptions, to performance reviews, to management techniques should refl ect this. Damage to customer opinion and standing within the marketplace is something that should also factor into your view of risk. This is often the hardest loss to recover in the event of a high-profi le accident or incident. A reputational risk management plan in place that includes communication policies and strategies can help to an extent. The best technique to avoid this is to eliminate or reduce such losses in the fi rst place, which goes back to having a strong safety program. Andrew Whitman, a Senior Risk Manager for Risk International, suggests that there are several elements to keep in mind when reviewing your TCoR: Remember it's not just premiums… TCoR also includes self-insured losses, internal administrative fees, including collateral costs, and outside vendor fees (i.e. broker and third party administra- tor fees). Total cost of risk is easily benchmarked against industry peers… TCoR is mea- sured per $1,000 of revenue. By measur- ing TCoR against revenue you are able to compare your program to similarly situated companies. Even if a true peer doesn't exist, you can create a peer by weighting portions of your revenue base against relative industry peers. Bench- marking provides a great performance measuring stick relative to how you're doing against your peers. If losses are low, and premiums are high (relative to benchmarks), there may be a need to retain more predict- able losses and reduce annual premi- ums. If broker fees and premiums are high, there may be a need to under- take a true competitive process with your broker(s) and carriers. TCoR is a barometer of health for your risk management program. Ultimately, if you have a strong risk management program, your TCoR should constantly be improving despite changes in the underlying business operations. About Jewelers unBLOCKed™ Jewelers unBLOCKed™, offered by CED 1976 LLC, is the national exclusive Manag- ing General Underwriter for multinational A++ rated insurance companies in the jewel- ers block and luxury space. JUB provides proprietary customized insurance coverage to meet the challenges of the jewelry industry. So- lutions are developed for retailers, designers, wholesalers, manufacturers and refi ners. Our services include the underwriting and issuance of industry leading jewelers block policies. In addition Jewelers unBLOCKed™ also pro- vides bespoke insurance programs for the pri- vate client and collector. For more informa- tion, please visit www.jewelers-unblocked.com. Manage Risk Beyond Insurance

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