Committing to this will make your firm safer, more resistant to adversity, and change cashflow and profit for the better.
As our risk management advisory services area grows at Zweig Group, we are finding some common themes. For instance, a lot of firms are sub-optimally insured, meaning that they have inadequate coverage, high costs, and ill-suited deductibles, among other issues. Many firms lack a comprehensive risk management strategy, perhaps because they fail to realize positive cash and profit impacts from better risk management. And many firms have simply outgrown their current insurance coverage.
If this sounds like your firm, it’s time to revisit this. Take a hard look at how your firm deals with the expense and risk exposure of where you are today. A risk management advisor, like Zweig Group, can model your current coverage and advise you on how to improve it, in addition to showing you the significant benefits of captive insurance solutions. You may find some not-so-difficult ways to improve your cash flow and profit.
Risk management trends. This year has seen increases in professional liability insurance costs, driven primarily by higher claims costs. Professional claims are seeing the same atomic jury awards other liability coverage is also facing. Professional coverage for APD projects is seeing greater demand. Some insurance companies are not embracing this trend, causing more difficulty in placing professional coverage. Cyber liability protection is more difficult to obtain and is requiring greater cybersecurity measures to qualify for coverage. Cyber liability coverage costs are up 40 percent to 100 percent, driven by a large number of cyber claims, including large ransomware demands. At the same time, M&A activities are increasing, requiring careful navigation during the merger process to ensure proper insurance protection for both entities.
Economic benefits. Firms that overlook this important business area are leaving cash on the table. If you take the time to reevaluate your firm’s expense and risk exposure, you could:
- Increase profits and cash flow with better insurance and possibly a captive insurance entity. For example, a firm with $65 million in billings as a threshold can generate $1.5 million to $2.5 million in extra profits over a five-year span. If yours is a larger firm, the numbers get bigger. These are proven and provable numbers.
- Use profits and reserves to add to the stock price and improve the stability of the balance sheet. Who among us cannot put $2 million dollars to work for the benefit of the company, its employees, and its customers?
- Use profits and reserves to offset insurance costs. While building up reserves, firms can use the surplus to pay for insurance while having the added benefit of cash on-hand for greater stability in rocky times.
- Use profits and reserves to reinvest in people or assets. Wellness programs, improved benefits for recruiting and retention, and internal company assets for customers and employees are just a few examples of what a strong cash position can do for your operations.
There’s no time like the present. Committing to a risk management strategy will make your firm safer, more viable and resistant to adversity, and change cashflow and profit for the better. Working with an expert can get you past one-size-fits-all solutions and to a strategy that is designed specifically for your firm and its needs. Click here to learn more about Zweig Group’s risk management advisory services.
Dathan Gaskill is managing director of Zweig Group Risk Solutions. Contact him at email@example.com.
The Principals Academy The Principals Academy is Zweig Group’s flagship training program encompassing all aspects of managing a professional AEC service firm. Elevate your ability to lead and grow your firm with this program designed to inspire and inform existing and emerging AEC firm leaders in key areas of firm management. Join us November 3-4 in Arlington, Texas. Click here to learn more!