Risk identification

After risk sensitisation, risk identification is particularly significant for companies. The liability risks can be pinpointed with the aid of eight different supervision areas: technology, politics, commerce, supplies, production, social risks, ecology, and sales.

Technology

In this supervision area, it may be the case, for example, that defective products are manufactured with outdated machinery or other equipment.

Politics

New laws may be adopted which increase liability, e.g. environmental protection legislation, product protection laws.

Commerce

A company must always keep an eye on the competition; it must keep up with new technologies.

Supplies

The procurement sector may entail a major risk for companies. Suppliers are of special interest to liability insurers since they provide the actual raw materials for the company, the basic materials needed for production purposes. In order to avoid losses, such as recalls, from the outset, it is important to identify the quality standards used for the production of raw materials, the company?s goods-receiving process, the documentation which is compiled, etc.

Production

Production must be uninterrupted and safely executed and it must deliver goods of the appropriate quality. It may entail major risks for liability insurers: in the environmental sector, for example, due to the media used, chemical agents, emissions, and inadequate waste disposal equipment, or in the area of occupational health and safety, due to a company?s safety technology being inadequate, e.g. if employees are not provided with breathing apparatus or masks.

Products

Defectively manufactured products can cause property damage. Take, for example, a manufacturer of petrol filters, whose production resulted in a high rate of complaints. The result was that the engines had to be repaired and the filters recalled.

Social risks

Poor motivation among the workforce leads to a high level of absenteeism. Machinery which has hitherto been operated by specialists is now operated by less qualified staff. As a consequence, 100% quality cannot be guaranteed, and hence the products are not safe.

Ecology/Sales

This is a subject which is growing in importance. Corporate crises can erupt very quickly in this area. If a manufacturer is receiving negative press, it may very quickly culminate in his products no longer being marketable. As to the mostly ecological consequences of production - exhaust gases containing heavy metals, waste water, contaminated storage depots, limited occupational health and safety, etc. - the significance of these needs no further illumination here.

In this context, it is important to note that these eight different areas of supervision are constantly shifting in relation to one another, so that companies can always be confronted with new risk situations. This is especially true of companies operating and producing on a global scale. In such cases, a correspondingly oriented risk management team or system can at least try to master this state of affairs.

What we are talking about, then, is a risk that is in a state of perpetual change which can only be handled with a strategically oriented risk management