RISK Management: A Business Fundamental.

• Author: PARMELEE, CATHERINE

If you think money management is all it takes to keep your ship afloat, consider the Titanic. After the first ocean liner was built about 50 years prior to the Titanic's construction, safety precautions were chipped away one by one in the name of competition. According to Walter Lord, author of A Night to Remember and The Night Lives On, the perfectly constructed ship was no longer the goal; it was the ship that made the most money.

It took just one disaster to wipe out the White Star line, which was never able to recover the loss of the vessel and the resultant settlements. The nitty-gritty is that managing risks is as imperative as money management.

"Successful businesses add value--value to employees, value to customers, value to the bottom line. Good risk management is about enabling you to add to those values," said Randy Pugh, president and CEO of Willis of Alaska Inc. in Anchorage, who cited this as his favorite quote regarding risk management.

Managing risk means taking a broad view of what constitutes a risk, beyond the parameters of the conventional insurance marketplace. "Risk management has little or nothing to do with insurance, said Richard Osgood of Ribelin Lowell & Co. in Anchorage. "Insurance is just one of the tools."

Furthermore, risk management is more than identifying and eliminating risks to assure conformance. In fact, according to experts at the international firm of Willis, simply taking a traditional approach to risk control and claims management based on inspections and legislative compliance can fail to meet all business needs.

"Loss control helps prevent losses up front," Osgood agreed. "And you can cut costs with a loss control plan, but that's only part. Risk management even means considering what you are going to do with excess cash."

Effective risk management includes ways a business can improve performance. Willis professionals explain that taking a strategic view of risk is to view it in relation to return--the upshot being adequate protection and a healthier bottom line.

A risk manager is the person responsible for managing company activities that affect risks of loss. Initially, "loss" pertained to accidental loss. However, the scope of risk managers' activities today should include financial losses from many nonaccidental causes, such as currency fluctuations, market changes, pollution cleanup and much more.

Risk management encompasses many fields. A professional background of any type helps, but essential criterion is managerial ability. "A risk manager is a jack of all trades, master of none," said Lori Wing, senior vice president at Brady & Co. in Anchorage. "A risk manager's function is to...