Risk management: Prevention is always cheaper than insurance
Risk analysis and prevention are fundamental. Let’s talk about insurance only as a second step. If you are responsible for a company, a division, or a production facility, you are paid to account for worst-case scenarios – the future of the entire organization and its employees depends on the measures you take today. You can easily recognize a good manager: they prepare for the worst during times when things are going well, profits and stocks are rising, the company is closing one deal after another, barely keeping up with hiring, and there isn't a cloud in the sky. It’s not a matter of if something will go wrong, but when. In this article, we will outline how we manage risks so that our clients can emerge from any situation with minimal losses and resume their operations as soon as possible.
Prevention is always cheaper
Let's say you have a legal problem. If you contact lawyers only when you are already "taking on water," it is usually too late. Simply put, you have neglected prevention. It is exactly the same with insurance for companies, their employees, or specific production operations.
It doesn't matter whether it's a fire, flood, theft, failure of key machinery, employees leaving for the competition, a blackout or system outage, or a shortage of chips, plastics, or building materials. Risks need to be identified and addressed much earlier.
"We're insured, we're not risking anything!"
Collecting money from an insurance policy is only one part of the equationthat you are dealing with – the easier one. The real problems are still waiting for you: Where can you quickly find a replacement rental? Where can you move machines or where can you buy new ones? How do you meet the contractual requirements of other parties? Where do you look for new employees? How do you deal with a technology outage? What does the remediation of a destroyed site or production line entail?
These essential follow-up steps, which we refer to as business continuity plan, are smart to think through and arrange in advance. If you want to be 100% prepared for any crisis situation, we would be happy to help you identify and implement them.
We will save you trouble (and a tidy sum) with an in-depth analysis
A new client at Eurovalley usually expects proposals for specific insurance policies. Unlike traditional insurance companies, we do not sell off-the-shelf insurance products in "standard sizes."
Before we proceed to proposing solutions, it is essential for us to thoroughly get to know the client, or rather their world, problems, challenges, and intentions – only then can we be sure that we are offering the client something that truly makes sense for them in their given situation and that is worth the investment. It is not uncommon for us to discover together how a client can effectively cover risks on their own. In such cases, insurance is often not even necessary.
This is illustrated in practice by intentionally simple examples: If we identify a devastating fire as the main risk, the solution might be the simple installation of sprinklers and fire doors. In the case of theft risk, it might involve hiring security or perhaps higher fences around the property, and so on.
On the other hand, if it is beyond the client's capacity to cover the risks, we remove the risks from the balance sheet by transferring them to an insurance company.
Risk chaining and layering
By risk chaining, we mean a situation where a client is threatened not only by their own risks, but also by third-party risks. Many of our clients, for example, often have no idea whether their suppliers, who regularly visit their premises, are insured or what they are insured against. All these factors must be taken into account before we begin working on an optimal solution that is as advantageous as possible for the client.
If an insured event occurs where the damage exceeds the agreed insurance limit, the client is forced to pay the difference (excess loss) out of their own pocket. To prevent this, we will show you how to insure even this excess. For this, we use the methodology of risk layering. This involves categorizing individual losses according to their severity and, consequently, their cost into "layers"—from routine incidents to serious ones that impact company cash flow, all the way to catastrophic events that threaten the very existence of the client or the company.
After layering the risks, we will propose tools to insure each layer in the most advantageous way possible. The solution for catastrophic risks is to insure them separately or—as is common globally for large companies like Coca-Cola and others—to establish a special fund as a hedge against catastrophic events (so-called captive insurance).
Investor insurance model
This is ideal especially for the public sector, which works with public funds and investments. It is common practice to transfer the insurance obligation to contractors. However, this is only seemingly advantageous.
When damage occurs for which the contractor is not liable (e.g., due to force majeure), the public sector must cover it. To save public sector clients these unnecessary costs and to ensure they do not have to passively wait for the insurance proposals contractors might bring, we advise them on which risks to insure and how—starting from the project stage.
After all, someone always has to pay for insurance. If the public sector takes insurance into its own hands, it gains many advantages:
- It simply includes the insurance amounts in the costs
- It also reduces the project price by that amount
- It does not have to worry about whether the contractor will run into trouble or goes bankrupt
- They are assured that they will receive insurance payouts on time
- They can act independently regarding the supplier's steps and situation.
If you work in the public sector and are planning a project, please do not hesitate to contact us – Eurovalley is one of the few entities in the Czech Republic that works with the investor insurance model. Our 27 years of experience are always at your disposal.
Holding insurance model
This model addresses the situation where insurance solutions are duplicated across collaborating companies – the reason being that each company wants to "cover its own back" and therefore pays for the same insurance unnecessarily. A similar situation is common in public administration, for example, in a city that manages a kindergarten, a school, a swimming pool, and, let's say, a community center. Here, too, it is unnecessary to pay for insurance simultaneously.
An elegant solution is to share the insurance or divide it among the participating entities. Eurovalley's assistance lies in creating a "protective umbrella" over all interconnected entities so that risks can be managed collectively or, conversely, individually depending on the entity – for example, liability coverage based on asset value and the definition of activities that need to be covered, as well as financial limits. In addition, we will verify how well individual entities are insured to rule out potential bankruptcy and similar crisis situations.
This solution has 3 main advantages:
- Insurance savings, where a city, for example, does not have to send money to a kindergarten or a swimming stadium for insurance, as they cover it independently
- Overall control and overview senior manager or city council
- And priceless peace of mind and security
The next step? That’s up to you.
Now that you know everything about our approach to risk and how we work with our clients, you can make an informed decision about a potential partnership. If you would like to learn more or discuss a specific situation, we are here for you – don't hesitate to contact us, we look forward to assisting you.
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Effective insurance starts with understanding risks. We help clients identify, assess, and manage risks so that their insurance strategy aligns with their real-world operations and long-term vision. Our insurance consulting connects detailed analysis with executive-level decision-making processes.
