Business risk evaluation model
Preventing losses from occurring and thereby protecting customers and employees is the most important objective of operational risk management. In order to evaluate the operational risks in new and existing business activities, Securitas uses a business risk evaluation model.
This model focuses on a number of important aspects of the assignment and the relationship with the customer, and is described in more detail below. Should a loss occur and Securitas is deemed to be fully or partly responsible, insurance solutions are used to minimize the financial impact of any claims by customers or third parties.
This is the first stage of the process. The key points are the size of the project, its duration and whether it involves a new or existing service. Specific training and supervision requirements are also considered.
The type of customer under consideration is of importance in terms of level of operational risk and financial status. High risk customers and large loss potential have to be identified and necessary insurance cover taken out for the risk involved. The creditworthiness of the customer must also be assessed.
A fair division of responsibilities and risks between Securitas and the customer is essential in every contract. Standardized contracts are the norm. Reasonable caps on potential liability and indemnification for third-party claims are important components of the customer contract.
This stage involves careful calculation of the profitability of the business. Managers have to assess the investment required and whether the contract involves any off-balance-sheet exposure. Payment terms also have to be considered, and a judgment made as to whether the assignment will generate sufficient profit in relation to the risks (see the business risk evaluation model above).