isk management—the process of identifying, assessing, and prioritizing the different types of risk an organization might encounter—is essential to the success of any business. However, companies can employ various insurance products and prudent practices to minimize their exposure in the workplace.

Generally, risk management involves avoiding or eliminating the vast number of events that could have an adverse impact on a business. The events could negatively affect everything from personnel safety and wellness to a company’s day-to-day operations and overall financial performance. More specifically, risk management entails identifying hazards (something with the potential to cause harm), assessing the associated risk (the likelihood of that potential harm happening), minimizing any risk deemed unacceptable, and then controlling the situation to mitigate any remaining hazards.

To Jana Smith, the managing partner in Parker, Smith & Feek’s Anchorage office, risk management is a culture that companies create from the top down. “It’s overall providing a safe environment for your employees to grow and have a positive experience in the workplace while at the same time achieve work-life balance,” says Smith, CPCU, ARM, CIC. “At the end of the day, I want my employees to come to work and be happy to be there. I want it to be comfortable and a place that they’re glad to come to every day.”

It’s critical that risk assessment be consistent, systematic, and conducted in the correct context. In addition, all potential hazards should be documented—no matter how improbable and low-risk they are. Ultimately, risk assessment—when done effectively—can give businesses a valuable tool for deciding which risks they are prepared to accept based on their policies and standards.

The most impactful factor in managing risk in the workplace is employees—not the environment, according to Pobieglo. Businesses can manage their environmental risk, but it takes people to identify when there are deficiencies and to resolve those deficiencies. And it’s essential for all employees to be part of that process. “Everyone in the company is a risk manager, from the CEO down to the janitor,” Pobieglo says. “It’s really important that businesses promote that culture with their staff.”

Another significant area of risk management is health and wellness, which companies can address directly through benefits packages. Employers should have programs that encourage wellness, healthy practices, and safety. Parker, Smith & Feek, for example, gives employees access to nutritional information and time off to participate in health activities. The company also has a wellness website staff can log into and receive credit for engaging in healthy practices like getting a physical, supporting a community fundraiser, donating to a charity, competing in a race, losing weight, sleeping eight hours a night, and even drinking eight glasses of water a day. “You get points and when you get to certain levels, you might get a Fitbit or something else,” Smith says.

Another vital aspect of managing risk is promoting mental health wellness. Many companies can offer an employee assistance program as part of their benefits package. “It provides assistance for whatever personal issues workers are dealing with,” Smith says. “That way, employees have the ability to speak with a professional counselor.”

Any business—regardless of its size—can implement risk-mitigating health and wellness programs. Doing so benefits the company in the long run, but the employer has to make the investment. “The cost benefit will depend on your goals and objectives, but workplace safety reduces the cost of your workers’ compensation insurance,” she says.

Workers’ comp insurance, which is required by the state, is a primary instrument for addressing employee safety. Under the Alaska Workers’ Compensation Act, all employers with one or more full- or part-time employees are obligated to purchase and maintain workers’ comp insurance policies. Workers’ comp insurance is designed to protect workers and employers from some of the losses caused by on-the-job accidents and job-related illnesses. It covers medical expenses and a portion of lost wages for employees who become injured or ill on the job as well as employee rehabilitation and death benefits.

For employers, workers’ comp offers protection from lawsuits stemming from workplace injuries. That’s because in exchange for their compensation, injured workers lose the right to sue their employer for negligence. Workers’ comp insurance fills a substantial void as health insurance policies typically exclude coverage for work-related injuries. And health insurance policies generally don’t cover lost wages or reemployment benefits for serious work-related injuries that prevent an employee from working for an extended period of time.

In addition to workers’ comp insurance, companies can use their benefits package to promote health and wellness among their employees. They often provide medical/disability insurance, vacation, and sick leave as basic benefits. Increasingly, companies offer paid time off (PTO) that employees can use however they wish. “PTO is a great thing, but employees need to be responsible in using it to make sure they do not use up all their time for vacation and have to come to work sick,” Smith says.

While human resource strategies can help businesses minimize risk management problems, insurance can help companies protect themselves, Houston says. It’s sort of a risk transfer and protection approach. “Most businesses want to do the right thing, and they buy insurance for the things they can’t stand happening to them [as a worst-case scenario],” he says.

There is an array of insurance products available to help businesses deal with the diverse range of exposure they face. An important option is professional liability insurance, which helps companies make sure they are documenting and doing the right thing for their customers. Also known as errors and omissions insurance, it protects a business from claims of negligence related to providing a professional service or giving advice.

Another common product is employment practices liability insurance, which protects employers but also is a tool for employees to bring claims for a wrongful work environment. Employment practices liability insurance (EPLI) includes coverage for defense costs and damages related to various employment-related claims, including allegations of wrongful termination, discrimination, workplace harassment, and retaliation. EPLI also provides coverage for many situations that general liability insurance does not.

Houston says he’s seeing more people becoming aware of EPLI claims. It’s important for companies to properly train their managers to keep them from running afoul of the law, but exercising common decency can obviate many problems. “A lot of it is being a decent person,” he says. “That takes care of most of your claims. It doesn’t stop you from getting sued, but it can prevent you from doing something wrong.”

Pobieglo also views EPLI as a necessary facet of managing HR exposure. “On one hand, you’re wanting to protect your employees and the general public,” he explains. “On the other hand, you want to protect yourself from employees and former employees.”

In many cases, Pobieglo says, it’s former employees who will bring a lawsuit. And it doesn’t have to be a legitimate complaint for an employer to rack up significant expenses, given that the average employment practices liability claim is $625,000. “You can do everything right, and you can still have defense costs,” he says. “We’d like to see people carry $1 million. Even a $100,000 policy is better than nothing, and it can cover the typical frivolous lawsuit.”

Depending on the size of the company, the annual premium for EPLI ranges from $200 to $300. But if businesses go to court, they have a strong chance of losing as about 70 percent of employers do not win their cases. “The courts are heavily tilted toward employees,” Pobieglo says.

A cyber liability policy can also help companies manage risk. Cyber liability insurance, which is becoming commonplace, can protect businesses against lawsuits filed by customers or other parties as a result of security or privacy breaches. They can cover claims that allege that the business failed to protect sensitive information stored on its computer system.

About 80 percent of claims relating to cybersecurity involve phishing emails, which are becoming more prevalent and more costly to mitigate. This makes cyber liability insurance, coupled with employee training, crucial for companies. “As a business owner, you can’t control every keystroke your employees do,” Pobieglo says. “It’s really important to have policies and procedures in place that govern the use of technology and make sure people stick with those policies.”

Companies can also mitigate risk using non-insurance tactics and helpful resources. For example, they can implement internal measures to reduce safety violations, including having workers wear safety gear, installing safety mechanisms on equipment, and enhancing safety training.

Businesses can use training programs on various topics to ensure employees—including managers and supervisors—are educated about how to conduct themselves in a way that supports effective risk management. And they can leverage an employee handbook to reduce incidents related to sexual harassment, discrimination and hostility, and other behavioral issues. “Employers should have an employee handbook that provides information on all of those topics,” Smith says.

Companies can also capitalize on external insurance-related tools to enhance their risk management efforts. Clients of Conrad-Houston Insurance, for example, can take advantage of a new risk management product called ThinkHR. The resource provides training videos and information about important topics, including OSHA standards, how to build a good employee manual, and the proper way to terminate employees. “There are an awful lot of rules that small businesses have to comply with, and many of them don’t have anyone in place to keep up with them,” Houston says. “With this product, they will be able to pick up the phone and talk to someone, live chat, email, and visit the website.”