31 Mar 2020

Managing Total Cost of Risk

strategic cost management - managing total cost of risk today

How is COVID-19 impacting your organization?

Do you have any material change in operations, sales, payroll, budget?

Evaluating and managing your total cost of risk could be the right answer.

Companies are unsure of what the future holds and are looking to trim costs and spend their money wisely. Managing total cost of risk (TCOR) today means that every expense be evaluated as we proceed into the great unknown of a life with Corona virus and beyond. As we contemplate risk management, we need to look at four main tasks: 1. Assess and re-assess insurance needs prioritizing compulsory and contractual requirements and determining what are our strategic needs, 2. Consider cash flow and evaluate premium financing options including new more-forgiving payment terms from insurance carriers, 3. Re-visit risk management techniques and contractually transfer more risk where possible and 4. Monitor and adapt to the changing COVID-19 landscape.


  • Categorize priorities as compulsory, contractual, or strategic
  • Assess any potential to amend contractual requirements
  • Adjust strategic goals according to current realities
  • Proactively endorse changes in operations and exposures
  • Minimize unintentional coverage gaps and overlaps
  • Calculate the impact of earned and minimum premium prior to policy cancellation


  • Examine insurer-facilitated installment plans and premium financing
  • Be aware of collateral implications (e.g., on loss-sensitive policies)
  • Inquire about changes to insurers’ payment options and non-pay cancellation terms
  • Accrue for audits, dividends, profit sharing; project renewal rate changes


  • Selectively retain more risk and review alternative risk financing options
  • Utilize free and low-cost services available through brokers and insurers
  • Contractually transfer risk
  • Avoid risks that are no longer profitable


  • Record details of all losses, extra expenses, and new revenue streams
  • Seek opportunities to mitigate financial losses, but be mindful of new risks
  • Re-allocate risk management responsibilities in accordance with workforce changes
  • Update strategies to evolve with regulatory guidance, legislative changes, industry best practices, new insurance offerings or restrictions, and economic factors
  • Assess potential for contractual penalties, litigation, or regulatory action, negative PR
  • Understand policy terms applicable to the acquisition or divestment of entities or assets

Remember that we are your partner. Total Cost of Risk (TCOR) is a topic that we have been discussing for decades with our clients. We will gladly discuss managing total cost of risk strategies and many other important topics as we navigate together through these turbulent times. Look at our other resources to help your company cope with managing in this age of COVID-19 such as Cyber Security tips to stay secure while working from home.