If you have been reading my last few newsletters, you know how to identify risk and how to evaluate it. However, it is best if you can prevent the risk from becoming a loss in the first place. This is where RISK CONTROLS come into play.
Risk controls are measures you can take to reduce or eliminate your risk. The sprinkler system you put in your building reduces the risk of a fire loss. Having branch offices well lit at night with silent burglar alarms reduces the chance of burglary losses.
Risk controls can be applied to just about every separate risk. Let’s look at controls for banking risks from four (4) different areas: Property, Liability, Crime, and Personnel.
I have already mentioned a few Property controls but here are a few more: Are there any hedges or large bushes next to your bank? These are good places for a fire to start, as well as a good place for a burglar to hide. Do you have fire extinguishers in your branches? Do your employees know where they are? Do they know how to use them? Really??
The Liability risks for a bank are too myriad to mention here, but there are some general risk controls to follow that are applicable. Please remember, EVEN IF YOU HAVE THE BROADEST LIABILITY INSURANCE COVERAGE AVAILABLE, YOU CAN STILL HAVE AN UNCOVERED LAWSUIT. Your best loss control in this area is to make sure your customers understand exactly what service you are providing. Most lawsuits come from a misunderstanding of the responsibilities of each party. Make your contracts clear (see below). They will save you a lot of problems.
The “Crime” risk is one of the largest bank exposures. While embezzlement is probably the largest exposure to loss, burglary and robbery are high on the list as well. Remember, it was John Dillinger who said he robbed banks because, “That’s where the money is!”
Of course, a good burglary and robbery alarm system with cameras well positioned throughout the bank, is a must. Also, be sure the monitors are in plain sight. Customers love to see themselves on a TV or monitor, and a would-be robber or burglar will realize that he/she is now on film. Additionally, keeping a minimum amount of cash in the top drawer makes you less attractive to a robber. Be sure you have opening and closing procedures in place, and that you change your “all clear” signal frequently. By the way, never make the “all clear” signal the closing of the blinds. If a burglar/robber is in your branch, that is the first thing he/she is going to tell your people to do!!
The last area of risk for discussion is the Personnel risk. This area is probably the most difficult to “control” as it applies to your employees. So many things can happen to and by your employees that controlling it is almost impossible. Dual controls will help to discourage embezzlement. A good safety program with training sessions should help improve your accident rate. When safety programs and dual controls don’t really cover the situation, a Corporate Mission Statement that states the philosophy of the corporation as to how employees are to act, might be the solution.
I’m sure you realize by now that these comments barely touch the surface of the risk controls available for a bank. Loss prevention engineers from insurance companies or insurance consultants, like Bahr Consultants, Inc., can help you will a Risk Control audit.