Risk is an ingredient of human life. How best to live with it is a challenge for every individual and indeed
every enterprise. The world we live in continues to change rapidly presenting both risk and reward.
The risks, which our ancestors faced, living in their relatively simple societies, were basic in nature and
required relatively simple methods of management. By comparison, today’s societies, having been
transformed by enormous changes, are full of more complex risks and hazards that call for more
sophisticated and scientific systems of risk management.
Broad definitions such as “the planned minimization of the total cost of risk” and “the application of the
principles of management decision-making to the specific problems of risk” do little to clarify the exact
nature of risk management as an activity. It could better be defined as: “The identification, analysis and
control of those risks which can threaten the operations, assets and other responsibilities of an
organization”.
Speaking of humans, life and/or assets would be exposed to undesired calamities unless potential risks to
life or business are managed using appropriate risk management techniques. As one wag put it, the
alternative to risk management is risky management! It is vital to understand the precise significance of
such damage to organizations, processes and responsibilities of an organization.
In line with the above, risk surveying is a practical exercise of risk control measure, subsequent to risk
identification and analysis; conducted with a view to limiting the risk of life and property losses from fire
and other perils, by identifying the occurrence and likely spread of any risk. Basically, the main concern is
to make sure that the insured workforce, premises, facilities, equipment, processes, operations etc, are
protected from undesired consequences.
Broadly speaking, the aim of risk survey in insurance is to:
- find out if the risk offered is acceptable;
- help in determining an appropriate rate to be
charged;
- make recommendations for improvement of the
risk;
- make an estimate of the maximum amount, or
percentage of the risk that is likely to be lost in
one fire or any other loss.
The risk inspection/survey could also be undertaken to ensure compliance with local legal requirements,
but the main emphasis should be on the preservation of life and property through the practice of prudent
hazard protection measures, with a view to minimizing the likelihood of the risk materializing, or if it should
occur, ensuring that its duration and spread will be limited.
Fire risk surveys in particular always include an inspection of the building when a note is made of the
features of design, method of construction,
floor and wall openings such as staircases, lift shafts service ducts, including building services such as
electrical system, heating system, air conditioning and ventilation, waste and material handling systems.
This is extended to include details of hazardous materials, with their characteristic hazards; including
handling, storage and protection of predominantly flammable and combustible liquids, liquefied
petroleum gases, explosives, combustible metals, combustible dusts, and materials of high fire load.
Process hazards are also considered, particularly those which could generate flammable or
combustible products, or vapour cloud explosion during manufacture.
Fire protection equipment is another point of interest where a property may be equipped with heat,
smoke, or flame detection equipment to provide early warning of developing fire. Appropriate portable fire
extinguishers may be installed to fight fire at its initial stage, when the seat of the fire is still visible. A
higher level of fire fighting equipment such as hose reels, hydrants, drenchers, gas flooding system and
automatic sprinklers may be put in place.
Furthermore, the number of employees, and the number of working hours per day influence the degree of
exposure. Accidents are caused by individuals and employees can feel, see, and smell fire/smoke and
respond immediately. As the old adage goes, “Prevention is better than cure”. One may not be able to tell
exactly how many risks have not materialized because of compliance with risk improvement
recommendations. However, common sense tells us that risk surveys and compliance with
recommendations have prevented quite a number of major losses, as all major losses initially start as
minor incidents.
In very many cases, reinsurers are guided by the opinion and views of the direct insurers in decision
making, as they are not proximate to the risk under consideration. In other words reinsurers underwrite
the underwriters of the direct companies. This scenario puts the reinsurers at the mercy of the
direct insurer, and as such risk surveys conducted by professionals, highlighting the major areas of
concern mentioned earlier, are of utmost importance for reinsures. The reinsurer finds himself in a
position to assess and pr