Watson, who also serves as WA manager for construction and mining risks at insurance broker firm Willis Australia, explained that risk management increased visibility and understanding of risks that might obstruct organisation objectives.

“It protects reputation, supports corporate governance and shareholders who want a consistent financial return.

“It also develops a culture, provides leadership and promotes behaviour so people will work safely.”

Watson added that risk management was important because common sense might not be as common as it used to be.

“What is safe to one person, what is risky to one person isn’t necessary to others,” he said.

Operational risks, supply chain issues, capacity constraints, government regulations and labour shortage are common through many organisations.

“Financial risks, capital availability loss of wages and supplies, commodity price fluctuation – many of those risks aren’t insurable and a part of that process is looking at how to deal with them,” Watson added.

“Part of my job is linking this to insurance, determining what is insurable, doing analytics of the exposure and a gap analysis to determine where insurance comes into play.

“Insurance should not be the only first risk treatment level you should consider.

“The hierarchy is to avoid, to retain, to control, to transfer but the correct application of insurance takes into account risk profile, risk tolerance and retention capability.”

Additionally hazard risks, facility damage, environmental liability and natural catastrophes are all considered aspects of risk management.

A question Watson is commonly asked is how much premium can be saved if companies adopt risk treatment plans.

“Insurance gets an investment income on the premium that’s paid and reinsurance is cheap so there are incentives to offer discounts,” he said.

“We are currently in a soft market and we have been for the past decade.

“While the value has gone up, the rates are lower.

“But eventually there will be a tipping point where premium rates will start to rise.”