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Redhand advisors1/28/2024 ![]() The cost of the investment should include the following: While it is difficult to measure these types of benefits, they should be factored into the decision-making process. An example from implementing a RMIS is the potential in greater visibility for the risk management function to senior management and throughout the organization. These new capabilities provide a value that should be included in any potential gain. In addition to these areas a RMIS may allow you to do things that you previously could not do. Evaluating your loss data and exposures to make informed decisions on areas to focus claims management and safety efforts can help reduce retained claims costs and improve safety effectiveness which will in turn reduce your overall costs and prevent risks. Retained Risk Costs – having risk information at your fingertips gives you the ability to improve the results of your company’s retained risk cost.Retention levels, policy limits and credit levels can be evaluated using historical data and what-if scenarios to help make the best decision for your organization. Better information leads to better decision making. A RMIS should improve the quality of the information that is available to make decisions and to provide to underwriters. Risk Transfer Costs – a significant portion of a company’s total cost of risk is spent on risk transfer.From process improvement to increased productivity, a RMIS can save significant time in administrative costs. A review of the needs assessment that should already have been performed is a good place to start to identify areas where a RMIS can assist. Risk Management/Administrative Costs – a RMIS can help improve and automate your risk management functions.The gain from an investment in a RMIS will vary by organization, but areas to identify gains can be broken down into three broad categories. ![]() That foundation will provide the insight to determine potential gain from an investment in a RMIS. The first step is reviewing business processes, performing a thorough needs analysis and understanding your organization’s total cost of risk. ROI = (Gain from the investment over some period of time – Cost of investment over same period of time) / Cost of Investment over same period of time There are many ways to calculate the ROI, but the basic formula is: Research indicates that many companies do not measure the ROI for software investments, but the evidence supports the benefit in doing so. ROI is a common metric used for evaluating, approving and measuring the success of any significant investment, including software purchases. Determining the ROI will help quantify the business case for the investment. Whether it’s your first RMIS or you’re contemplating switching systems, the costs of these system can seem very high. Before investing in a Risk Management Information System (RMIS), estimating the return on investment (ROI) is an important step in the decision making process.
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