A Conversation With Hortica on Why Risk Management Is So Important Today
July 13, 2023 
As severe weather events become more frequent and unpredictable, businesses face greater risks if caught unprepared. Making matters worse, material inflation and supply chain delays could lead to longer recovery periods and even greater financial losses if a business experiences one of these more severe and more frequent storms.
Greenhouse Grower Senior Editor Brian Sparks recently talked to Traci Dooley, National Agency Sales Director for Hortica, a brand of the Sentry Insurance Group that specifically focuses on the horticulture market. Check out our conversation below, where we discussed why it’s critical to review and adapt your plan, why risk management strategy must start at the top of any organization, and more.
Brian Sparks: Growers often want to learn about the new technology and the new varieties that are out there. but when it comes to a topic like insurance, it can be hard to get them to understand that this is a key part of their business. With risk management, how and why should growers make it a priority in their businesses?
Traci Dooley: You’re right that it’s not a sexy topic, but it is an absolute necessity, I believe, for business owners to make it a priority. Speaking from the insurance side, insurance is only one element of risk management. There needs to be a lot of planning on the part of business owners before it filters down to insurance. Growers might be able to handle a small claim, whether it’s a small property claim or a small liability type claim, on their own without the help of insurance. But I think a grower needs the peace of mind to deal with the what-if scenario, the thing that they didn’t think about or the catastrophic event that might have a huge impact on their business. If that happens, how are they going to deal with that?
When you have a small claim, you might lose a little bit of product or some sales. But if you have a big catastrophic claim, you’ll not only lose the crop that you have, you could lose future crops or future income because you could lose your customer to another grower. If you’re not able to provide what your customers need, they’ll go to the next best place to get it, and maybe that becomes the place they get their product from there on out. So always being prepared for that what-if or worst-case scenario is an absolute must.
Brian Sparks: Can you talk about the team that needs to be in place within the company to make preparedness a priority and to carry out everything involved?
Traci Dooley: When I was a beginner in the insurance industry, there was a risk management concept that I had to learn, and the way that I learned was using the acronym “ISIM”, which is that you identify the issues, or in this case any potential exposures to loss. Then you select the method that you want to handle any of the potential items that you identified and implement that method. The last part is that you have to monitor if your plan is working. That might mean testing your plan, and if it’s not working, you might need to make revisions to the plan. The worst thing that a business owner could do is to create a risk management plan that looks really good on paper, then file it away in a secure place. If you do that, it’s done nothing for you. You have to review that risk management plan at least annually, but maybe more than that. If a key employee who’s a part of your plan leaves, you need to make sure you still have the proper people in the right place doing the right thing. It’s a plan you should review often, just like you would put together your plan for the crop cycle for the next year.
Brian Sparks: I would imagine that in a business that’s seasonal, you’d want to look at it right before the busy season starts, and again at the end of the season as you start to look ahead to the following year.
Traci Dooley: Yes, absolutely. Maybe at the beginning of the year something seemed very plausible. But when you get through the busy season, you look at your plan again and say, well, that wouldn’t have worked. As far as putting together that risk management plan and the team that needs to be in place, you need to identify the key people both within your organization and outside of your organization. You need to brainstorm and make a list of everything that could happen, whether it’s a weather event or a truck full of plants being involved in an accident on the road. Identify all the things that could happen, and then prioritize them in whatever order makes sense for you. Part of the risk management plan might be something simple like creating a safety atmosphere so no one gets hurt. But it could be a big step, like what would happen if you were to have a major fire or a tornado. That’s why you have to make that list and then prioritize it.
Brian Sparks: How much of a difference does the size of your business make? If you’re a big grower, you might be able to assign a person or a whole department to focus on this. But if you’re a smaller company where the owner is also the head grower and the accountant, that has to be a bigger challenge, I would think.
Traci Dooley: I agree completely, although bigger properties don’t necessarily create bigger issues. It could be the same issue from a small greenhouse grower to a really large greenhouse grower. How you deal with it could be different depending on the resources that you have available to you, and one of those resources could be insurance.
Brian Sparks: How should you plan if you’re in what might be considered a high-risk area. It seems like no area is immune to disasters anymore, but how might your processes and your planning differ based on your location or your potential for risk?
Traci Dooley: When you’re talking about what’s considered high risk, there are certainly high-risk areas for hail, wind, or snow. But you can also view a high-risk area differently when it concerns casualty risk. You could be a greenhouse grower in a very mild climate and you might not expect any severe weather. But if you have a truck full of plants traveling through one of those areas and it’s involved in an accident, those are also areas that are considered very litigious, where attorneys are waiting for an accident to happen. That’s why I think the risk management plan shouldn’t just be about what can happen at your facility. What if one of my drivers is out on the road and has an accident or a heart attack? There are a lot of different scenarios that you could come up with that aren’t necessarily property driven. That’s why you have to look at the operation as a whole and not just specifically to the property side.
Coming out of the other side of COVID, you also have to think about cost of goods, and the materials you buy every day to run the business. If my operation experiences a catastrophe, is what I have insured for enough to replace the structure? That could be a huge hit to your bottom line if you’re not insured adequately. That’s where reviewing your policy, getting with your insurance consultant, and reviewing those values is important.
There’s another element of insurance that can come into play, and that’s business interruption. If you’ve made a claim as you try to rebuild your greenhouse and there’s something in the supply chain that is going to take longer than normal to arrive, your business interruption insurance pays for your net profit for that period of time that you’re unable to reopen your doors. But it also pays additional expense or extra expense. Maybe the roof isn’t there because the polycarbonate is not in, but you still need to grow your spring crop. In that case, maybe there’s a greenhouse facility down the road that has space available and you need to lease space from them. That’s extra expense that is covered as part of your business interruption and income coverage.
Brian Sparks: We’ve talked about the team approach to all this. How do you think a business owner or somebody in leadership at a company can get buy-in from the rest of their team to focus on some of these areas? When it comes to everyday preparedness, if even just one person on your team is not focused on that, it can break down the whole process.
Traci Dooley: That’s a very interesting question. We’ve sometimes had to have those tough conversations about making sure you have your house in order. Getting the house in order really does start at the top because everyone underneath you has to understand that the risk management, the safety issues, and the safety culture is a concern starting at the top. It’s not something that you can delegate and then hope that it gets better. It starts with leadership, and those people in that role have to explain how and why safety and risk management is very important to the operation. Then they have to back it up with what they do.
Brian Sparks: Can you talk about the financial benefits to being prepared?
Traci Dooley: The reason that becomes so important is because you become a more attractive insurance risk to an insurance company when you have those safety plans and that safety culture in order. Let’s say you have greenhouse A and greenhouse B. Greenhouse A has a safety culture and is very methodical about what they do and has policies in place to enforce what they do. Greenhouse A is going be paying a lot less for their insurance than Greenhouse B if Greenhouse B just views insurance as paperwork to be filled out.
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