What’s your cost of risk? A report from the consulting and actuarial firm Milliman, Inc., determined that the cost of risk for the retail sector in 2016 is largely due to injuries at work and their related workers’ compensation payments, which make up 40 percent of risk related expenses. Customer injuries/general liability, property damage, liability and risk management make up the remaining 60 percent.

The report found that the average cost of risk for retailers in the United States is projected to total $23 billion dollars this year, or $5.93 per $1,000 of retail sales. Since retail profit margins tend to be pretty slim (estimated between 2 and 6.5 percent of sales), every dollar spent on risk is important. The report states that there are 15.7 million people who work in retail and every month there are 55,000 workplace injuries. A lot of them are minor; a Centers for Disease Control and Prevention report stated that the rate of nonfatal work injuries that do not require time away from work for the combined retail and wholesale trades is around 70 percent. The majority of nonfatal injuries in retail are due to contact with objects, overexertion and falls.

Though employee injuries have decreased in the past five years, the overall cost of risk has not because the cost of these injuries has actually increased. Around 45 percent of workers’ comp losses are indemnity costs, and 55 percent are medical costs. There are emerging risks like cyber threats that retailers have to account for as well. Retail stores are the biggest target for cyber attacks out of any industry.  In 2015 average insurance premiums for retailers increased by 30 percent, which has not helped to reduce the cost of risk. One way that companies can try to mitigate risk is by identifying big problems and hazards and then looking to address those problems at the root and prevent injuries.

The Milliman Retail Cost of Risk Research Report is available here.

How can you reduce your cost of risk?