Swift Corporation, having 5,000 sales representatives driving company cars, faces significant exposure to risks associated with physical damage. Implementing a partial retention program can be a beneficial strategy for several reasons.
Firstly, a partial retention program means that the company will assume some level of financial responsibility for damages instead of transferring all the risk to an insurance provider. This can lead to lower premiums because the insurer is taking on less risk. With a large number of vehicles, even small savings on premiums can accumulate to substantial amounts over time.
Secondly, by retaining a portion of the risk, the company may be incentivizing better safety practices among employees. When employees know that they might be responsible for part of the costs associated with damages, they may drive more carefully and adhere to company policies regarding vehicle use.
Moreover, it allows Swift Corporation to maintain better cash flow management. Instead of paying high premiums for comprehensive coverage, they can set aside a specific amount for potential damages, which can be more financially manageable. It provides a balance between protecting assets and controlling expenses.
In addition to financial benefits, implementing this program encourages a culture of responsibility and accountability among the sales workforce. Employees may take more care of the vehicles, knowing that any damage could impact their financial responsibilities.
In summary, a partial retention program can help Swift Corporation manage its risk effectively while also leading to potential cost-saving opportunities and fostering a sense of responsibility among employees. This thoughtful risk management approach should align with the corporation’s financial and operational goals.