Financial Risk Management

Greetings from Xpedient Medical to everyone in our network – Financial Risk Management.
Welcome to the second edition of Xpedient Xpress. In this edition we will be looking at Financial Risk Management in Private Practice. The private medical field is complex, fragmented, and comprised of many moving parts, as illustrated by this image. In light of this, we bring you the second edition of our newsletter, in which we hope to demystify some of these confusing topics. Through this series, we aim to spark consideration of what it means for you to manage a healthy practice. Although there are many aspects to consider when running a business, financial risk management is one of the most important for the sustainability of your practice.

In business, as with most precious things in life, protecting what you have is fundamental. A key aspect of financial sustainability for a practice is to continuously take simple, yet crucial, safeguarding steps. Maintaining these protective measures ensures you don’t suffer major losses from either a significant single setback, or multiple episodes of incidents. This process is known as financial risk management (FRM), and it’s essential for your practice’s financial health. In this newsletter, we’ll address the most important aspects of FRM.


FRM can be summarised as the process of identifying, assessing, and controlling threats to an organisation’s capital and earnings. These threats are deemed risks. You should regularly schedule time to thoroughly evaluate these risks through FRM. The old adage of “plan for the worst and hope for the best” is very relevant here! Beyond protecting yourself from financial risks, performing FRM will also create better operational sustainability, which further increases the value of your practice.

What are the
types of risks?

01 Internal and controllable risks

Financial Risk Management: These risks refer to factors within a business that are of a preventable nature.

Financial Risk Management: These risks refer to factors beyond the control of your practice, which are not preventable.

Risk mitigation via Insurance

Insurance will always be a critical tool for mitigating future risks. However, insurance has developed distinct products over time and it’s vital to understand precisely what is and isn’t covered in each offering. At least once a year, it’s paramount to review your insurance policies with your broker.

 

It’s also worthwhile to mention that insurance is an expense where a practice can save money by occasionally obtaining third party quotes to ensure your broker is truly looking after your best interests. Nonetheless, if you do re-quote, it’s still your responsibility to understand exactly what is covered and be mindful of exclusions and possible co-payments.

 

The primary insurance policies to note are the following:

Risk mitigation through attention to staff

Despite South Africa’s very high unemployment rate, we experience the paradox of a severe shortage of skilled workers for the modern economy. This is particularly true for the medical industry.

 

Staff are often overlooked when considering mitigating risks to your practice. However, employees are one of the most pertinent aspects of operation. The staff are often the face of the business, as they primarily interact with your patients. As with any other business, customer experience is vital to ensure that patients return. For this reason, it’s imperative to view your staff through the lens of financial risk management.

We recommend assessing the following basic considerations:

  1. Are your staff happy – In most instances, there are simple indicators that demonstrate that staff are not happy, such as:
    • high staff turnaround;
    • absenteeism or frequent lateness;
    • elevated patient complaints;
    • disengagement of staff; and
    • complaints from staff.

  2. Management of staff – Staff need to be monitored and managed frequently, yet doctors often don’t have time to schedule staff meetings. As a result, this falls on practice managers who are not always well-equipped to manage staff. In turn, this can lead to conflict. Another pressing issue is that doctors don’t always ensure that staff are remunerated in line with market benchmarks. Staff, on the other hand, usually have an established idea of the monthly revenue generated by a practice. Over time, this combination can lead to an environment that fosters a level of entitlement. In most instances, staff do not fully comprehend the costs incurred in running a practice and what a doctor takes home. This important context should be clearly provided, rather than avoiding difficult conversations.

We suggest the following actions to mitigate risks associated with staffing issues:

  • Conduct a benchmark review of market-related salaries for your staff to see whether they are aligned.
  • Schedule at least one monthly staff session, which can outside hours according to everyone’s convenience.
  • Review your overtime policy. Is it a fair and workable protocol that regulates overtime?
  • Consider the growth of your staff. Do you provide opportunities for training, learning, or further education? This often reflects that staff are valued and is worth far more than the costs incurred and time forfeited.
  • Evaluate your staff’s workload. Are they overburdened with work? It is a good idea to compare your growth in revenue over time versus the number of employees at your practice, where relevant.

Ensuring that staff are retained and happy is paramount for the sustainability of a private practice in South Africa, and safeguards you against some of the largest threats to your business’s health.