Any person can change hats to become “the boss” as a business owner. When this happens they are required to consider aspects of the business that have never really been of concern to them before. When their business is responsible for repair and service of aircraft, liability and risk management issues should come very near the top on the list of concerns.

Aviation maintenance shops differ vastly, one to another. Large, independent, and FBO shops employ many personnel. They do regular maintenance and heavy inspections on large, turbine-powered commercial and corporate aircraft. At any one time, these shops may house many aircraft, worth tens of millions of dollars, collectively. At the other end of the spectrum is the lone aviation technician, working from a small building at the local general aviation airport. These shops focus on oil changes and scheduled inspections of light singles and the occasional twin. They do minor repairs and removal and replacement of parts and components. In the middle are the countless medium-sized maintenance shops, overhaul facilities, avionics installation and repair, paint shops, nondestructive testing technicians, and others. Although these shops differ in size, scope of work performed, and revenue, they all share similar risk situations.

Ask ten people what they think risk is and you will get ten different answers. It does not take a thorough search of risk resources to reveal the same problem. Definitions are many and they are all worded in slightly different ways. What is important is to understand the concepts underlying risk. Risk is the chance of injury or loss. Insight can be gained by listening to how people refer to risk in an everyday context and, particularly, in the aviation environment. The underlying concept is always the same —a chance that something is going to happen and consequences if it does.

Risk management introduces the idea that the likelihood of an event happening can be reduced, or its consequences minimized. In aviation, the term is frequently used in the context of decision-making about how to handle situations. Effective risk management seeks to maximize the benefits of a risk while minimizing the risk itself.


Risk management is the identification, assessment and prioritization of risks and the subsequent coordinated and economical application of resources to minimize monitor and control the probability and impact of losses. Effective risk management activities create value and should be an integral part of the decision-making process. How does risk management impact your bottom line?

  • Opportunity for better pricing on insurance premiums
  • Saves out-of-pocket costs like deductibles
  • Ensures a safe and stable environment for employees, volunteers and customers
  • Helps you understand and be prepared for risks before losses occur

  • Strategies for addressing an identified risk typically include two of the following:

    Risk Avoidance

    Can you eliminate a service or activity considered too risky?

  • Eliminate activities that involve risk
  • Avoid creating activities that involve risk
  • Relatively extreme approach

  • Mitigation or Prevention

    What steps can be taken to reduce the likelihood of losses occurring or lessen the impact of losses should they occur?

  • Manage liability by structuring activities and programs in ways that reduce or limit institutional risk

  • Risk Transfer

    Can we transfer either the risk or financial consequences of a loss to another party?

  • Insurance policies
  • Indemnification agreements
  • Releases and waivers

  • Risk Retention

    Accept the risk as it is – some risk is inherent in the activities of operation.

  • Self-insurance
  • Deductibles
  • Deciding not to purchase an insurance policy for a specific exposure

  • Since this publication is primarily a guide to assist the business owner how to manage his risk through insurance we will further discuss risk management as it is associated with the various insurance products available for this business.


    Every business owner should step back and ask this question. Once this is determined then you can set up the best ways to protect it. Not everything can or needs to be insured. Insurance should be your last resort once the risk management principles have been employed. It is important to determine what has value and how much. Once this is accomplished and the risk management principles are applied you will have a better idea what risk needs to be offset by insurance.

    For most businesses this can be viewed in three basic areas, PROPERTY, PEOPLE and INTANGIBLES SUCH AS REPUTATION. Although we can’t cover everything in this article we can attempt to offer some suggestions to start with when placing value on your business.

    Property to protect can include hangars, autos, inventory and property of others

    People you will want to protect include yourself, employees and customers.

    Intangible Assets may include protecting reputation, name recognition, brand name and other intangible assets.

    It is reputation that brings customers back. It is reputation that continues business growth. Would a serious aircraft accident caused by your business hurt your reputation? Would on line theft of customer data hurt your reputation? (Ask Sony Corporation)

    Other intangible assets that have value are data base information, customer contact information, patents, trademarks, accounting records and the list goes on. You can see there is much that has value and the risk of loss becomes greater the longer a business is in operation.

    There are good business practices to protect these intangible assets. Without much thought you are probably doing some of this now but for most business it is often given little consideration. We often fail to see the value until something happens but then it is too late. This is an area of business where you must be proactive. There are many means available for loss prevention and restoration but most need to be in place before the loss occurs. Discuss with your agent, get advice, know what others are doing to employ best practices in their business.

    There is insurance available for litigation and assistance in reconstructing intangible assets. (See Extra Expense and Cyber Liability) Placing value on intangible assets is often where the difficulty lies with insurance but there are great insurance products available today which are designed to help offset the expense incurred, preserve your integrity and get you back in business as quickly as possible. But remember, loss prevention measures established first can also reduce the insurance premium required.

    Generally the longer a business is in operation the more it has to lose in physical assets, people including customers, and intangible assets such as your reputation which creates a greater need for proper risk management including insurance products.

    Contact us today and one of our highly experienced agents will be happy to listen to your needs and act on your behalf to help you get the right coverage at the right price.

    You can reach us through our contact form here or by phone toll free at: (800) 999-1109.