Running a trucking operation can be a risky business at the best of times. Whether hauling freight across the country or closer to home, carriers and drivers must contend with bad weather, vehicle breakdowns, safety issues, cargo theft or loss, and more. Add in today’s challenging market conditions – from slowing consumer demand to rising interest rates and ever-thinning profit margins –being in business can be a fight for survival.1
“In today’s climate, there are a lot of pressures on trucking companies in terms of the cost of running their day-to-day operations,” says Tommy MacKinnon, Underwriting Specialist, Commercial Auto, Atlantic Operations at Sovereign Insurance. “Everyone is trying to maintain profitability and, in many cases, they are just trying to make ends meet as costs continue to increase.”
It may be tempting, then, for trucking companies to try to reduce operating costs to save money. However, it’s imperative to not cut corners on risk management. “To maintain compliance and keep their operations running smoothly and safely, trucking companies have to stay the course and stay on top of their risk management practices,” says Tommy. “Every dollar they invest in risk management brings a return in some form or another, ultimately helping to mitigate losses.”
Key risks and how to mitigate them
One of the main risks facing trucking companies is the ongoing labour shortage. While today’s market volatility has eased labour pressures somewhat, the industry faces a long-term problem. The Canadian trucking industry currently has around 20,000 vacant driver positions, and the workforce is rapidly approaching retirement, according to a report PwC Canada commissioned by Food, Health & Consumer Products of Canada (FHCP). Without action, the shortage will soon grow to 30,000.2
“The labour issue is only compounding – it’s not getting any better,” states Tommy. “One of the biggest exposures and risks facing a transportation company is seeking out the right drivers in terms of qualifications. By not having a robust recruitment process in place, companies start to take on additional risks.”
Attracting qualified drivers with the right experience is the top priority. If companies don’t screen and hire carefully, it can lead to costly and dangerous accidents and violations.
Once hired, a comprehensive onboarding process is critical. “Whether they’re doing short-haul or long-haul runs, drivers must be familiar with the overall operation and be well-versed in their responsibilities on the road,” says Tommy. That includes being educated and trained on safety policies and procedures, maintenance programs, disciplinary measures, and more.
See: Best practices for hiring and onboarding new drivers
“Organizations should also have regular check-ins with their driver workforce, whether that be safety meetings or accident meetings where they review prior accidents,” adds Tommy.
Another risk management practice on the labour front is to offer an incentive plan for good driving behaviour and years of experience. Companies can offer perks and rewards for drivers’ performance and achievements, as well as provide feedback.
In today’s inflationary environment, high repair costs are another risk for trucking companies. Spare parts for trucks have become increasingly expensive and delays in shipping parts can result in idle trucks and drivers.3 More technologically advanced features in today’s vehicles can further complicate repairs – and add to repair bills.
“With rising costs and ongoing supply chain issues, maintaining an existing fleet is a challenge,” says Tommy. “Trucking companies can help reduce expensive repairs by investing in preventative maintenance programs to keep their fleets in good working condition.”
Drivers have a big part to play in preventative maintenance. For example, they can conduct pre-trip inspections to ensure everything is in the right working order and they can also keep spare parts on hand for quick repairs while they’re on the road.
See: Sovereign’s Fleet Preventative Maintenance Checklist
As today’s headlines attest, many industries are grappling with theft – and trucking is no exception. Recent estimates say cargo theft increased nearly 80% in Canada and the U.S. since 2022. In Canada alone, reported cargo losses increased nearly 30% last year compared to 2021.4
To protect cargo while in transit, key best practices include: confirming delivery with consignees; securing safe parking for drivers and establishing clear means of communication; tracking and monitoring goods while in transit; and using security devices, such as locks and seals. To prevent product losses from spoilage, companies can install monitored temperature alarms and power source backups in refrigerated trucks and trailers.
See: Cargo Theft Prevention Best Practices During the COVID-19 Pandemic
Perhaps less tangible, but most important, is an organization’s attitude and mindset towards risk mitigation. “For some companies, risk mitigation is not always at the forefront – it’s an afterthought,” explains Tommy. “If they’re proactive in their approach and are willing to invest in best practices – whether for driver hiring, maintenance procedures, or theft reduction – that is a big part and a big first step in mitigating risks.”
Insurance partners also have a big role to play, he adds. For example, Sovereign’s Risk Specialists offer onsite risk inspections and provide tailored recommendations to help transportation companies better understand their exposures and address them based on industry best practices.
“Not only are we there in the event of a loss when they need us the most, but we can also provide value-added services to help improve their risk management through our in-house experts,” says Tommy.
1 CTV News Montreal, “‘No profit right now’: Trucking industry facing leaner times as consumer demand drops,” Aug. 24, 2023
2 FHCP, “Canada’s truck driver shortage will soon grow to 30,000 vacancies; immediate action needed,” Sept. 14, 2023
3 Hardworking Trucks, “Managing risk in the trucking industry,” May 31, 2023
4 TruckNews.com, “Cargo thefts rise sharply and that’s just part of the story,” April 30, 2023