Embed Size (px)
Citation preview
Show Me the Money!
Risk Management for Finance
Professionals
By Robin Aronson, JD, CPCU, ARM, AIC
Washington Cities Insurance Authority
Risk Services Manager
What is WCIA ?
• Formed in 1981
• Risk Pool
• Interlocal Agency; not an Insurance co.
• Run by the Members for the Members
• Over 160 Members
Roadmap
• Basic Definitions of Risk Management
• Legal Issues
• The Risk Management Process
• Risk Management & Your Organization
• Risks Facing Public Agencies
• Risk Transfer & Contracts
• Your Role in Risk Management
What is Risk?
• Any uncertainty about a future event that
threatens your organization’s ability to
accomplish its mission
What is Risk Management?
• The process of making and carrying out
decisions that will minimize the adverse
affects of accidental loss upon the
organization
Why Practice Risk Management ?
• Helps Achieve Organizational Goals and
Values
• Preservation of Assets – People
– Property
– Revenue
– Reputation
Things Will Go Wrong!
Sometimes Quite Wrong!
And sometimes VERY Wrong!
Risk Management
Ignoring the Risk Management function is
like surfing the internet without anti-virus
protection.
You can do it…. but it is ill advised.
Risk Management Function
in an Organization
Where in the Organization does the responsibility
for managing risk rest?
• Finance?
• Legal?
• Human Resources?
• Risk Management Department?
• All of the Above?
• Nowhere?
Risk Management Strategy for
your Organization
Consider:
• Do you have a strategy or policy currently?
– Is it in writing?
• Do you need a strategy?
• What is the Organizational Culture and how does it
impact Risk Management?
• Who is or would be involved in development of a
strategy?
• Who is involved in implementation?
• Who is involved in monitoring of the strategy or
program?
Sample Risk Management
Strategy
The Risk Management Division of the General Services
Agency shall identify and measure all risks (uncertainty
of loss) by developing and implementing appropriate
techniques for assessing and resolving these
exposures via risk assumption, risk reduction, risk
retention, risk transfer or the purchase of insurance.
Sample Strategy cont.
• Goals and Objectives :
• • Continue to inspect all County facilities for safety compliance
• • Create and maintain a Web site for risk management
• • Continue to be an active member of the Board of Directors of
the County’s excess insurance authority to protect the
interests of the County
• • Work with all departments on required training programs and
provide resources for training sessions
• • Develop an annual risk management report for the Board of
Supervisors and departments
• • Continue to aggressively pursue settlement and/or dismissal
of all claims
• • Continue to work with buildings and grounds to make sure all
County facilities are insured and properly valued
Loss to an Organization:
Types of Losses
• Loss to your property
• Loss to employees
• Liability loss (bodily injury or property
damage to third parties)
Loss Basics-Liability Loss
• Negligence
• Incidents
• Claims
• Lawsuits
Loss Basics - Negligence
• Duty Owed
• Breach of Duty
• Proximate Cause
• Damages as a Direct Result
Loss Basics - Incidents
• An event that may result in a person
alleging that the organization, or an
employee was negligent in some way.
Loss Basics - Claims
• When a person asks for money based on
the City’s or a City employee’s alleged
negligence.
Loss Basics-Claims Filing
• Clerks may handle Notice of Claim
• Importance of Prompt Notification to Risk
Pool/Insurance Company
• “Just the facts, ma’am”
Joe Friday, Dragnet
Loss Basics - Lawsuits
• If a claim is not resolved a lawsuit may be
initiated, asking a judge or jury to resolve
the dispute
Loss Basics-Summons & Complaint
• Notice of Appearance
– Default judgment after 20 days
• Notify your Risk Pool/Insurance Co.of
lawsuit
• Transmit copies of pleadings for
determination of defense and
indemnification obligations
Loss Basics – Litigation Hurdles
• Litigious Society
– Deep Pockets
• Joint & Several Liability
– Liability “Lotto”
• Erosion of Immunities
• Perceptions of government
WILL MY AGENCY GET
SUED?
Maybe….but you might just win!
• Comparative negligence/fault (Washington)
• Recreational immunity
• Standard of care
• Joint and Several Liability
• Waiver and release forms
• Assumption of Risk
Comparative Negligence/Fault
• Weighing of fault amongst all parties
• Not a complete bar to recovery by plaintiff
RECREATIONAL IMMUNITY
STATUTE
• RCW 4.24.210 Recreational
Immunity Statute
• Purpose is outdoor recreation
• No fee of ANY KIND…(except)
• Must place warning sign for all
“known dangerous artificial
latent conditions.”
• Each element must be present.
WARNING
This Equipment was built
By LOW BIDDER
Releases and Waivers
• Must not be inconspicuous
• Releases cannot limit liability for the
acts falling “greatly below the standard
established by law for the protection of
others”
Joint and Several Liability
• Key Elements:
– Fault Free Plaintiff
– More than One At Fault Party
– Plaintiff may choose to collect damages from
whichever party has greatest resources (i.e., govt.,)
– RCW 4.22.070
Loss Basics-Documentation
• Documentation
• Maintain file
• Preserve file per record retention schedules
• Not documented…didn’t happen!
• Name, date and time
• Action taken
• Further follow up needed
Risk Management Process
5 Step Process:
I. Identification & Analysis of Risks
II. Evaluate Alternatives to Manage Risk
III. Selection of Risk Technique
IV. Implementation
V. Monitoring
I. Identification & Analysis
• What is the range of risks to which your
organization is exposed?
Risks Facing Public Agencies
• Property – Autos, Facilities, Equipment
• Liability – General, Cyber, Civil Rights, Errors &
Omissions
• Human Resources – Workers Comp, Terminations, Training, Attitude
of employee toward risk
• Loss of Income – Initiatives, Reduced Tax Base ,Market trends,
Interest Rates
A Few Specific Risks to Consider
• Buildings/Facility Use
• Fleet/vehicles
• Roadway Maintenance
• Parks/Playgrounds
• General operations
• Mowing, Trees
• Trails/Athletic Fields
• Aquatics
• Volunteers
And…a Few More Risks to
Consider!
• Sewer and Storm water systems
• Senior centers
• Land Use issues
• Police/Jail/Fire
• IT/Cyber Issues
• Personnel
• Public Records
• Special Events
• Contracts (Risk Transfer)
Personnel • Employment claims (Hiring practices,
Discrimination, Retaliation, Wrongful
Termination)
– Policies and Procedures
– Personnel manuals
– Training of management & staff
• Employee Injuries
– Safety Programs/Training
– Workers Compensation
IT/Cyber Risks:
• Social Media
• Privacy of citizens and employees
• Data
Policies and Procedures?
Cyber coverage is a wise purchase! Don’t let a data disaster bust the budget!
Public Records
• Public Records Requests for recent accident
information (Free Discovery!)?
• Could be building a liability case
• May not be able to Risk Transfer!
• Public Records Training is Key!
Special Events
• Special Events Permit Process
– Police, Fire, Garbage, Sanitation
• Alcohol (beer gardens/wine
gardens/Farmer’s Markets)
– Liquor liability coverage
• TULIP insurance (Tenant User Liability Insurance
Program-”short term liability insurance”)
II. Evaluate Alternatives
Examine methods to reduce or stop risks
• Preventing losses or mitigating their effect
on your organization
– Risk Avoidance
– Risk Retention
– Risk Transfer
III. Selection
• Choose the Risk Control and Risk Financing
technique that best addresses the issue
What is Your Appetite for Risk?
A Few More Items to Consider When
Selecting the Risk Control Method
• Expense
• Politics
• Comfort level
• Expediency
Risk Avoidance
Risk Retention:
Risk Management Matrix
Category I:
Low Frequency/Low
Severity
(Ignore/Retain)
Category II:
Low Frequency/High
Severity (Transfer)
Category III:
High Frequency/Low
Severity (Retain)
Category IV:
High Frequency/High
Severity (Avoid)
Risk Transfer
Another Risk Transfer Opportunity
Risk Transfer:
Contracts
• Who is responsible for reviewing and writing
contracts in your organization?
– 1. In-house legal department
– 2. Outside contracted legal firm
– 3. Risk Management
– 4. Purchasing / Contracts Administrator
– 5. Other
Risk Transfer
Contracts: The Belt and Suspenders Approach to
Protection
• Indemnification Clauses in Contracts (Belt)
• Additional Insured status on Insurance Policy
(Suspenders)
Both compliment each other but only 1 is necessary
Contracts:
Indemnification Clauses in Contracts
52
Indemnification for claims arising out of:
• Performance of the Agreement
• Resulting from the acts, errors or omissions of
the Consultant in performance of the
Agreement
• Avoid the use of
– Negligence or “negligent acts”
Contracts:
Indemnification & Hold Harmless clauses
53
• Defend
• Indemnify
• Hold harmless
Risk Transfer: Contracts
Sample Indemnification Clause in Contract:
“The Contractor shall defend, indemnify and hold the City,
its officers, officials, employees and volunteers harmless
from any and all claims, injuries, damages, losses or suits
including attorney fees, arising out of or in connection
with the performance of this Agreement, except for
injuries and damages caused by the sole negligence of
the City.”
Risk Transfer:
Insurance Basics
• Insurance
– Types of Insurance
• General Liability
• Auto/Property
• Professional Liability (or E & O)
• Cyber
– Insurance Limits
• $1,000,000 per occurrence
• $2,000,000 aggregate
– Certificate of Insurance
• “This Certificate is issued…”
– Additional Insured Status
Certificate of Liability Insurance
Certificate of Insurance
Risk Transfer
Insurance and Contracts cont.
• Who is responsible for checking certificates
of insurance within your public entity?
– 1. Risk Management
– 2. Purchasing / Contract administrator
– 3. Outside contracted vendor
– 4. Individual departments
– 5. Other
Risk Transfer:
Insurance and Contracts cont.
Additional Insured (AI)
• Adding another insured by specific or automatic
endorsement
• Defend, indemnify, &…
• Hold harmless: prevents subrogation by the
contractor’s insurance carrier
59
Risk Transfer:
Contracts and Insurance cont.
• Are specific Additional Insured
endorsements a part of your public entity’s
insurance requirements?
– 1. Yes
– 2. No
– 3. Sometimes
– 4. Not sure
Certificate of Insurance
Documentation of Coverage and
Endorsements
62
• Certificate of Insurance (COI)
– “This insurance is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend or alter the coverage afforded by the policies below.”
• Coverage types, limits and insurance company information
• Listing you as an additional insured (AI) in the comments box on the certificate is not enough!
• Get AI endorsements and reserve the right to get a certified copy of policy upon request!
IV. Implementation
• Put in to practice the control technique you
have selected
V. Monitoring
• Is the technique being implemented?
• Is the technique making a difference?
Risk Management and Your
Organization
– Establish Risk Management Objectives
• Determine organization’s risk comfort level
• Establish performance goals
– Establish Staff Training
• Individual & Organizational Risk
Management
• How to Identify and Respond to Risks
• Importance of Reporting and Documentation
Remember…
Risk Management is an A.R.T.
• Risk Avoidance - Eliminate Risk
• Risk Retention:
• Loss Prevention - Frequency
• Loss Reduction - Severity
• Risk Transfer
Failure is not an option!
A successful Risk Management
program has its rewards!
Thank You
QUESTIONS?
