Lesson 5 Risk Control

Transcription

1 Lesson 5 Risk Control Lesson 5 Intro p1 (ELR) After an organization s exposures to loss have been identified during Step 1 - Risk Identification and then analyzed during Step 2 Risk Analysis, it is time to select and apply the appropriate risk control techniques necessary to reduce the frequency and/or severity of potential losses. Successful risk control programs are based on careful risk identification and risk analysis. Lesson 5 Intro p2 (ELR) Lesson 5 Learning Objectives: 1. Define risk control and discuss its role in the risk management process. 2. Describe the three approaches to loss control. 3. Discuss the key elements of the five primary types of risk control techniques. 4. Discuss the root causes of accidents and injuries. 5. Describe the six basic steps to accident prevention. 6. Identify the elements of a safety and health program and understand how they work together to control risks. 7. Define claims management and explain its role in a risk control program. 8. Describe features of three principal types of claim management plans. 9. Define and discuss the characteristics of a crisis. 10. Define and discuss the principles of effective crisis management. 11. Identify and explain the four essential steps of the crisis management process. Elements of Risk Management Course Print

2 Lesson 5 Topic A Control of Risk p1 (ELR) Lesson 5 Topic A - Risk Control Learning Objective: Define risk control and discuss its role in the risk management process. The focus of risk control is to find solutions that will prevent or reduce losses to the organization. Risk control is a people process individuals throughout the organization must be involved in all aspects of an effective risk control program. Definition of risk control: any conscious action or inaction to minimize, at the optimal cost, the probability, frequency, severity, or unpredictability of loss. Lesson 5 Topic A Control of Risk p2 (ELR) Learning Objective: Define risk control and discuss its role in the risk management process. Three Important Impacts on the Risk Control Step Activities from the Identification and Analysis Steps help shape the organization's Risk Control program. Risk Identification Methods We discussed the ten methods in Lesson 3. Risk Control activities interact most frequently with the Identification and Analysis Steps. Incident Analysis Incident analysis involves tracking incidents without regard to subsequent accidents, losses, occurrences or claims. Reporting procedures, tracking and review may be specific to the organization. Incident analysis is more effectively managed by using a risk management information system (RMIS). By tracking and analyzing incidents, risk control techniques can be applied: in a manner more timely to the event, as a preemptive act, avoiding or minimizing the chance of an incident, in a manner that reinforces risk control practices involving employees, or to demonstrate due diligence or reasonable investigation in defense of claims. Cost Benefit Analysis Cost-benefit analysis is a financial decision-making tool used to help management choose between risk control alternatives. The risk manager can compare the present value costs (cash outflows) with present value benefits (reductions in losses and other cash inflows) over time to measure the best rate of return. Losses, probabilities, interest rates, and cash flows require assumptions that may vary from expected. Elements of Risk Management Course Print

3 The solution with the best rate of return may not be chosen unless it is compatible with the organization s management philosophy. Lesson 5 Topic A Control of Risk p3 (ELR) Learning Objective: Define risk control and discuss its role in the risk management process. Frequency and Severity We introduced the terms frequency and severity with Risk Analysis Terms in Lesson 2. Frequency The number of times an incident, accident, or occurrence occurs. Example: Through analysis of historical loss data, it is determined that the organization has had only 3 losses due to fire over the past 10 years. Severity The monetary or financial impact of losses. Example: Although 2 of the fire losses resulted in only minor financial losses, the third fire cost the organization $3,000,000. Lesson 5 Topic A Control of Risk p4 (ELR) Learning Objective: Describe the three approaches to loss control. Approaches to Loss Control There are three very different approaches to loss control although they all have a common goal to prevent or reduce the frequency and/or severity of losses. Approach #1 Financial Approach Using a financial approach, the focus is on the cost of the loss control method and the period of time it will take the organization to recover its investment. For example, the Fleet Safety Program will cost $10,000 to implement. The analysis indicates it will result in a $3,000 annual reduction in retained losses and insurance premiums. Therefore, it will take 3.3 years to recoup the initial investment ($10,000/$3,000). Approach #2 Systems Approach The systems approach is based on the belief that the organization s systems are causing the accidents. The systems approach relies on thorough risk identification and classification, the training of employees and an equipment maintenance program. Flow charts are used to track risk exposures. Elements of Risk Management Course Print

4 Approach #3 Practical Approach The practical approach relies on grass roots support top management is on board with the loss control programs; there are incentive and reward programs to encourage attention and focus on safety and effective safety committees are formed. One is not mutually exclusive of the others; an organization may use more than one approach. Please refer to Lesson 5 Topic A Control of Risk p5 (ELR) Lesson 5 Topic A Control of Risk p6 (ELR) Learning Objective: Define risk control and discuss its role in the risk management process. The Relationship Between Frequency, Severity, and Risk Control Determining the frequency and severity of risks can help you identify the best methods for controlling them. Please refer to Lesson 5 Topic A Control of Risk p7 (ELR) to complete the Knowledge Check at this time. Lesson 5 Topic A Control of Risk p8 (ELR) Frequency and Severity Chart The Frequency-Severity Chart below helps you identify risk control methods based on the frequency and severity of risks. Take a moment to look at the chart. Elements of Risk Management Course Print

5 Severity = Cost High = High cost per incident Low = Low cost per incident Frequency = How often something occurs Low = Rare High = Frequent Each box represents a different combination of frequency and severity. Each box recommends an appropriate risk control technique. For example, a risk control technique for a risk with low frequency and low severity is retention. On the next page, you will identify the risk control techniques associated with each box. Please refer to Lesson 5 Topic A Control of Risk p9 (ELR) to complete the Knowledge Check at this time. Elements of Risk Management Course Print

6 Lesson 5 Topic A Control of Risk p10 (ELR) The Frequency Severity Chart Summary Because of this correlation, the risk manager can decide on a risk control method for a loss, given its frequency and severity data. Elements of Risk Management Course Print

7 Lesson 5 Topic B Risk Control Techniques Lesson 5 Topic B Primary Risk Control Techniques p1 (ELR) Learning Objective: Discuss the key elements of the five primary types of risk control techniques. 1. Avoidance Eliminating an activity or exposure which eliminates chance of loss - Example: Your company decides to cease using a dangerous chemical in the manufacturing of one of your products. 2. Prevention Breaks sequence of events that leads to a loss or that makes the event less likely Example: Performing regular equipment checks 3. Reduction Reducing the severity or financial impact from unpreventable losses Example: A fire sprinkler system is installed in your manufacturing plant. 4. Segregation/separation/duplication Work primarily to reduce the severity of the loss Example: A second arc welding unit is purchased as a backup to the primary unit. 5. Transfer (Contractual, physical, or both) Have another party be financially responsible for all or partial amount of the loss Example: Purchasing insurance. Lesson 5 Topic B Primary Risk Control Techniques p2 (ELR) Learning Objective: Discuss the key elements of the five primary types of risk control techniques. Risk Control Technique #1 Avoidance True risk avoidance is totally eliminating an activity and/or exposure to an activity. Avoidance means choosing not to engage in an activity or owning the property in question to begin with OR eliminating the activity with which the organization is already engaged in or getting rid of property it owns. Avoidance eliminates the chance of loss. It is a self-sufficient risk control technique, and no further action is required so long as the activity is fully eliminated. Lesson 5 Topic B Primary Risk Control Techniques p3 (ELR) Learning Objective: Discuss the key elements of the five primary types of risk control techniques. Avoidance Continued A college attracts a large number of students with its international programs. Chances are good that the Elements of Risk Management Course Print

8 college will not seriously consider a recommendation to close its campus in Europe, just because the risk manager is concerned about the frequency and severity of losses that have occurred in the past five years. Avoidance is often not feasible. As you can imagine, avoidance may be a difficult technique to sell to management for several reasons. Eliminating the activity or property may be in conflict with the goals and profit motives of the organization. The organization relying on the revenue from the activity or product you are recommending be avoided may not be in favor of the recommendation. The activity may be inherent to the overall corporate mission or identity. It is also a difficult technique to implement because the risk manager may lack the appropriate decision-making authority. Lesson 5 Topic B Primary Risk Control Techniques p4 (ELR) Learning Objective: Discuss the key elements of the five primary types of risk control techniques. Avoidance continued Example: Gephardt, Inc. owns several large shopping malls in the Pacific Northwest. Under discussion is whether to provide valet parking services for shoppers. After identifying and analyzing the potential loss exposures from a valet service, the risk manager has recommended to management that valet parking not be provided. It is important to remember that when avoidance is applied and the activity is discontinued, it eliminates future losses; however, there may still be an exposure from the past activities. Example: A firm has decided to discontinue manufacturing a product that has been responsible for injuries to children. While the product is no longer being made available, previously sold products are still in the marketplace and subject to losses and claims. Elements of Risk Management Course Print

9 Lesson 5 Topic B Primary Risk Control Techniques p5 (ELR) Learning Objective: Discuss the key elements of the five primary types of risk control techniques. Risk Control Technique #2 Prevention The goal of loss prevention is to reduce the frequency of types of claims from activities or property that cannot or will not be avoided. The term prevention implies an action taken to break the sequence of events that may lead to a loss, or at least to make it less likely; loss prevention interrupts the domino effect whereby one hazardous event leads to another, resulting in incidents or accidents. It also allows entities to conduct operations that might otherwise have to be avoided. Loss prevention does not reduce severity; it reduces frequency. Example: performing preventative maintenance on company vehicles. Lesson 5 Topic B Primary Risk Control Techniques p6 (ELR) Learning Objective: Discuss the key elements of the five primary types of risk control techniques. Risk Control Technique #3 Reduction The goal of loss reduction is to reduce the severity or financial impact from losses that are not prevented. It presumes a loss will occur but attempts to reduce the size or extent of the loss. Loss reduction techniques can be applied both before and after a loss. Pre-Loss Loss reduction techniques can be applied before the loss. Example: Fire suppression equipment is installed to reduce the severity of a fire loss. Post-Loss Even after a loss has occurred, loss reduction techniques can be effective. Example: Two major management processes that can be significantly reduce the severity of losses are the organization s claims management process, and its crisis management plan. Elements of Risk Management Course Print

10 Lesson 5 Topic B Primary Risk Control Techniques p7 (ELR) Learning Objective: Discuss the key elements of the five primary types of risk control techniques. Risk Control Technique #4 - Segregation / Separation / Duplication Segregation, separation or duplication is used to reduce the overall severity of losses. Segregation an isolation of an exposure from other exposures, perils or hazards. Segregation Example: Security-controlled access and specialized fire suppression equipment in a computer room located within a building. Separation the spread of exposures or activities over several locations. Separation Example: Parking 25 company trucks at one location and 25 trucks at another location across town. Should a fire or vandalism loss occur, only 25 trucks are at risk to loss at any one time (barring a catastrophe affecting the area). The company could continue operations with 25 trucks if necessary. Senior management flying on different airplanes to attend a meeting. Duplication the use of back-ups for critical systems or operations. Duplication Example: Duplication can be having spare parts for critical piece of equipment and storing them off site. Lesson 5 Topic B Primary Risk Control Techniques p8 (ELR) Learning Objective: Discuss the key elements of the five primary types of risk control techniques. Risk Control Technique #5 Transfer The goal of risk transfer is to reduce risk to the organization by transferring some or all of the risk to another party. Transfer is accomplished through either physical or contractual means. Please refer to Lesson 5 Topic B Primary Risk Control Techniques p9 (ELR) to complete the Knowledge Check at this time. Elements of Risk Management Course Print

11 Lesson 5 Topic B Primary Risk Control Techniques p10 (ELR) Learning Objective: Discuss the key elements of the five primary types of risk control techniques. Physical Transfer Physical transfer shifts some or all of an operation function or exposure to an outside source. Physical Transfer Example 1: A school district contracts with a third party to provide food services for the district. Example 2: A furniture store contracts with a third party for its deliveries. Lesson 5 Topic B Primary Risk Control Techniques p11 (ELR) Learning Objective: Discuss the key elements of the five primary types of risk control techniques. Contractual Transfer Contractual transfer shifts responsibility of certain liabilities to another party. There are four types of contractual transfer. Hold harmless or indemnification agreement Affirmative assumption of the financial consequences for liabilities of another through a contract. Note: Indemnitee the one who is owed the obligation from another, Indemnitor the one who owes the obligation to another. *There are three types of hold harmless agreements Limited, Immediate Form, and Broad Form. Discussion on these is outside the scope of this course. Example: Jenkins Auto Dealership has hired ABC Roofing to repair the roof on one of its buildings. The contract requires ABC Roofing to hold Jenkins Auto Dealership harmless from any loss while repairing the roof and to be financially responsible for any damages or injuries to a third party. Exculpatory agreement or clause Pre-event exoneration of the fault of one party that results in any loss or specified loss to another. Example: MasterPark Airport Parking has language on each ticket stating it is not responsible for loss of contents or damage to the vehicle. Waiver of subrogation Pre-event relinquishment of the right of one or both parties insurers to seek Elements of Risk Management Course Print

12 recovery from a culpable party for loss payments made to the insured. Example: The lease contains a waiver of the subrogation in favor of the tenant. In the event the tenant is legally responsible for fire damage to the building, the building owner s insurance company cannot subrogate against the tenant. Limit of liability or liquidated damages clause Pre-event limitation of the amount, type, or method of calculation of damages available by one or both parties to an agreement. Example: A major shipping company limits the amount payable in the event of a damaged or lost package to $100. Lesson 5 Topic B Primary Risk Control Techniques p12 (ELR) Note: Contractual transfer is outside the scope of this course, however you can find a comparison of various types of contractual transfer agreements in our Forms Library. Please refer to Lesson 5 Topic B Primary Risk Control Techniques p13 (ELR) to complete the Knowledge Check at this time. Elements of Risk Management Course Print

13 Lesson 5 Topic C Basics of Accident Prevention Lesson 5 Topic C Basics of Accident Prevention p1 (ELR) Risk Control & Loss Mitigation You can see how risk control goes through a gradual transition from exposure, to prevention, to loss, to mitigation and to cost of risk. Losses negatively impact Cost of Risk (COR) as both retained losses and insurance premiums are included in the COR calculation. What is mitigation? In this course we are referring to the actions taken by an organization to reduce the severity of losses, including the prevention of injuries. Lesson 5 Topic C Basics of Accident Prevention p2 (ELR) Learning Objective: Discuss the root causes of accidents and injuries. Why Should Injuries be Prevented? It seems completely intuitive, but consider why for a moment. There s more than just doing the right thing involved. 1. It is good business to prevent losses to employees or others 2. If accidents are prevented, there is no need for transfer or financing 3. It is the law! OSHA, Department of Transportation, state worker compensation statutes, etc. all require employers to have safe workplaces 4. Cost of risk retained and insured losses affect the organization s cost of risk 5. Humanitarian concerns no organization wants people to be injured Lesson 5 Topic C Basics of Accident Prevention p3 (ELR) Learning Objective: Discuss the root causes of accidents and injuries. Root Causes There are three root causes of accidents and injuries: Unsafe acts or behaviors Unsafe conditions Uncontrollable events Elements of Risk Management Course Print

14 Studies show that approximately 88 percent of all accidents and injuries are the result of unsafe acts or behaviors. Lesson 5 Topic C Basics of Accident Prevention p4 (ELR) Learning Objective: Discuss the root causes of accidents and injuries. 8 Reasons for Unsafe Workplace Practices Why do employees act in unsafe ways or use unsafe procedures? After all, if these are the reasons for the vast majority of all accidents and injuries, doesn t common sense tell us they are controllable? Risk control could mitigate these types of losses to an organization. It is just a matter of time accidents and injuries will eventually occur with continued unsafe behavior. 1. Employees are unaware that the behavior is unsafe 2. Never been told or trained 3. No regular reminders and feedback 4. Workplace conditions encourage unsafe behavior 5. Natural rewards and punishments favor unsafe behavior 6. People take risks when rewards are quick and certain and risk of accident is low 7. Unsafe work is faster, more convenient, and more comfortable 8. Unsafe behavior rarely results in injury on any single occasion Lesson 5 Topic C Basics of Accident Prevention p5 (ELR) Learning Objective: Describe the six basic steps to accident prevention. Six Accident Prevention Basics Accident Prevention Basics can be used to reduce employee injuries. These are six basic steps to accident prevention. Below they are ranked in order of prevention effectiveness if implemented alone. 1. Elimination of the hazard Similar to the risk control technique of avoidance. Example: Don t allow employees to wear a headset or ear buds to listen to music while working. 2. Substitution of a less hazardous substance or process Lessens the severity of an accident. Examples: Install lift gate on trucks to load heavy equipment rather than employees manually loading the truck; replacing lacquer based paint with water based. Elements of Risk Management Course Print

15 3. Engineering controls Devices or equipment that will lessen the chance of an accident occurring. Example: Require employees to wear harnesses when working on roofs. 4. Administrative controls Consists of rules or activities that management undertakes. Examples: Safety meetings, supervision, or safety procedures and manuals. 5. Personal protective equipment Gear worn or used by workers. Examples: Equipment such as gloves, foot and eye protection, protective hearing devices, hard hats, respirators, etc. worn by employees to minimize their exposure to a variety of hazards. 6. Training Education Examples: Topics relevant to the organization such as safety, hazards associated with height work, instructions on new equipment, CPR, etc. Please refer to the Lesson 5 Topic C Basics of Accident Prevention p6 (ELR) to complete the Knowledge Check at this time. Elements of Risk Management Course Print

16 Lesson 5 Topic D - Safety and Health Programs Lesson 5 Topic D Safety and Health Programs p1 (ELR) Learning Objective: Identify the elements of a safety and health program and understand how they work together to control risks. An organization concerned with employee safety will want to implement a program to reduce injuries. Now let s consider what it means to implement a truly effective safety and health program. We will cover 8 Essential Elements. 1. Management Leadership 2. Accountability, Responsibility, and Authority 3. Employee Participation 4. Hazard Assessment & Control 5. Employee Information & Training 6. Accident Reporting, Investigation, & Analysis 7. Post-Injury Management 8. Evaluation of Program Effectiveness Lesson 5 Topic D Safety and Health Programs p2 (ELR) Learning Objective: Identify the elements of a safety and health program and understand how they work together to control risks. Eight Essential Elements of a Health and Safety Program #1 Management Leadership How does the organization spearhead a safety and health program? 1. Written safety policy The safety policy should be signed by CEO or president. 2. Goals and objectives These are written programs showing safety policies and goals. 3. Responsibilities/accountabilities Define these for all managers, supervisors, and employees. 4. Resources Provide authority, information and training to fulfill responsibilities. 5. Walk the walk Management should be held responsible for following safety policies. Example: If management is in an area requiring employees to wear hard hats, so should management. 6. Integrate safety into the business practice Safety should be a part of the business, and not in addition to the business. Elements of Risk Management Course Print

17 Lesson 5 Topic D Safety and Health Programs p3 (ELR) Learning Objective: Identify the elements of a safety and health program and understand how they work together to control risks. Eight Essential Elements of a Health and Safety Program 2. Accountability, Responsibility and Authority How does the organization create a safety program that is accountable and responsive? o o o o The safety goals and objectives should be included and properly weighed in performance reviews and employee compensation. They should be both activityoriented (e.g., training meetings, newsletters) and results-oriented (e.g., reduction in frequency and/or severity). Safety responsibilities should be defined by position. Authority should accompany responsibility for safety issues. The program should stress individual accountability for actions, behaviors, and conditions. Lesson 5 Topic D Safety and Health Programs p4 (ELR) Learning Objective: Identify the elements of a safety and health program and understand how they work together to control risks. Eight Essential Elements of a Health and Safety Program 3. Employee Participation If the safety program is to succeed, every employee must participate. o Employee Participation is a must for success o o o o o Engage employees at the establishment, during implementation and in the evaluation of the program Establish regular communication between employer/employees Employees should serve on safety committees. Involve employees in safety inspections Establish safe channels for negative feedback, such as reporting unsafe conditions, actions or behaviors Elements of Risk Management Course Print

18 Lesson 5 Topic D Safety and Health Programs p5 (ELR) Learning Objective: Identify the elements of a safety and health program and understand how they work together to control risks. Eight Essential Elements of a Health and Safety Program 4. Hazard Assessment and Control Accidents and injuries will eventually occur with continued unsafe behavior. Management should reward, recognize and praise employees safe behavior as it produces extra effort and high morale. Discipline for unsafe behavior should be fair and consistent and a last resort as it produces minimal compliance and low morale. To evaluate the hazard assessment and control component of a safety and health program, we should first look at the characteristics of accidents. When unsafe behaviors and conditions exist, the risk manager may assume the following: Any unsafe behavior or condition left unchanged may lead to an accident, Management may have time to correct unsafe behaviors and conditions before an accident occurs, and Most unsafe behaviors and conditions will be observed one or more times before an accident occurs. What causes accidents? Unsafe acts or behaviors (88%) Unsafe conditions (10%) Uncontrollable events (2%) (The graph depicts only direct causes of an accident, a common situation will be that an accident arises from a combination of unsafe behaviors and unsafe conditions.) Lesson 5 Topic D Safety and Health Programs p6 (ELR) Learning Objective: Identify the elements of a safety and health program and understand how they work together to control risks. Eight Essential Elements of a Health and Safety Program Elements of Risk Management Course Print

19 More on Hazard Assessment and Control Systematic identification and assessment of workplace hazards Audits identify weak management practices Inspections identify unsafe conditions and behaviors Job Safety Analysis (JSA) or Job Hazard Analysis (JHA) identify unsafe work methods Behavior-based safety results identify unsafe acts Incident reporting identifies unsafe acts, behaviors, conditions, work methods and management practices Regulatory and consensus standards identify hazards and perils Records of activity, exposures, and corrective action Please refer to Lesson 5 Topic D Safety and Health Programs p7 (ELR) to complete the Knowledge Check at this time. Lesson 5 Topic D Safety and Health Programs p8 (ELR) Learning Objective: Identify the elements of a safety and health program and understand how they work together to control risks. Eight Essential Elements of a Health and Safety Program 5. Employee Information and Training Employees need to know they are responsible for their own safety and health program and they need all the information necessary to fulfill their responsibilities to that program. Every employee should receive specific training for each exposure, which includes the nature of the exposure and how to recognize it, any control measures and any protective procedures the employee must follow, and any provisions of applicable standards or regulations. Training should start when an employee is hired and before the initial work assignment. There should be periodic training to maintain awareness and competency. Additional training should take place when there is a change in a workplace exposure or procedure, or when there is a change in job assignment. Elements of Risk Management Course Print

20 Lesson 5 Topic D Safety and Health Programs p9 (ELR) Learning Objective: Identify the elements of a safety and health program and understand how they work together to control risks. Eight Essential Elements of a Health and Safety Program 6. Accident Reporting, Investigation & Analysis Accident versus incident: Accident an event definite as to time and place that results in injury or damage to a person or property Incident an event that disrupts normal activities and may become a loss or claim Investigate all accidents and incidents that cause or could cause bodily injury, property damage, OSHA recordable injuries, and/or first-aid cases. Reasons for investigating accidents and incidents: Identifies causal factors involved in the accident or incident and any needed changes in behavior or conditions Reduces employee and equipment downtime and expense Lesson 5 Topic D Safety and Health Programs p10 (ELR) Learning Objective: Identify the elements of a safety and health program and understand how they work together to control risks. Eight Essential Elements of a Health and Safety Program Accidents - Conducting the Investigation It should be conducted as soon as possible after the event and at the actual accident site. There are a variety of individuals who could be involved in the investigation depending on the specifics of the loss, such as supervisor, employee, safety committee, management and/or outside authorities such as OSHA. Witnesses should be interviewed as soon as possible. Lesson 5 Topic D Safety and Health Programs p11 (ELR) Learning Objective: Identify the elements of a safety and health program and understand Elements of Risk Management Course Print

21 how they work together to control risks. Eight Essential Elements of a Health and Safety Program Characteristics of an Effective Accident Report Remember, before an accident occurs, numerous errors have been committed. Entries should be accurate, make sense, flow sequentially and provide insight as to the cause of the accident Recommendations for prevention could include engineering controls, administrative controls, human resources hiring and placement procedures, training, and discipline There should be a documented follow-up mechanism Provide for auditing by the administration Lesson 5 Topic D Safety and Health Programs p12 (ELR) Learning Objective: Identify the elements of a safety and health program and understand how they work together to control risks. Eight Essential Elements of a Health and Safety Program 7. Post-Injury Management Post-injury management consists of all the actions the organization takes after an injury occurs. The value of effective post-injury management can be described as follows: 1. Allows for early evaluation of injury 2. Reduces health care costs 3. Reduces lost work time 4. Improves employee morale 5. Addresses legal issues with the American with Disabilities Act (ADA), Family and Medical Leave Act (FMLA), etc. The employee, supervisor, management, medical provider and claims adjuster can all participate in postinjury management. Lesson 5 Topic D Safety and Health Programs p13 (ELR) Learning Objective: Identify the elements of a safety and health program and understand how they work together to control risks. Eight Essential Elements of a Health and Safety Program Written Policies and Procedures A comprehensive manual should be developed that includes policies and procedures on return-to-work (coordinator or administrator and supervisor involvement), prompt Elements of Risk Management Course Print

22 reporting procedures, and ongoing employee training that includes instruction on accident reporting procedures, medical provider procedures, and modified-duty procedures. Established Medical Provider - If permitted by regulatory authorities, it is beneficial to direct care of injured employees to an established medical provider because the provider can develop a familiarity with the organization's operations, and understand the treatment and return-to-work philosophy of the organization. Claims Handling In most organizations, the insurance carrier, a third-party administrator (TPA), or an in-house claims adjuster handles the claims. Regardless of who handles the claim, elements of successful claim handling include addressing the organization's return-to-work philosophy and availability of modified duty, medical cost containment activities, and recovery or subrogation from negligent third parties. There should be continuous communications among the employee, the medical provider, and the claim handler. Lesson 5 Topic D Safety and Health Programs p14 (ELR) Learning Objective: Identify the elements of a safety and health program and understand how they work together to control risks. #8 Evaluation of Program Effectiveness 8. Evaluation of Program Effectiveness The final essential element of a Safety and Health Program is to evaluate the effectiveness of the program. When determining whether a health and safety program has been effective, the risk manager must make sure the program is effective and appropriate for the workplace conditions. This should be a formal evaluation process with documented results. Is it working? Has frequency and/or severity improved? Does the program have the support from senior management? Are employees on board with safety? Do inspections uncover fewer unsafe acts by employees and fewer unsafe conditions? Have insurance premium debits decreased or credits increased? What is the impact on the experience modifier? Has the number of OSHA citations and the amount of fines reduced? Incidence Rate: Number of Injuries / Illness X 200,000* Total Hours Worked per Year** *100 Full time equivalent workers 100 Workers X 40 hours/week X 50 weeks Elements of Risk Management Course Print

23 ** Number of employees X 2000 hours. Other sources of measurements include: National Safety Council (NSC) statistics OSHA citations and fines Accident and injury trends Overall totals (causes, locations, etc.) Trend analysis and benchmarking Internal comparison over time External comparison to similar organizations of BLS/OSHA rates Please refer to Lesson 5 Topic D Safety and Health Programs p15 (ELR) to complete the Knowledge Check at this time. Elements of Risk Management Course Print

24 Lesson 5 Topic E Claims Management p1 (ELR) Lesson 5 Topic E Claims Management Learning Objective: Define claims management and explain its role in a risk control program. Earlier we said there are post-loss activities that can reduce the severity of a loss. Claims management is an example of a post-loss activity. Claims Management is defined as... The prompt resolution of an organization's losses subject to insurance or an active retention program, including claims by other persons or entities to which it may be legally or ethically bound. Lesson 5 Topic E Claims Management p2 (ELR) Learning Objective: Define claims management and explain its role in a risk control program. Claims Management Continued Prompt: The primary goal of claims management is to resolve claims maters promptly and effectively. Resolution: A resolution includes a full or negotiated settlement, a denial of the claim, completion of litigation and/or alternative dispute resolution or subrogation. Losses: A reduction in the value of assets Subject to insurance or active retention program: This refers to the fact that many types of organizational losses are not subject to state licensing limitations. Claims: A demand for payment or obligation to pay as a result of a loss; claims are made by either of the following: First party: The organization Second party: Employee(s) in course and scope of employment (contract implied-in-law - not so much a contract as a duty imposed by law) Third party: Any entity other than the organization itself or a second party Ethically Bound: This refers to payments that are voluntary payments or compensation made without regard to legal fault or responsibility. Elements of Risk Management Course Print

25 Lesson 5 Topic E Claims Management p3 (ELR) Learning Objective: Define claims management and explain its role in a risk control program. Bundling versus Unbundling While detailed information about the three types of Claims Management Plans are outside the scope of this course, there is basic information about which you should be familiar. In order to understand the basic differences, you need to first understand the difference between bundling and unbundling. Bundling - When an insurance policy is purchased, the insurance company includes services in the traditional/standard insurance contract such as: State filings Loss control Claims services Policy issuance Statistical filings The insured is not responsible for any of these services and the cost for them is embedded in the insurance premium. These services are said to be "bundled" in the insurance policy. Therefore, in a bundled insurance contract, the insurance company is responsible for claims management. Unbundling - When an insurance contract is placed on an "unbundled" basis, services such as loss control and claims administration are not automatically included. The insured selects and pays for services on an a la carte basis. If claims service is not included, the insured becomes responsible for claims management. Lesson 5 Topic E Claims Management p4 (ELR) Learning Objective: Describe features of three principal types of claims management plans. Types of Claims Management Plans Insured Plan (bundled insurance program) In the insured plan approach, the insurer provides both insurance and claims management services including investigation, evaluation and settlement. Elements of Risk Management Course Print

26 Self-administered plan (unbundled insurance transaction) A self-administered plan is also used in conjunction with unbundled insurance. Self-administered plans normally have a very large self-insured retention. Again, the insured, not the insurance company is responsible for claims management. The organization handles its own claims management including investigation, evaluation and settlement. Third-party administered (TPA) plan (unbundled insurance transaction) A third party administered plan is used in conjunction with an unbundled insurance contract. The insured, not the insurance company, is responsible for claims management. As the insured organization may not have staff or expertise to manage claims, the insured organization will contract with a Third Party Administrator to handle its claims management including investigation, evaluation and settlement. Lesson 5 Topic E Claims Management p5 (ELR) Note: While all other characteristics of these three plans are outside of the scope of this course, there is additional information provided for your reference. Elements of Risk Management Course Print

27 CLAIMS ADMINISTRATION Insured Plan TPA Plan Self-Administered Plan Description Bundled Insurance Program with an insurance carrier. The insurer s employees handle claims administration. Unbundled Insurance Program. Insured and Insurer collectively select the TPA. Unbundled Insurance Program. Insurer writes excess insurance over the insured s self administered claim program. Deductible vs. SIR Normally a low SIR or a low deductible program. Normally larger or possibly a very large, SIR. Normally very large SIR. (Sometimes, little evaluation of whether a peril is covered under the policy, i.e. Medical) Reason Normally a small line of business or loss experienced varies (i.e. infrequent or catastrophic, losses, etc.) More flexibility in loss reporting, more control over claim staff and claim process. TPA may be utilized because the insurer s claim loading is too high, or the insured wants more control over the reserving approach, or ease in changing insurance carrier. Ability to obtain ultimate control over loss reports, the claim process, customer (claimant) contacts. Insured may also want to establish a different litigation/ settlement approach, develop consistency, or improve (change) the insured(s) reputation (with plaintiff attorneys and customers). Elements of Risk Management Course Print

28 Loss Runs 1 Normally provided with a renewal or just before. Loss Runs reflect Insurer s Reserves. May be obtained as needed or may be set-up to run on a regular basis (i.e. monthly, quarterly, etc.). Loss runs reflect the reserves set by the TPA s staff. May be set-up on a regular basis (i.e. monthly, quarterly, etc.). Internal systems provide the most flexibility to customize reports, or search for specific problems or loss exposures. 1 Loss runs should be used to prepare loss allocation reports. Understandable copies of loss runs should be distributed with loss allocation charges. Insured Plan TPA Plan Self-Administered Plan Reserving Insurer has an incentive to make sure reserves are close to accurate. Usually estimates are high for individual claims, but low in the aggregate. Most TPAs are motivated to keep reserves low, at least initially. No real incentive to keep reserves accurate, and rarely monitored. Therefore, it is important to review TPA reserves regularly. It is important to keep reserves up-to-date in order to maintain or establish credibility with insurer. There is a tendency to keep reserves low, but reserves should be monitored closely to make sure estimates are adequate. (Note: reserving is an art.) Staffing Issues With an insured plan, there is very little control over staff selections (more control with larger accounts). Insured has more control over staff selection and is normally given the opportunity to interview individual claim handlers when selecting a new TPA. (Less flexibility once selected.) Ultimate control over entire claim staff and, includes responsibility for all personnel issues. Selfadministered plan must satisfy Reinsurer. Elements of Risk Management Course Print

29 Adjusters Sometimes good, sometimes VERY bad. (These people set the reserves that ultimately control your pricing.) Some insurers allow the insured input in adjuster selection. Insured has more say and generally a closer relationship with TPA Adjusters. Normally, bad adjusters can be removed from the account, but this sometimes takes a while. (Note: TPA s have a general tendency to Complete control over selection and training. The insured MUST adequately train, teach the companies reserve philosophy and MONITOR results. Insured Plan TPA Plan Self-Administered Plan Supervisors and Managers A single Supervisor or Manager is sometimes assigned authority to oversee the insured s entire claim operation for a particular line of business. This supervisor or manager is responsible regardless of the claim office responsible for administration of the specific claim. Same as Insured Plan, but may be structured so that a different Supervisor is responsible for claims at each claim office. (Generally, Supervisors and Managers are responsible to the client for all of the claims handled in a particular line of business for that insured.) This is the key person in the self-administered claim program. This individual must work well with the insurer and is ultimately responsible for claim management and overall personnel issues with claim staff. This person is normally responsible for claim training and must work closely with the Risk Manager to control the loss reserves and reserving philosophy. Elements of Risk Management Course Print

30 Settlement Authority Adjusters, Supervisors and Managers are given claim authority by line of business based upon their experience, seniority or other factors. Authorization in excess of the adjuster s authority must be referred, usually in writing, to a superior. If authorization is requested in excess of the supervisor s authority, the file is referred to the manager or even home office. Claim authority is granted similar to the authority granted by an insured s claim program, but in general, adjusters and supervisors have higher authority than individuals at insurance companies. Settlements in excess of a certain prearranged value are generally reported to the client through regular loss runs or reports. Sometimes the TPA must obtain authority from the insured or insurer in advance of settlement. A similar method of granting claim authority is established with a selfinsured program, as compared to a TPA program. Settlement authority for larger value claims is often obtained through the company s senior management. Many times, authority is required from the company s financial and legal departments, as well as the unit that will be charged for the loss (Loss Allocation). Insured Plan TPA Plan Self-Administered Plan Claim Audits Remember: what gets measured gets done. 2 The insurer s home office will require multiple audits annually. Normally, home office employees visit each claim office and review files that have been pulled prior to the visit. (These files are identified through a random selection process.) Results of these audits are almost never shared with the insured. TPAs have some internal audits but they generally occur much less frequently than with an insurer. Excess Insurance Carrier audits occur, but on an infrequent basis. An insured should consider an annual independent audit. (Internal audit results are rarely shared with clients... unless they are VERY good.) Internal audits should be performed by the supervisor quarterly and results should be posted by territory. An excess insurance carrier will also require regular audits (at least annually). An independent audit by an outsider may also be desired to assist in stream-lining or improving the internal claim process. Elements of Risk Management Course Print

31 Access to Communication 3 Dependent upon the size of the account, and the insurer, normally there is a true trickle-down of information. Once the claim is reported to the insured, the information is conveyed as follows: Claim Staff Claim Management Underwriter Broker or Agent Risk Manager Operations and Claim Staff. Claim data is generally not very detailed Information is shared with the client as re- quested or through loss runs. (Sometimes, unless the right questions are asked, negative information is not conveyed to the client.) Only recurring claim problems are normally identified for the Risk Management Department, if at all. The claim data that is pro- vided by the TPA is generally not very detailed or, if it is detailed, the coding is not usually very accurate. (TPAs don t normally monitor or check loss coding.) 4 The claim staff must monitor claim activity and identify frequent claim problems. Reports must be run internally as needed and claim coding must be checked for accuracy. 2 Independent auditors are only as good as the person doing the audit. Get references and discuss your claim philosophy in advance of the audit. Make sure the auditor understands and can accept your unique claim philosophy. 3 Risk Management is responsible for conveying recurring loss problems to each operational unit. 4 Inaccurate coding makes it impossible to identify loss frequency and severity problems, and therefore risk management becomes very difficult. Elements of Risk Management Course Print

32 Insured Plan TPA Plan Self-Administered Plan Suggestions for Control and Understanding Together with your carrier (claims and underwriting), establish your own claim program. The program should be reduced to writing and include procedures as follows: Claim opening procedures Authorized adjusters Risk Management contact procedures Claim settlement authority Procedures for settlement in excess of authority Claim Denial Procedures Medical Pay Procedures The program should be reviewed at least annually. Each claim office, which may handle your claims, should have a copy of the program and one person in that office should be responsible for oversight of the Program (i.e. the Supervisor). Visit the office regularly, at least annually, and question the Supervisor about the handling of specific claims as required by the Program. Establish your own claim program, similar to type identified for an insured program. Involve the following parties in the development of the program: the insurer (underwriting and possibly claims) the TPA s management (a Supervisor and an adjuster from the TPA, if possible), and the representatives from the risk management department who are responsible for the claim program. Be sure to visit the TPA s office regularly and compare the handling of specific claims in a formal review process at least once or twice annually. Share the results with the TPA. Work with the insurer and claim staff to establish a claim program. (Use your previous insurance company or TPA program as a guide.) Monitor the claim process and specifically compare claim handling to the established program. Monitor at least monthly and share results with the claim staff and the insurer. (Post and chart results to motivate improved performance.) Elements of Risk Management Course Print

33 Insured Plan TPA Plan Self-Administered Plan Suggestions for Control and Understanding (continued) Claims should have a copy of the program and one person in that office should be responsible for overseeing the program (i.e. the Supervisor). Claim offices should be visited regularly, at least annually, and the Supervisor should be questioned about the handling of specific claims as required under the program. Investigations At the time of the incident, a complete investigation should be performed. This includes obtaining the name, address and telephone number of every witness; photographing the hazard or condition (or lack thereof); getting statements from witnesses, if possible; and documenting all findings. This information must be sent to Risk Management within hours of the incident. Risk Management should obtain the information and send loss information to the insurance carrier, TPA or claim department daily. (It is recommended that loss reports be sent directly to the insurance carrier with a copy to the agent or broker, if necessary.) Elements of Risk Management Course Print

34 Insured Plan TPA Plan Self-Administered Plan Investigations (continued) Insurance carriers should contact the operations supervisor, or person who completed the report, directly. Copies of all correspondence should be sent to the Risk Manager. Operations employees should be directed to assist insurance company personnel as needed and to contact Risk Management if they have any questions. Insurance carriers should contact the operations supervisor, or person who completed the report, directly. Copies of all correspondence should be sent to the Risk Manager. Operations employees should be directed to assist TPA personnel as needed and to contact Risk Management if they have any questions. Risk Management claim personnel should contact operations if there are any questions about the investigation before contacting the customer, if necessary. Customers should be contacted within 24 hours of receipt of the incident report. Outside Investigators (Success starts with involvement and sup- port all along the chain of command.) Insurance companies generally have their own policies about using outside investigators. If suspicious conditions exist, the insurance carrier should be notified. Outside investigators may be used to investigate the extent of an injury or possible fraud situations. If a fraud or a serious exaggeration of the injury is suspected, the adjuster should be contacted immediately. Outside investigators may be used to investigate the extent of an injury or possible fraud situation. If a fraud or a serious exaggeration of the injury is suspected, the adjuster should be contacted immediately. (Surveillance is suggested in these situations.) (Surveillance is suggested in these situations.) Cleveland Index Bureau - Identifies recurring claim problems with the same individual. Cleveland Index Bureau - Identifies recurring claim problems with the same individual. Elements of Risk Management Course Print

35 Insured Plan TPA Plan Self-Administered Plan Cost Normally included in insurance pricing (Bundled Program). Pricing Varies Different Types Cost per claim Cost per hour/ based on adjuster level Flat Fee - Quarterly, monthly, etc. Adjustable Flat Fee (deposit charge with audits to adjust actual costs) Indirect Additional Costs Staffing o Manager o Supervisor o Adjuster o Administrative o Support RMIS (Risk Management Information System) Claim Storage (current and historical) Training Costs Audit Costs Audit costs Special report costs. Elements of Risk Management Course Print

36 Cost/ Benefit Traditional method of handling claims. Benefits Loss data is readily accessible to insurance carrier; Ease in handling Insurance carrier satisfaction Costs Delay in claim reporting Lack of control over: o Attorney selection o Litigation strategy o Customer contacts o Customer satisfaction and audit results Minimal loss run access Lack of claim detail in computer system Insured has more control over: Attorney selection Litigation strategy Customer contacts Claim audit results More control by insured less control for the insurer Easier to sell to an insurance carrier than selfadministration Easier to change insurance carriers on renewal Cost may be high TPA may require a hold harmless agreement Risk Management Department is not Involved with the day- to-day claim process Inaccurate claim data Delayed reporting. The most control by the insured, the least control by the insurer. Risk of failure on any one claim or entire program. Benefits Ability to accurately track claim data; Access to reports instantaneously; Control and knowledge of all large claims; Ability to fully investigate all claims; Complete control over: o Attorney selection o Litigation strategy o Customer contacts o Claim audit results Costs Staff must be maintained All personnel issues borne by Risk Management (including firing) No scapegoat Elements of Risk Management Course Print

37 Insured Plan TPA Plan Self-Administered Plan What to Look For Watch For Large reserve increases just before renewal Selecting a TPA Get proposals from several companies Watch For Lack of timely customer contact Lack of timely customer/ claimant contact Overwhelming number of customer complaints Old (open) claims in which you are not receiving regular information Interview management Interview claim representatives View loss reports and back-up computer system Watch For Overwhelming number of customer complaints Labor (union) Relations and Human Resources issues creeping into the claims process Non-compliance with the claim procedure Increasing reserves to enable bills to be paid Claims identified with large potential, but that have small reserves Lack of timely customer/ claimant contact Overwhelming number of customer complaints Old (open) claims in which you are not receiving regular information Requirements Upper management support Technical support for RMIS Adequate supervision of claim staff Experienced manager Appropriate training program Non-compliance with the claim procedure Elements of Risk Management Course Print

38 Insured Plan TPA Plan Self-Administered Plan Litigation Management 5 Insurance carriers have significant interest in reducing attorney fees. Many insurers have inhouse claim counsel who are employees and are paid salaries by the carrier. Outside counsel is used for more difficult or nonmainstream type cases. Adjuster selects legal counsel and legal counsel reports to both the insurer and the insured. (Note: Insured is ALWAYS the attorney s client, not the insurer) Most insurance carriers will settle a case if there is potential exposure, rather than incurring the cost of litigation and risk of loss. The TPA will allow a case to litigate or settle the case, dependent upon the adjuster s background and the client s settlement philosophy. Outside counsel is selected based upon the attorney s knowledge and experience with the type of claim and the attorney s charges. Hourly rate Negotiate discounted rate Negotiated hourly limit Flat fee per claim Flat fee for all claims (similar to in-house counsel) (a/k/a Yearly Maximum) Contingent fee basis Generally, more willing to allow cases to litigate. (Interest in preserving or promoting a tough reputation.) Selection criteria are similar to that of a TPA. 5 All litigation requires that the adjuster manages the attorney, and a sort of a partnership must evolve between them. Elements of Risk Management Course Print

39 Insured Plan TPA Plan Self-Administered Plan Alternative Dispute Resolution Arbitration: A process of dispute resolution in which a neutral third party (arbitrator) renders a decision after a hearing at which both parties have an opportunity to be heard. Where arbitration is voluntary, the disputing parties select the arbitrator who has the power to render a binding decision. Mediation: Private, informal dispute resolution process in which a neutral third person, the mediator, helps disputing parties to reach an agreement. The mediator has no power to impose a decision on the parties. Mini-trial: A private, voluntary, informal form of dispute resolution in which attorneys for each side make a brief presentation of his or her best case before officials for each side who have authority to settle. Usually, a neutral, third party advisor (often-another attorney) is present at the hearing. Following the attorneys presentations, the principals attempt to settle the dispute. The neutral third party may be asked to render a non-binding advisory opinion regarding the outcome of the dispute if it were litigated. Lesson 5 Topic E Claims Management p6 (ELR) Claims Management Activities Gathering data incident/accident reports, contractual obligations, verification of loss/claim amounts, other aspects of the investigation. Enforcing contractual obligations insurance policy, hold harmless, additional insured. Mitigating damages after a loss event actions taken to minimize severity. Promoting equitable compromise of claims settling for the lowest, reasonable dollar amount. Identifying and combating fraud internal, external, and systemic fraud. Forecasting losses setting accurate serves, performing trend analysis (inflation and loss development). Advising and consulting with insured and internal departments legal, underwriting, operations, loss control, administering sales, product development. Please refer to Lesson 5 Topic E p7 (ELR) to complete the Knowledge Check at this time. Elements of Risk Management Course Print

40 Lesson 5 Topic F Crisis Management p1 (ELR) Lesson 5 Topic F - Crisis Management Learning Objective: Define and discuss the characteristics of a crisis. Crisis Management, just as with Claims Management, provides for post-loss activities that can reduce the severity of a loss after it occurs. Definition of Crisis The standard dictionary definition of crisis is a turning point, as in a sequence of events, for better or worse. The definition of crisis used in the Certified Risk Managers program is: any critical incident that involves death, serious injury, or threat to people; damage to environment, animals, property and/or data; disruption of operations; threat to the ability to carry out organizational mission and goals; and/or, threat to the financial welfare and image of the organization. Lesson 5 Topic F Crisis Management p2 (ELR) Learning Objective: Define and discuss the characteristics of a crisis. Characteristics of a Crisis Crises can have widely varying characteristics and impacts: Potential to significantly damage reputation or can be entirely self-contained One or more asset classes affected, e.g. people, property Loss or interruption of operations, e.g. for how long? severity? Damaging to consumer, shareholder, employee confidence or in some cases, can strengthen confidence May involve multiple audiences and stakeholders or it may affect only a few May be of interest to the media or it may be noted and forgotten almost as soon as it becomes known May be unique and entirely unpredictable or it may be largely anticipated Disruption in operations, shutdown or possible bankruptcy Serious personal injury to customers, employees or other persons Creates potentially damaging media affecting public opinion Elements of Risk Management Course Print

41 Lesson 5 Topic F Crisis Management p3 (ELR) Learning Objective: Define and discuss the characteristics of a crisis. Sources of Crisis We quickly think of earthquakes, hurricanes and floods as sources of crises. Let's examine five additional areas or situations that can result in a crisis. Industrial or technological disasters can run the gamut from a loose connection to a failed system. Biological or pandemic disasters May be natural in origin or intentional. Examples include Severe Acute Respiratory Syndrome (SARS) or Influenza A (H1N1). Transportation breakdowns Airplanes grounded due to threat of national security or train derailment. Environmental or natural hazards Can be challenging or impossible to control, can be widespread and far-reaching. Examples include oil spills, flooding, and earthquakes. Infrastructure breakdowns Disruption of transportation, telecommunications, electricity, oil & gas, emergency response teams, government, banking and insurance, potable and waste water, etc. Human hazards Can be accidental, organized or deliberate and are difficult to avoid. Arson, computer hacking, identity theft are examples. Lesson 5 Topic F Crisis Management p4 (ELR) Learning Objective: Define and discuss the characteristics of a crisis. Pre and Post Loss Phases of a Crisis A crisis has four phases, two of which occur pre-loss and two occur post-loss. 1. Threat Likely probability of occurrence but the event has not yet occurred. The weather forecast calls for torrential rainstorms with flooding likely. 2. Warning The occurrence is imminent. The rivers are rising and they are predicted to crest tonight. Elements of Risk Management Course Print

42 3. Event Something that occurs at a time (or time period) and place with potentially adverse effects. The flood occurs. 4. Impact The effects of the event. Property severely damaged by flood and local officials prohibit access. Lesson 5 Topic F Crisis Management p5 (ELR) Learning Objective: Define and discuss the principles of effective crisis management. Crisis Management Definition: the act or process of managing a crisis to prevent the occurrence of a catastrophic loss, if possible, and reduce the impact catastrophic losses to the organization. To be effective, a crisis management program must adhere to a number of principles. Comprehensive considering and taking into account all hazards, all phases, all stakeholders and all impacts relevant to disasters. Progressive anticipating future disasters and formulating preventive and preparatory measures to build disaster-resistant and disaster-resilient plans and operations. Risk-driven using sound risk management principles (hazard identification, risk analysis, and impact analysis) to assign priorities and resources. Integrated ensuring a unity of effort among all levels of the enterprise and all elements of customers, suppliers, government and a community. Collaborative creating and sustaining broad and sincere relationships among individuals and organizations to encourage trust, advocate a team atmosphere, build consensus, and facilitate communication. Coordinated synchronizing the activities of all relevant stakeholders to achieve a common purpose. Flexible using creative and innovative approaches in solving disaster challenges. Professional valuing a science and knowledge-based approach based on education, training, experience, ethical practice, and continuous improvement. Elements of Risk Management Course Print

43 Lesson 5 Topic F Crisis Management p6 (ELR) Learning Objective: Define and discuss the principles of effective crisis management. Crisis Management Process: Four Essential Steps The actual crisis management process consists of four essential steps: 1. Planning 2. Preparation 3. Response 4. Recovery. Lesson 5 Topic F Crisis Management p7 (ELR) Learning Objective: Define and discuss the principles of effective crisis management. Crisis Management Process Step 1: Disaster Planning 1. Building the Planning Team The team should consist of the program leader, individuals from multiple levels within the organization with expertise in operations, authority, special knowledge or other skills and leadership skills. Team members should understand their authority and limits. Establish a reasonable time schedule and budget to define training requirements and exercises to report progress to upper management. 2. Conduct Vulnerability and/or Disaster Analysis Brainstorm for analysis, considering all possible disasters and then rank them based upon probability and severity of impact. Include the source, timing, impact, probability of occurrence and controls/mitigation both pre-loss and post-loss. 3. Identify Types and Effects of Disaster or Crises What crisis has the organization previously experienced? Is the organization subject to geographical or industry vulnerability? What are the historical, geographical, technological, human error and facility or plant design factors? 4. Identify Critical Products, Services and Operations Elements of Risk Management Course Print