Show Me the Money! Risk Management for Finance Professionals

Transcription

1 Show Me the Money! Risk Management for Finance Professionals By Robin Aronson, JD, CPCU, ARM, AIC Washington Cities Insurance Authority Risk Services Manager

2 What is WCIA? Formed in 1981 Risk Pool Interlocal Agency; not an Insurance co. Run by the Members for the Members Over 160 Members

3 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

4 What is Risk? Any uncertainty about a future event that threatens your organization s ability to accomplish its mission

5 What is Risk Management? The process of making and carrying out decisions that will minimize the adverse affects of accidental loss upon the organization

6 Why Practice Risk Management? Helps Achieve Organizational Goals and Values Preservation of Assets People Property Revenue Reputation

7 Things Will Go Wrong!

8 Sometimes Quite Wrong!

9 And sometimes VERY Wrong!

10 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.

11 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?

12 Consider: Risk Management Strategy for your Organization 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?

13 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.

14 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

15 Loss to an Organization: Types of Losses Loss to your property Loss to employees Liability loss (bodily injury or property damage to third parties)

16 Loss Basics-Liability Loss Negligence Incidents Claims Lawsuits

17 Loss Basics - Negligence Duty Owed Breach of Duty Proximate Cause Damages as a Direct Result

18 Loss Basics - Incidents An event that may result in a person alleging that the organization, or an employee was negligent in some way.

19 Loss Basics - Claims When a person asks for money based on the City s or a City employee s alleged negligence.

20 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

21 Loss Basics - Lawsuits If a claim is not resolved a lawsuit may be initiated, asking a judge or jury to resolve the dispute

22 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

23 Loss Basics Litigation Hurdles Litigious Society Deep Pockets Joint & Several Liability Liability Lotto Erosion of Immunities Perceptions of government

24 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

25 Comparative Negligence/Fault Weighing of fault amongst all parties Not a complete bar to recovery by plaintiff

26 RECREATIONAL IMMUNITY STATUTE RCW 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

27 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

28 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

29 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

30 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

31 I. Identification & Analysis What is the range of risks to which your organization is exposed?

32 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

33 A Few Specific Risks to Consider Buildings/Facility Use Fleet/vehicles Roadway Maintenance Parks/Playgrounds General operations Mowing, Trees Trails/Athletic Fields Aquatics Volunteers

34 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)

35 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

36 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!

37 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!

38 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 )

39 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

40 III. Selection Choose the Risk Control and Risk Financing technique that best addresses the issue

41 What is Your Appetite for Risk?

42 A Few More Items to Consider When Selecting the Risk Control Method Expense Politics Comfort level Expediency

43 Risk Avoidance

44 Risk Retention: Risk Management Matrix Category I: Category II: Low Frequency/Low Severity (Ignore/Retain) Category III: Low Frequency/High Severity (Transfer) Category IV: High Frequency/Low Severity (Retain) High Frequency/High Severity (Avoid)

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46 Risk Transfer

47 A Risk Transfer Opportunity

48 Another Risk Transfer Opportunity

49 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

50 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

51 Contracts: Indemnification Clauses in Contracts 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 52

52 Contracts: Indemnification & Hold Harmless clauses Defend Indemnify Hold harmless 53

53 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.

54 Insurance Risk Transfer: Insurance Basics 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

55 Certificate of Liability Insurance

56 Certificate of Insurance

57 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

58 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

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

60 Certificate of Insurance

61 Documentation of Coverage and Endorsements 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! 62

62 IV. Implementation Put in to practice the control technique you have selected

63 V. Monitoring Is the technique being implemented? Is the technique making a difference?

64 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

65 Remember Risk Management is an A.R.T. Risk Avoidance - Eliminate Risk Risk Retention: Loss Prevention - Frequency Loss Reduction - Severity Risk Transfer

66 Failure is not an option!

67 A successful Risk Management program has its rewards!

68 Thank You QUESTIONS?

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