Managing Your Risk
Improvements in risk management rely upon regular monitoring

By Michael Kelly
Property and Casualty Program Specialist

For the past four months we have been examining the concepts and basic tenants of the risk management process. This month's column concludes with step five, which involves the procedures of risk administration. This is the phase where the various risk management plan concepts are implemented and then monitored for their effectiveness.

An effective risk manager has to provide a clear direction and defined goals. He or she needs to be a good communicator – a skill that includes listening as well as speaking. The possession of an ability to promote teamwork and cooperation, as well as effectively managing conflicts or disagreements, is also extremely important. With these tools in place, it becomes possible to set up and administer a risk management game plan.

First, a mission statement that summarizes in concise terms the goals and fundamental desired direction should be developed by the county's risk manager after consulting with managerial staff and department heads. To facilitate acceptance, staff should be able to provide input, and the statement should be simple in nature. It is the "strainer" through which all risk management decisions are made. If the question at hand does not pass through the strainer, aligning with the overall spirit of the statement, then it does not get implemented or gain any purchase.

Next, from this basic operational premise, perhaps in concert with the county's insurance carrier's risk control staff, a risk management standard operating procedure manual should be established. It should initially reaffirm your county management's support for the risk management program with a brief statement to all county employees. Also it should define the scope, responsibility and authority of your risk manager, and should establish levels of performance and cooperation expected from staff. This manual should provide an avenue for county staff to familiarize themselves with procedures for dealing with exposures, and should serve as a reference for establishing a "how to" guide for such things as reporting incidents and accidents, expected job safety requirements, and reporting procedures to comply with insurance policy language terms.

Soon after procedures and protocols are established and have been implemented, the risk manager should decide what needs to be measured and reported back to county management in the form of a stewardship report. In such a report, a baseline calculation of your cost of risk should be developed so that benchmarks against yourself as well as other similarly comprised counties can be continually recorded and reported. Progress of loss control programs and any projects or initiatives that have involved the risk manager should be included, along with a summation of open claims and any new occurrences likely to develop into a sizeable loss since the last report.

This continual process of seeking improvement through measurement and reporting of results is paramount to the success of your risk management department. The process of measuring and then interpreting data is not always an easy task, however, but due to the amount of information available via the Internet, it has become easier.

Listservs through state and national associations such as the Public Risk Management Association (PRIMA) and the Association of Governmental Risk Pools (AGRiP) are excellent sources for help. Often risk managers will post open-ended questions requesting such things as suggested best practices for addressing a given risk or exposure situation. Through this ability to draw upon advice of literally hundreds of other risk managers throughout the world on a relatively quick basis, it becomes possible to gain a multi-angled perspective for most any risk management issue.

Further, risk managers are a group of individuals normally most willing to help each other. They tend to be an inner-cooperative, highly communicative and close-knit group. In addition, given enough financial support through the purchase and utilization of Risk Management Information System (RMIS) software, the process of recording, tracking and reporting to county management becomes a much easier duty to accomplish.

Remember, the risk management process is circular in design. It begins with risk identification, and proceeds to risk analysis, risk control and risk financing, and finally ends with risk administration. It then reverts back again to risk identification and proceeds repetitively through the five-step process, with the risk manager tweaking various points in the circle with each pass, in an effort to lessen the cost of risk.

Finally, always bear in mind that the practice of risk management is just that – it is not an exact science; there is always the possibility of a catastrophic loss that represents an anomaly. Predicting future losses with absolute accuracy is impossible, but if you establish conservative loss assumption parameters, have buy-in from management and departments, and are willing to take steps to rectify problems that may arise, it is normally possible to control and keep your cost of risk at the lowest plausible level.

NCACC Property and Casualty Program Specialist Michael Kelly writes a regular column on risk management for CountyLines. With more than 32 years of risk management/insurance experience, he holds the Associate in Risk Management, Associate in Risk Management for Public Entities, Certified Risk Managers and Certified Insurance Counselors professional designations. Archived versions of the column can be found online at www.ncacc.org/managingyourrisk.html.