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Managing your risk by Michael Kelly

NCACC Risk Management Director Michael Kelly writes a regular column on risk management for CountyLines. With more than 41 years of risk management/ insurance experience, he holds the CPCU - Chartered Property & Casualty Underwriter, ARM-P - Associate in Risk Management for Public Entities, CRM - Certified Risk Manager, ARe - Associate in Reinsurance and CIC - Certified Insurance Counselor Professional Designations. He can be reached at michael.kelly@ncacc.org or (919) 719-1124.  For archives of this column click here.

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Nov 30

Looking under the hood - What worked this year?

Posted on November 30, 2012 at 9:18 AM by Chris Baucom

This month’s Managing Your Risk article marks the beginning of the fourth year for this column, and writing it each month has proven to represent a great deal of effort – and reward. In taking some time to reflect, it reminds me that the fall month of November is also an excellent time to reflect on your efforts for Risk Management and how the past year has gone for your entity. While most counties and their entities are quite busy during the first six months of a year, the last quarter is typically paced a bit slower, making it an optimal time for your annual review.

As discussed in prior writings, the last step in the risk management process is reviewing what worked and what did not work in the way of preventing or reducing the severity of losses. It is a time to revisit previously defined goals as well as your core mission statement. Your standard operating procedures manual should be examined for any needed changes – major or minor – and revised as such.

It is the time to prepare the annual stewardship report for management and update its numbers in order to calculate the current baseline cost of your entity’s risk. Loss control programs should be reevaluated, and any special projects or initiatives should be considered and included in your report, along with the updated summary of open claims since the last stewardship report.

Your benchmarking spreadsheets should be brought up to current values, as of July 1, 2012, in order to track the annual progress or regressive results of your efforts. Consideration should be again given to what exactly you are measuring with an eye towards refinement or simplification – i.e. do you need to continue to track all the ratios you initially set up? Are there any new ratios that might help underscore areas needing your attention?

With the economy still lagging, do not overlook the HR aspects of your risk management review. Difficulty in finding new jobs has forced previously employed individuals into looking for any and all ways to survive – including the possibility of “creative” litigation. So if you have been putting off tweaking your HR Policy Manual, now is an excellent time to reexamine it for today’s employment law concurrence.

Finally, stop and consider any changes in your entity’s operations since last November. Examples that I have seen since last year are assumption for the management of a regional airport, the purchase of an operational hospital, construction and deployment of a new and innovatively designed wastewater treatment facility, and/or expansions of existing operations, such as the development of a whitewater rafting exposure thanks to your tourism department. Remember, the risk management process is in fact circular in design – one must be constantly coming back to the initial process of identifying risk. New operations would certainly qualify as new risks.

This repetitive process with an annual thorough review of “what worked” and perhaps even more importantly “what didn’t work” is what risk management is all about. Nothing can be done in some cases to avert or avoid the occasional catastrophic loss – these are to be expected. Through this expectation steps can be taken up front to mitigate the results – like purchasing insurance for the catastrophic risk of a hurricane. However it is also this annual “fall review “ that will help eliminate those unexpected losses that will hurt the most, as their potential was never identified until it was too late.