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Risk Management Strategies


April 1, 2019 by Roger Neal
Category: Management

Risk Management Strategies

When considering risk management, local governments generally focus on the type of risks that may affect them in a negative way. They also consider the relative likelihood and severity of those risks. The “probability and severity matrix” introduced in my blog, An Introduction to Risk Management, can be useful for this purpose.

The purpose of this current blog is to examine three strategies you can use to manage risks: (1) risk prevention/control, (2) risk reduction, and (3) risk avoidance/ transfer. Each strategy can be used independently or in combination.

Risk Prevention

The most cost-effective way of managing risks is by avoiding accidents or losses in the first place. Studies have shown that for every dollar paid out in an insurance claim, up to four dollars are considered as uninsurable. Report writing, overtime to backfill, travel to repair shops, depositions, and providing documents are all examples of uninsured losses that cost you time and money.

To help prevent workplace injuries, one valuable prevention tool is the Job Hazard Analysis (JHA). According to the Washington Department of Labor & Industries (L&I), JHAs are a practical and effective tool for identifying hazards and possible solutions to reduce or eliminate hazards. JHAs focus on hazard identification at the job task level.

When conducting a JHA, always consider the full range of safety and health hazards, from machine safety, to high noise levels, to chemical and biological exposures. The information from your JHAs can also fulfill your hazard assessment requirement for personal protective equipment. For more information on JHAs, see L&I’s Job Hazard Analysis page.

To help prevent property or liability claims, you can use any one or a combination of engineering, education, or enforcement-related solutions. The table below offers examples of each.

Type of Solution Example
Engineering Automatic fire sprinklers installed in high-valued or critical buildings
Education Staff training on anti-harassment policies
Enforcement All agency communications to be conducted using internal (agency) phones/computers

Risk Reduction

To function every day, all public entities engage in activities that involve a certain degree of risk. Here are five areas each entity should focus upon to reduce risks to the organization: People, Policies, Training, Supervision, and Discipline.

People

The hiring process is a classic high-risk, low-frequency activity. Hiring and maintaining good people is critical. Carefully check backgrounds and previous work history for all applicants. Understand and use the probationary process during hiring. A typical Employment Practices Liability claim can cost hundreds of thousands of dollars.

Policies

Developing good and legally sound policies is vital in reducing risks. Most entities have far too many policies and not enough guidelines, procedures, or checklists in place. In a future blog, I’ll discuss the difference between “policy” and “guidelines,” or “procedures.”

Training

Every day is a training day, and it can be as simple as a 2-minute tailgate talk focusing on safety (Here, those JHA’s are a great resource).

Use staff meetings to review your high-risk, low-frequency policies. Having your experienced staff mentor newer staff on everyday activities is becoming ever more important as our experienced staff and department heads retire. Share those school-of-hard-knocks lessons with each other. Training can be free and does not require sending folks to an out-of-state conference. Document all training, even informal sessions.

For more about capturing the knowledge of retiring staff, see MRSC’s blog on Retaining Institutional Knowledge in the Wake of the Silver Tsunami.

Supervision

As a former boss said, “All good supervisors were good employees. Not all good employees are good supervisors.” How true. It takes different skills to be a good supervisor.

Most personnel issues are a result of an individual with a title not being an effective supervisor. Simply promoting the most senior individual and never providing education on how to be an effective supervisor is a recipe for disaster. Provide training on how to conduct a performance evaluation, how to coach a struggling employee, and how to write a good and grammatically correct report. All are key supervisory skills.

Supervisors also need to get out of the office. “Supervision by walking around” to see how the staff are working is an effective and time-tested strategy. 

Discipline

Discipline that is unfair, unequally applied, or just ignored is a significant risk. Employment practices liability is a major risk to every public entity. Work with your risk pool or insurance provider to avoid risks that might give rise to a hostile work environment, discrimination, retaliation, or wrongful termination claim. Develop systems to ensure that discipline is rapid, fair, and uniform across your organization.

Risk Avoidance or Transfer

It is common for local governments to adopt policies that are designed to avoid certain risks. Prohibiting the drinking of alcohol in public parks is one example of a risk-avoidance strategy.

Public entities often transfer risk by using contracts and permits. Whenever appropriate, your entity can and should transfer risk to others. As an example, when a local service club wants to have a parade, local governments typically require the club to have liability insurance that meets certain minimum levels. Prior to being signed, every written contract should have the indemnity and insurance clauses reviewed by both your agency’s legal counsel and your risk pool or insurance company. Failure to do so may result in you accepting more risk than you realized. You are better using your contract language instead of that of another party, which is written to protect them and not your entity.

In my next blog, we will examine the importance of documentation and the use of checklists in reducing risks in your entity.

Question? Comments

If you have questions about this topic or other local government issues, please use our Ask MRSC form or call us at (206) 625-1300 or (800) 933-6772. If you have questions or comments about this blog post, please email the MRSC Insight Editors.


MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.

About Roger Neal

Roger Neal is a Town of Steilacoom Councilmember and is retired from AWC, where he served as Program Manager for the Risk Management Service Agency, providing risk management solutions for over 100 Washington municipalities. He is also the former President of the Washington PRIMA Chapter, the public sector risk management professional society.

Roger has over 25 years of experience providing risk management solutions for both public sector agencies and the private sector, and he is regular speaker on the topic of Public Sector Risk Management.

Roger is writing as a guest author. The views expressed in guest columns represent the opinions of the author and do not necessarily reflect those of MRSC.

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