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RISK MANAGEMENT BASICS Presented by John Chino, ARM PE, CSRM Arthur J. Gallagher Risk Management Services, Inc.

RISK MANAGEMENT BASICS Presented by John Chino, ARM PE, CSRM Arthur J. Gallagher Risk Management Services, Inc. . OBJECTIVES. Attendees will understand: Components of the Risk Management Process The direct & indirect cost of risk The benefits of Risk Management Current loss trends

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RISK MANAGEMENT BASICS Presented by John Chino, ARM PE, CSRM Arthur J. Gallagher Risk Management Services, Inc.

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  1. RISK MANAGEMENT BASICSPresented by John Chino, ARM PE, CSRMArthur J. Gallagher Risk Management Services, Inc.

  2. OBJECTIVES Attendees will understand: • Components of the Risk Management Process • The direct & indirect cost of risk • The benefits of Risk Management • Current loss trends • Risk avoidance techniques

  3. What is Risk Management? • Manage risks Reasonable application of effective management skills to control internal & external risks • Reducing organizational risks to an acceptable level • Good management Identify unsatisfactory conditions/practices

  4. What is Risk Management’s Function? “Locate, assess, and establish effective preventative and corrective measures for elements detrimental to organizational efficiency and effectiveness”

  5. WHY WORRY ABOUT RISKS? • Direct cost (insured) • Indirect cost (uninsured) • $1 to $3 - $53 Ratio • Operational budget $1 $3-$53

  6. IMPACT Example • Direct Cost $12.4 million annually • Indirect Cost $3 X $12.4M = $37.2 million annually $5 X $12.4M = $62.1 million annually $10 X $12.4M = $124 million annually

  7. INDIRECT COSTS • Employee lost time • Employee/crew wages • Overtime/comp time • Cost of hiring replacement • Cost of training replacement • Supervisory time • Investigation time • Legal expenses • Building/equipment damage • Replacement of materials/supplies • Decreased output • Over 125 miscellaneous costs

  8. RISK MANAGEMENT BENEFITS • More effective and efficient services • Better quality of services • Increased production (more services per dollar) • Decreased operational costs • Reduced cost of risk (direct & indirect) • Reduced waste of resources • Community satisfaction ( happier taxpayer) • Improved employee morale (motivation)

  9. Public EntityMissions • Efficient, Accessible and Effective Government • A Great place to live, work and play • Provide solution oriented services to the community through the application of professional skills, adopted plans, and standards which facilitate the growth of the local economy and enhance the quality of life and preserve the natural environment for current and future generations.

  10. RISK MANAGEMENT PROCESS Five step process 1) Identify risk exposures 2) Analyze risk exposures 3) Select appropriate risk management techniques - risk funding - risk control (avoidance) 4) Implement techniques/measures 5) Monitor results and revise as necessary

  11. RISK IDENTIFICATION 1st Step • Identify all areas of exposure • Physical property • Loss of income/services • Human resources • Legal liability

  12. EXERCISE Risk Identification

  13. Sample Exposure

  14. RISK ANALYSIS 2nd Step • What can go wrong? • Identify everything that can go wrong • How severe is it likely to be? • How frequently is it likely to occur? • Prioritize (most serious first)

  15. RISK ANALYSIS 2nd step cont. • Property • Automobiles • Buildings • Equipment • Property damage • Crime • Weather • Fire • Other

  16. RISK ANALYSIS 2nd step cont. • Loss of income/services • Operations that produce income • Taxes • Fees • Other • Loss of services (work disruption) • Accounting processes/IT • Embezzlement

  17. RISK ANALYSIS 2nd step cont. • Human Resources • How can staff get hurt/killed • Office • Field • On travel

  18. RISK ANALYSIS 2nd step cont. • Legal Liability • Auto, General, Law Enforcement, Civil Rights, • Land Use, etc. • Protect citizens property • Protect citizens operations • What tasks/activities will get you sued

  19. SAMPLE RISK RANKING CRITERIA

  20. Risk Avoidance

  21. AVOIDANCE 3rd Step • Terminate • Transfer • Hold Harmless • Indemnification Clause • Defense Clause • Insurance Certificates • Treat • Tolerate

  22. Identify all sources of potential loss RE-ASSESS Severity, Probability, & Frequency Evaluate each risk NO TERMINATE NO NO TRANSFER YES Take action to eliminate risk NO TREAT YES YES Take action to treat risk Set standards Policy Training Equipment Services TOLERATE Take action to transfer risk YES Accept risk Monitor and Review Results

  23. IMPLEMENTATION 4th Step • Build a Team/Create a RM Culture • Policies & procedures • Define responsibilities • Communicate to employees • Train employees • Implement preventative measures

  24. MONITOR 5th Step • Establish and evaluate performance measures • Commend and correct individually and organizationally

  25. CONCLUSION Q & A

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