Risk Management Presentation Meeting Topics

1. Risk Management PresentationMay 12, 2011 Pam Lombardo, Director EH&S

2. Risk Management Presentation Meeting Topics • Section 1. Risk & the Risk Management Process • Section 2. UC Insurance Programs & Policies • Section 3. Risk & Contracts • Section 4. Other Risk Transfer Techniques • Section 5. Enterprise Risk Management

3. Section 1 Risk & the Risk Management Process • Definitions • The Risk Management Process • Risk Analysis • Risk Financing • Elimination, Loss Control, Risk Retention • Risk Transfer • Risk Management Flow Chart

4. Section 1. Risk & the Risk Management ProcessDefinitions • Risk: • the potential that a chosen action or activity (including the choice of inaction) will lead to a loss; the possibility of loss or exposure to loss. Almost any human endeavor creates some risk. • Risk Management: • a process that involves the identification, analysis and evaluation of risk and the selection of the best method of treating the risk. The objective of the risk management process is the protection of an organization’s financial, physical, and human assets from loss or destruction.

5. Section 1. Risk & the Risk Management ProcessThe Risk Management Process • Define Objectives: What do you want to do and how will you do it. • Risk Identification: Identifyall potential loss exposures – an inventory of all possible human, physical, financial, and natural losses. • Apply Risk Management Techniques: Analysis, financing, elimination, reduction, retention, and transfer.

6. Section 1. Risk & the Risk Management ProcessRisk Analysis • Risk Analysis: • How frequently will losses occur? • How severe will they be? • What are the total loss possibilities for a single risk occurrence?

7. Section 1. Risk & the Risk Management ProcessElimination, Loss Control, Retention • Elimination: • The best solution, is to eliminate risk if possible. • Loss Control: • take steps to avoid risk as much as possible, and implement policies and procedures that will reduce and prevent losses. • Risk Retention: • After you made your best effort to eliminate and avoid risks, and taken steps that will reduce and prevent losses, you must analyze the remaining loss potential to whether it is small enough to retain or it is necessary to transfer.

8. Section 1. Risk & Risk Management ProcessRisk Transfer • Risk Transfer: • Insurance: • The University purchases insurance to cover the exposures that are caused by its operations and that cannot be retained, eliminated, or transferred to a vendor. Insurance is a risk transfer technique. • Indemnification or Hold Harmless Provision: • Requires a supplier, tenant, or contractor to assumes responsibility for liabilities caused by its own negligence; vendor provides evidence of insurance to demonstrate it has financial wherewithal to meet the indemnification obligation. • Waiver of Liability: • A document that requires a participant in an activity to hold the University harmless if injured in the activity.

9. Manage Risks Monitor Controls Define Objectives Risk Identification What are you trying to do and how will you do it? What are you doing to manage the risks – financing, elimination, loss control, retention, and/or risk transfer? What are potential human, physical, financial & natural loss exposures? Are you monitoring key risk indicators and tracking efficacy of risk management techniques? Section 1. Risk & the Risk Management ProcessRisk Management Flow Chart

10. Section 2 UC Insurance Programs & Policies • UC Self Insurance Programs • UC Excess Insurance Policies • Commercial Insurance Policies

11. Section 2. UC Insurance Programs & PoliciesSelf-Insurance Programs • The University of California has been self-insured since 1986. Self-insurance is a form of retained risk. UC decided that the cost of buying insurance was so high that it made sense to establish the following in-house self-financed insurance programs: • Workers Compensation • Auto Liability • General Liability • Professional Liability • Employment Practices Liability • Property Insurance

12. Section 2. UC Insurance Programs & Policies UC’s Excess Commercial Policies The University’s Self-Insurance programs provide coverage to certain limits, the self-insured retention (SIR). Above the self-insurance programs, UC purchases excess commercial insurance policies. Excess insurance policies are a means of transferring risk.

13. Section 2. UC Insurance Programs & PoliciesUC Commercial Insurance Policies • UC does not self-insure all its exposures. It transfers the cost of risk of some by purchasing commercial policies that provide “first dollar” coverage: • Aviation • Boiler & Machinery • Builder’s Risk • Business Travel • ICA & Club Sports • Fine Arts & Collections • Foreign General Liability • Ocean Marine • Off-Campus Student Travel • Marine Open Cargo • Special Events

14. Section 3Risk & Contracts • What is a Contract? • Types of Contracts • Indemnification • UC’s Standard Mutual Indemnification Provision • Vendor Insurance • UC’s Vendor Insurance Matrix • Typical Vendor Insurance Requirements • The Certificate of Insurance • Waiver of UC Insurance Requirements

15. Section 3. Risk and Contracts What is a Contract? • Contract: A contract is a legally enforceable agreement between two (or more) parties to perform, or refrain from performing, some specified act(s) in exchange for lawful consideration. • Contract Elements: • Offer • Acceptance • Consideration • Terms (unambiguous) • Signature of individuals authorized to enter into contract

16. Section 3. Risk and ContractsTypes of Contracts • Facility Use Permits • Professional Services Agreement • Grants • Research Access Permits • Performance Agreements • Academic, Instructional agreements • Leases, Rentals • Purchase Orders

17. Section 3. Risk and ContractsIndemnification • What is Indemnification? • A Contract provision that is a form of risk transfer, as it specifies who shall be financially responsible in the event of a loss. • Regents' Standing Order 100.4(dd)(9): • Prohibits campuses from entering into agreements that contain indemnification provisions by which UC assumes liability for conduct of persons other than University officers, agents, employees, students, invitees, and guests.

18. Section 3. Risk and ContractsVendor Insurance • Indemnification • is a Promise to Perform • Vendor Insurance • is the Financial Wherewithal to Perform

19. Section 3. Risk and ContractsUC’s Vendor Insurance Matrixhttp://www.ucop.edu/ucophome/policies/bfb/bus63-VendorMatrix.pdf

20. Section 3. Risk and ContractsTypical Vendor Insurance Req’ts. • GENERAL LIABILITY (contractual liability included) with minimum limits:  a) Each Occurrence $1,000,000 b) Products/Completed Operations Aggregate $2,000,000 c) Personal and Advertising Injury $1,000,000 d) General Aggregate $2,000,000 • BUSINESS AUTOMOBILE LIABILITY $ 1,000,000 CSL • WORKERS COMPENSATION As req’d by State law • ADDITIONAL INSURED: both the General Liability and Automobile Liability policies shall be endorsed to include The Regents of the University of California as additional insured.

21. Section 3. Risk and ContractsThe Certificate of Insurance

22. Section 3. Risk and ContractsWaiver of UC Insurance Requirements Can UC Insurance Requirements Be Waived? • It depends – can be waived when exposure to liability is determined to be negligible. What Is Critical to Determining If Exposures Are Negligible? • We need to know whatthe final product is and how the vendor will accomplish the contract scope of work. The how and what is what creates the exposures. A Waiver Negates Risk Transfer. • When a department requests a waiver of University insurance requirements it creates increased liability for the University. Waivers are granted on the condition that the department requesting the waiver assumes financial responsibility for any losses that arise out of the contract scope of work.

23. Section 4Miscellaneous Risk • UC Waivers of Liability • Campus Connexions • Accident/Travel Insurance

24. Section 4. Miscellaneous RisksUC Waivers of Liability • protect the University from legal liability for injuries that may occur to individuals who participate in voluntary or required activities. • a participant in an activity agrees to hold the University harmless if injured in the activity. • commonly required for activities that create physical risk to the participants, e.g. sports activities, off-campus travel, boat charters, transportation, etc.

25. Section 4. Miscellaneous Risks CampusConnexions • Insurance for Affiliated Organizations: • Registered Student Organizations Event Liability Policy • Foundations, Alumni, and Support Groups Policies • Tenant Users Liability Insurance Protection (TULIP) • Recognized Club Sports Campsand Clinics Event Liability Policy • Renters Insurance • http://ucsb.marshcampusconnexions.com

26. Section 4. Miscellaneous Risks Travel Accident Insurance • The University’s Travel Accident Insurance Program: a travel insurance program for employees and students who are traveling out-of-state on University business or participating in University sponsored activities. The benefits are provided at no cost and include: • Out-of-Country Medical Expenses • Emergency Medical Evacuation • Repatriation of Remains • Security Extraction • Travel Assistance • Personal Property and Lost Luggage • Trips Interruption and Cancellation • iJet/WorldcueTRAVELER: When University travelers register for travel accident coverage they will receive travel alerts about the country they are traveling in. The system also allows the University to keep track of and communicate with its employees and students in the event of an emergency. http://www.ucop.edu/riskmgt/uctrips/

27. Section 5Enterprise Risk Management • Definition • Elements of Enterprise Risk Management • Everyone is a Risk Manager • Top 5 Risks at UCSB?

28. ERM - Defined • A risk-based approach to managing an enterprise • Integrates concepts of internal controls and strategic planning • Includes all stakeholders • Incorporates a broad spectrum of risks in complex organizations to ensure they are managed

29. Section 5. Enterprise Risk ManagementElements of Enterprise Risk Mgmt. • Strategic Goals – The University’s mission is teaching, research and public service. • Risk Assessment: Identifyandassess risk in context of strategic goals, to identify changing risk trends, and to prioritize risk management. • Risk Response: Develop a set of actions to mitigate risks. • Control Activities: Establish and implement policies and procedures to help ensure risk responses are effectively carried out. • Communication: Communicate risk management goals and activities, identify interrelations of risk factors across activities and units. • Monitor: Develop and implement means to monitor key risk indicators, and report on processes for on-going risk management activities.

30. ERM Flow Chart

31. Section 5. Enterprise Risk ManagementEveryone is a Risk Manager • MSO’s – Internal Controls, SAS 112 • Internal Audit - Annual Risk Assessment • General Counsel - Advice for Legal Matters, Manages Litigation • Insurance - Workers’ Compensation, General Liability Insurance • Compliance and Ethics Committee - Compliance with Laws, Ethics, Policies • Student Affairs - Student Behavioral Health Team • Athletics - NCAA Compliance • Strategic Planning - Funding for Operations • EH&S - Assess Safety and Hazards • Information Security- HIPAA, IS-3 • Design and Construction - Earthquake Assessment • Research - Compliance with Grant Regulations, Laws

32. Control Self-Assessment Questionnaire The Control Self-Assessment Questionnaire is a tool to be used by departments to assess the adequacy of the internal controls within their area. Departments are encouraged to conduct a self-assessment annually, or as needed with changes in administrative personnel. UCSB Policies and Procedures for Business Officers: http://www.policy.ucsb.edu/policies/specialty/admin

33. Section 5. Enterprise Risk ManagementTop 5 Risks at UCSB • Lab Safety • Outdated Information Technology Systems • Deferred Maintenance • Inadequate Information Technology Funding • Loss of Research Productivity as PI’s Teach Classes

34. Risk Management PresentationQuestions?

35. Section 6. Campus Contact InformationContacts • Lee Mudrick, Insurance Administrator • Tel. 893‐2860; Email: lee.mudrick@ehs.ucsb.edu • Kathy Speer, Insurance Coordinator • Tel. 893‐5837; Email: lee.mudrick@ehs.ucsb.edu • Kimberly Tapia, Contracts Manager • Tel. 893-5836; Email: kimberly.tapia@contracts.ucsb.edu • Daniel Sweeney, Contracts Analyst • Tel. 893-2271; Email: daniel.sweeney@contracts.ucsb.edu • Ron Betancourt, Contracts Assistant • Tel. 893‐4670; Email: contracts@contracts.ucsb.edu • Carrie Frandsen, Enterprise Risk Management • Tel. 893-3154; Email: carrie.frandsen@ehs.ucsb.edu

36. Risk Management Takes a Village http://www.riskmanagement.ucsb.edu