Challenges of Managing Risk In a Political Environment

							  Challenges of Managing Risk
   In a Political Environment
                   Presented to
       The Conference Board of Canada
Intergovernmental Forum on Risk Management
            Ottawa, October 8th, 2003
                   Presented by
        Craig A. Rowe, FCIP, CRM
Risk Manager, City of St. John’s, Newfoundland
              About Craig Rowe
 Risk Manager
 Insurance and Risk Career Spans 14 Years
    –   Insurance Broker
    –   Claims Adjuster
    –   Loss Control Inspector/Field Underwriter
    –   Risk and Insurance Consulting Business Owner
 Industry Involvement Local, National, US
 Speaker, Presenter, Instructor
              Introduction
 Risk management is risk management?
 Managing risk in the public sector has
  challenges that are separate and distinct
  from the private sector.
 Organizations are very large, and very slow
  moving.
 Open, transparent, for public scrutiny, and
  criticism.
 Prioritization and allocation of resources
  very different than in private companies.
               Introduction
 Difficult to measure and quantify the
  savings achieved by risk management
  initiatives.
 Public bodies are involved in activities that
  private industry isn’t.
 Governments have to provide services for
  the public interest, whatever the risk.
             Session Goals

 Exploration of the unique challenges of
  managing risk in the public sector.
 Look for answers to difficult questions.
 Discuss best practices for navigating the
  mine field.
       Presentation Overview
 What is risk management.
 Why manage public sector risks.
 Public sector risk management challenges.
 The step by step risk management process
  looking at specific public sector challenges.
 Best practices for effective public sector
  risk management.
 Risk Management: A Definition
 Risk management is the process of making
  and carrying out decisions that will
  minimize the adverse effects of risk on an
  organization.
 In the public sector the theory is the same
  but we must be aware of our limitations and
  challenges and work within them to achieve
  organizational objectives while minimizing
  the adverse affects of risk.
Why Manage Public Sector Risks
   Big Organization - Big Target!
    – Public entities are very big and are perceived
      as having a lot of assets.
    – Very visible target.
    – Catch all for litigation. Casting a big net!
    – Public entities are perceived as having large
      insurance policy limits.
    – People are becoming more litigious.
    – Courts are often sympathetic to injured people.
    – Deep pockets pay. Joint and several liability.
         Risk Management Goals
   Why Manage Risks?
    – Saves Resources:
         » People
         » Income
         » Property
         » Assets
         » Time
    –   Protects Public Image
    –   Protects People from Harm
    –   Prevents/Reduces Legal Liability
    –   Protects the Environment
               Public Sector
        Risk Management Challenges
   Organizational goals and objectives are political.
   Limited resources, with a great deal of demand for
    them.
   Very large, making decision making difficult and
    slow.
   Public owned entities are open and transparent,
    making privilege difficult to protect.
   Operations are very numerous, diverse, and high risk.
   Many services are essential for public interest
    eliminating risk avoidance as a risk management
    strategy.
               Public Sector
        Risk Management Challenges
   Public entities are often held to higher standards by
    courts, and the public.
   Large target for litigation due to very deep pockets
   Nature of some risks makes them uninsurable.
   Subject of intense public and media scrutiny and
    criticism.
   Risk assessment is challenging due to nature and scope
    of operations.
   Bound by legislation that can limit maneuverability,
    e.g. Public tendering act.
             Public Sector
      Risk Management Challenges

 Dealing with elected officials with relatively
  short portfolio tenures, and very different
  experience and views.
 Frequently changing direction and priorities.
 Joint and several liability has made us a bigger
  target and a catch all in litigation.
 Responsibilities for public safety puts us at
  higher risk.
    The Risk Management Process

   Identify Potential Exposures To Loss
    – what can possibly go wrong
   Measure Frequency And Severity
    – likely number and size of claims
   Examine Alternatives
    – what are the options: prevent, mitigate, retain,
      transfer, accept the risk, etc
    The Risk Management Process
   Decide Which Alternatives To Use
    – of the possible risk management techniques,
      which strikes the best balance between
      effectiveness and affordability
   Implement The Chosen Techniques
    – utilize necessary resources to develop the plan
   Monitor Results
    – is your plan working, are changes or updates
      required
Identify Potential Exposures To Loss

   Public Sector Challenges
    – Operations are large and very diverse.
    – Bureaucracies often have communication
      challenges.
    – All public entities are different in organization,
      & operations.
    – Legal environment varies greatly.
    – Frequently changing leadership.
Measure Frequency And Severity
   Public Sector Challenges
    – Scope of operations makes it difficult to
      measure loss potential.
    – Differences between public entities makes it
      hard to benchmark.
            Examine Alternatives
   Public Sector Challenges
    – Risk avoidance is often not an option.
    – Very limited resources, fiercely competed for.
    – Some alternatives may not be possible for political
      reasons.
    – The necessary but in from senior bureaucrats &
      politicians is often difficult to get if it means
      allocation of resources. It is difficult to measure and
      predict the outcomes/savings of risk management.
Decide Which Alternatives To Use

   Public Sector Challenges
    – Decision making can be slow in the public
      sector.
    – Decisions are often politically motivated.
    – Decisions are often overturned, initiatives often
      scrapped or delayed with changing leadership
      and priorities.
    – Collective agreements may limit options.
    – Legislative requirements or restrictions.
Implement The Chosen Techniques

   Public Sector Challenges
    – Implementation can also be slow.
    – Collective bargaining unit buy in.
    – Re-organization of existing resources can be
      complex and difficult.
    – Implementation of new initiatives and resources
      can be complex and difficult.
             Monitor Results
   Public Sector Challenges
    – Size and scope of operation may make this
      expensive and difficult.
    – Changing leadership and priorities may hinder
      or eliminate this process.
               Best Practices
 Constantly work to keep risk management at
  top of mind, especially for senior managers and
  politicians.
 Constantly look for ways to quantify the
  savings achieved through risk management.
 Constantly look for ways to quantify the
  benefits of risk management to the
  organization.
 Make senior management and politicians aware
  of the opportunity cost of not managing risk.
              Best Practices
 Record, track and share your accomplishments.
 Look for ways that risk management can
  improve the organizational image.
 Look for ways to make the organization
  dependant on risk management.
 Share information with other risk managers on
  increasing the profile of risk management.
 Work on building relationships with senior
  management.
               Best Practices
 Implement a risk management newsletter.
 Clip and send relevant articles to appropriate
  people.
 Take every opportunity to speak to and advise
  senior management.
              Summary
 Risk Management is Risk Management!
 Public sector risk management does pose
  peculiar challenges.
 The challenges are not insurmountable.
 Managing risk is a worthwhile endeavor, so
  we have to keep working to get the buy in
  and the necessary resources!
     Questions?

    Thank You!

www.craigarowe.com