The Elements Of A Risk Management Program - Part II of III

This article is the second in a series dealing with the topic of the risk management and how application of the various techniques will greatly enhance the success of any insurance program.

RISK CONTROL

After a county has identified and determined the degree of risk facing their operations, they must decide how to deal with these factors. The first of several decisions should be how to minimize, at the least possible cost, losses that may strike the county. The tools used to reach this objectives are refereed to as risk control measures. While all measures of control do not necessarily reduce potential losses, they may make, on an overall basis, certain losses more predictable. Thus bringing an element of control that may allow the county to prepare for the loss, rather than reduce the potential loss. The risk control measures we will briefly discuss in this series are, loss control, avoidance, separation, combination, and various methods of transfer.

Second, the county must determine which is the most cost effective means in which it can finance losses that do occur. Tools involved in the second decision include, those transfers, including the purchase of insurance, that are not considered risk control devices, but rather risk financing, and retention, via deductible or "self-insurance." Time will be devoted in future segments to discuss the financing alternatives available.

Next, the county must determine which treatment or treatments to implement to achieve the desired results, and finally, evaluate the outcome or impact of the program and change, if necessary, the method or program to achieve the best result.

Due to the confines of space, only the LOSS CONTROL method will be discussed in this segment.

LOSS CONTROL

Loss control measures counter risk by lowering the likelihood that an occurrence will take place or by reducing its severity should it occur. Loss control has the ability to prevent or reduce losses for both the county and for the public, while allowing the county to continue performing the operation creating the risk.

There are a host of methods utilized in the loss control phase of a risk control program. In fact, most insurance companies offer loss control engineering services designed to outline and guide you in your loss control efforts. However, these engineering services by themselves are not enough. Management acceptance and implementation are critical to their success.

In the first year of operation, the Loss Prevention Committee of the Wisconsin County Mutual Insurance Corporation addressed several issues common to it's members, such as, Certificates of Insurance and recommended limits of liability, limits of liability for employees using their personal vehicles during the course of employment and several other topics of immediate importance.

In addition, the Loss Prevention Committee, along with Crawford Risk Management, authored the first chapters of a Wisconsin County Mutual Insurance Corporation Liability Loss Control/Prevention Manual. The Manual addressed the implementation of a safety organization that not only recognizes workplace safety, but also identifies the need for loss control/prevention of liability losses. The first two chapters deal with the Highway Department and the Sheriff's Department and respond to the liability issues of these two departments. In it's eleven chapters, the Manual will deal with the following departments:

• Parks and Recreations
• Logging Operations
• Emergency Government
• Fairgrounds
• Personnel
• Premises Liability
• Vehicle Safety

The function of the Loss Prevention Committee is to act as a conduit for information regarding concern for liability issues confronting Wisconsin counties and suggest ways to successfully implement recommended programs, with the desired result of reduced losses and exposure to loss. The Committee asks for your direct input to bring to the forefront issues of concern as the relate to the operations within your county. To bring issues before the committee, please direct them to Frank B. Hall & Co., the General Administrator of the Mutual or to a Loss Prevention Committee member.

AVOIDANCE

One way to control an individual risk is to avoid the activity or operations with which the risk is related, by refusing to allow the county to participate in the identified activity or operation. To illustrate, if a county wishes to avoid a relatively hazardous task, or in some cases, operations better served by an individual firm that has the knowledge and expertise to more effectively perform these tasks, they may wish to avoid these risks by never performing these tasks. While avoiding the task and some of the risk, not all of the responsibility is avoided by contracting these services.

Two situations exist that determine whether or not this method is used. First, avoidance may be impossible and second, the benefits to be gained by avoiding the activity do not outweigh the practical use of another technique to address the risk.

SEPARATION

Separation of a county's exposures to loss instead of concentrating them at one location where there is exposure to one occurrence is the third tool available. We will spend little time in discussion of this method as it is most appropriate with efforts to control property losses.

COMBINATION

Combination is the fourth method used in a risk control program. This method uses the law of large numbers to make losses more predictable by increasing the number of exposure units. An example of combination would be a more centralized reporting or control of any segmented or very diverse departments into a more controlled unit. Again, this method is most commonly used for property type exposures.