1. RISK MANAGEMENT BASICS Presented by John Chino, ARM PE, CSRM Arthur J
RISK MANAGEMENT BASICS Presented by John Chino, ARM PE, CSRM Arthur 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 Entity Missions
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

21. Risk Avoidance

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

23. D E C I S O N P R NO NO NO NO Identify all sources of potential loss
RE-ASSESS
Evaluate each risk
Severity, Probability, & Frequency NO
TERMINATE NO NO
YES
TRANSFER
Take action to
eliminate risk NO
YES
TREAT
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

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

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

26. CONCLUSION
Q & A