School Risk... Too Risky to Ignore
Proactive loss prevention and mitigation training is a necessity in schools today. However, because of tight budgets, risk management is a function often spread throughout administrators in various departments. It has never been more important to be on the same page regarding daily risks and threats. This web seminar, originally broadcast on February 28, 2013, addressed risk analysis, as well as risk control techniques essential to ensuring school safety.
The National Alliance for Insurance Education & Research delivers practical, comprehensive and continuing education on risk management. The Certified School Risk Managers program is 40 hours, and today we’re offering you a quick snapshot of what we cover. We will discuss the identification of your exposures, as well as the fundamentals, handling, funding, and administration of school risk management programs.
In the 30 years I’ve been working with school districts, I’ve helped to establish several risk management programs. Does your district have a good handle on the daily risks posed to society? It’s safe to say that there’s a lot of room for improvement in most districts. The first step of the risk management process is risk identification; before we can analyze and measure our risks, we need to know what they are. When we talk about analysis and measurement, we are saying that there are some risks that are going to happen frequently, but don’t cause much in the way of losses. Then there are risks which happen infrequently, but are devastating. Based on those characteristics, we will address the risks with either risk control or risk financing. Risk control deals with safety and prevention of loss. Risk financing deals with how we pay for claims. No matter how good the risk control is, claims will occur.
Let’s start with risk identification. We want parents to know that we are doing everything possible to keep their children safe. We need to look at our exposures, and identify potential areas for loss.
Ways to identify potential risk include:
- Questionnaires. You can get samples from a carrier or create your own.
- Examining loss history. Financial statements will tell you what your assets and liabilities are.
- Personal inspections. There’s nothing like getting out in the field; you can see or hear things that an employee would never come to your office to share.
- Enlist help from others to identify risky situations so they will contact you when they get concerned.
Chino: School districts have become sophisticated in their alternative options for funding. Some larger districts are willing to look at their loss experience and determine whether it makes sense to hand over premium dollars to their insurance company. Some have access to very comprehensive loss data, creating a very accurate prediction of what future losses may occur. If a district doesn’t have access to that type of content and reliable data, then they are going to have to go with an insured program with deductibles. Districts have to choose a plan that fits.
Guaranteed cost, full insurance, deductible plan, self-funding or pool are all options. Pools are hybrids that can include many different options from deductible to self-funding. In guaranteed cost or full insurance there is no retention. A school writes one check when premium is due. A deductible plan allows schools to take on retention in increments because it is cheaper to pay your own losses. When we accept a deductible, we are taking a chance that, on any given year, our losses may be greater than in prior years. Self-funding typically means that we will have a high degree of retention, several hundred thousand to a million dollars. The cash flow advantages will be high, along with the loss sensitivity.
Johnson: Risk control is any conscious action or inaction to reduce the probability, frequency, severity or unpredictability of loss.
The five techniques associated with risk control are:
- Avoiding or ceasing operations, or eliminating risk completely;
- Preventing the loss before it occurs;
- Loss reduction. This is usually performed after the loss occurs;
- Segregation, separation, and duplication; segregation and separation allow you to reduce loss by splitting things up so they are not all affected at once. Duplication is having backups;
- Risk transfer, which allows for the transfer of things such as liability and workers comp.
Chino: Perils are different than they were 20 years ago. All schools in all states are exposed to various natural disasters. Natural disasters tend to be infrequent but quite severe. Human losses are more common. The economy also contributes to property risk. We see changes in costs due to market conditions. Property loss control can be implemented in numerous ways, including building separate enclosures, securing technology to reduce theft, always having fire protection equipment handy, and making sure student records can be moved and maintained while damage to a building is repaired.
Criminal acts are a very expensive legal risk; the most common type of loss associated with criminal acts is sexual molestation or misconduct. Over 90 percent of liability claims my clients experience are issues such as slipping or falling in the school building or on the playground.
Johnson: Your management risk is minimal as a member of a school board if you have common sense and good judgment. School boards are exposed to everything from intentional torts to negligence to battery and defamation. The average cost to defend an employment claim is $150,000. If dismissed, the average cost is $70,000. Sources of human resources risk include work-related injury and illness, retirement and resignation, and work-related violence. One of the top two causes of death in the workplace is workplace violence. Such incidents can be prevented and reduced with proper risk management. You control this by putting policies and procedures, as well as physical barriers like police officers, in place to stop the crime from occurring.
Schools also have cyber risk concerns. If hackers can get into the U.S. government, they can certainly hack into schools.
Chino: Risk management cannot be done by an individual. It needs a team to facilitate it and move it forward. A risk management team is a mechanism for effectively implementing and monitoring a risk management program. Your schools need a small tight team for action planning. The team ensures necessary tasks are performed and critical deadlines are met.
Corluccio: We have given you a brief overview of the CSRM program; it’s composed of five seven-hour courses. Each is followed by an optional 50 question exam. To earn designation, a participant must pass all five exams. The program is offered online and with classroom options in 18 states. There are over 1,700 participants and 500 designees in the program.
The five courses are:
- Fundamentals of risk management
- Handling school risks
- Measuring school risks
- Funding school risks
- Administering school risks.
You want to be proactive and anticipate and eliminate the many risks before they happen. This will also keep you in compliance with government regulations. Ultimately, being proactive saves lives, property, and money.
To watch this web seminar in its entirety, please go to: www.districtadministration.com/ws022813