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Risk management faces new challenges in counties
By Claire Lee Reiss, J.D.
Public Entity Risk Institute
Most people think of risk as causing losses, but risk, in fact, is only a measure of deviation from an expected outcome. That deviation can be either positive or negative, producing either gain or loss.
Either way, the uncertainty caused by rapid changes in society and shrinking resources is challenging counties as they try to manage their resources and serve their citizens.
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Scholarships Available for 2005 Risk Management Conference
The Public Entity Risk Institute (PERI) will award $1,000 scholarships to up to 60 individuals to help them attend the 2005 Public Risk Management Association (PRIMA) Annual Conference. Applications for the scholarships are now being accepted; the deadline for applications is Feb. 18, 2005.
The PERI Small Entity Scholarship Program assists employees and officials from smaller public entities and nonprofit organizations who could benefit from the PRIMA Conference, but who may not have the budget to attend. This is the 8th year that PERI has funded the scholarship program.
The PRIMA Annual Conference is June 5-Ð8, 2005 in Milwaukee. The conference features more than 80 workshops and conference sessions that address vital public risk management topics and issues. It is the largest conference devoted to public sector risk management in the United States.
Scholarship eligibility
To be eligible for consideration, an applicant must be from a smaller public entity or nonprofit organization, must not have attended the PRIMA Annual Conference in recent years and must have key responsibility within his or her organization for an area of risk management. (This responsibility includes such areas as risk management, insurance, safety, claims, disaster/emergency management and the overall management of the organization including risk management.)
Smaller public entities are defined as a municipality with a population of 50,000 or fewer; a county with a population of 100,000 or fewer or a school district with an average daily attendance of 4,000 students or fewer. A smaller nonprofit organization is defined as one with an annual operating budget of $2 million or less.
An applicant does not have to be a PRIMA member to be eligible. Only one person per organization may receive a scholarship in a single year.
Application procedure
Interested applicants should complete the brief, one-page Scholarship Application Form that can be found on PERIs Web site (www.riskinstitute.org). Look under "What’s New" on the PERI home page or in the "PERI News / News and Announcements" page. An application form can be requested by calling PERI at (703) 352-1846 or by e-mailing a request to Audre Hoffman at ahoffman@riskinstitute.org.
Completed applications should be mailed to Scholarship Program, PERI, 11350 Random Hills Rd., Suite 210, Fairfax, VA 22030, and be postmarked no later than Feb. 18, 2005; or e-mailed to Audre Hoffman, at ahoffman@riskinstitute.org, with receipt no later than Feb. 18. Some supporting documentation may be required with the form.
Scholarship benefits
Each scholarship recipient will receive $1,000 in direct financial assistance, which can be applied to any of the costs of attending the PRIMA Conference, including travel, lodging and registration fee. The scholarship also includes a discounted registration fee and a free six-month membership to PRIMA if the recipient is not already a member.
It is not expected that the $1,000 award will cover all expenses related to attending the conference. Recipients and their organizations will be responsible for funding expenses over $1,000.
Who can receive a scholarship?
Many public sector and nonprofit staff and officials have received the Small Entity Scholarship in the past. Recipients have included city and town managers, city and county clerks, finance directors, risk managers, police and fire officials, public works, human resources, safety directors, school administrators and business officials; and executive directors and other staff of nonprofit organizations.
In 2004, the 60 scholarship recipients came from 27 different states, and represented cities, villages, towns, counties, school districts, special districts and nonprofit organizations.
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Workers’ compensation, law enforcement liability and employment practices liability continue to be major cost-drivers, and are therefore important in any county’s risk management program. But new sources of risk and new twists on traditional sources of risk, have joined them.
Workers’ compensation, for example, has always been a major risk issue. But since the attacks of September 11, urban counties with large concentrations of employees may have difficulty securing workers’ compensation coverage at reasonable premiums.
Underwriters are concerned about the exposure of a large number of employees to a single disaster. And there are other evolving changes in the workers compensation landscape. Mold in buildings and HVAC systems has become an issue, raising the likelihood of claims based on allergic reactions in the workplace.
The average cost of medical care and prescription drugs in the workers’ compensation system has been increasing at a rate that exceeds the rate of increase in the economy as a whole.
A reduction in the number of volunteer emergency medical technicians has also forced counties to hire additional employees who, in some states, may be entitled to the benefit of statutory presumptions that certain conditions are work-related.
Property insurance rates also increased significantly post 9/11, as underwriters began to more fully consider the potential for catastrophic loss due to total destruction of a major property.
This in turn, or in tandem, focused county attention on the risks terrorism and criminal acts pose to their infrastructure, personnel and buildings as well as on preparation for, and response to, catastrophes of all types.
Dakota County, Minn., is improving building design and security procedures for public facilities and special events; increasing coordination between public safety and other agencies; conducting security audits; revising response protocols; buying new equipment for public safety; and working with adjacent communities and the public health department.
Careful management of the grant funding available for homeland security issues is critical. A county that identifies and obtains available grant funding and uses it productively is likely to have positive results. But failure to identify grant opportunities, apply for funding, or use the funding wisely is a waste of available resources.
Although terrorism is a highly visible exposure, catastrophic loss is more likely to come from natural hazards, such as floods, earthquakes and hurricanes, or even from very severe events arising from "normal" hazards, such as fire.
Dakota County addresses rising property insurance rates by designing and building new facilities with risk in mind. The county designs its new buildings to the standards for "highly protected risk" coverage, which is available to insureds in certain industries who undertake vigorous risk control programs that meet insurer standards.
These standards often exceed building code requirements, but Dakota County finds that the additional costs of the measures taken during the construction phase, such as improving sprinkler coverage densities or using wax-coated "greenboard" on all exterior walls, are not significant when compared to the overall cost of the construction project.
In Virginia, the increasing number of joint ventures and interlocal agreements between local governments and agencies is also changing the face of county risk. If not carefully crafted, these agreements can create confusion over which entity is responsible for workers’ compensation benefits and liability to third parties, and which entity will implement risk control and buy insurance to cover associated exposures.
The degree of governmental immunity for activities under an interlocal agreement may also be unclear if the participating governments and agencies have different levels of governmental immunity.
These are just a few examples of some evolving risks that affect counties. A comprehensive program to identify and manage its unique blend of risks will help a county protect its employees and its property and preserve its ability to serve its citizens.
(Author Claire Lee Reiss, J.D., ARM, CPCU, is deputy executive director and general counsel for the Public Entity Risk Institute, located in Fairfax, Va. and on the Web at www.riskinstitute.org. Also contributing to this report were: Wayne Faddis, VACo Risk Management Services; Terry Fleming, director, Division of Risk Management, Montgomery County, Md.; Taud Hoopingarner, director, Operations Management and B.J. Battig, manager, Risk and Homeland Security, Dakota County, Minn.; and Jane Jelinski,, director, Local Government Center, Montana State University.)
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