RISK MANAGEMENT

Simply speaking, a risk is any uncertainty about a future event that threatens your organization’s ability to accomplish its mission.

Chapter 21 pp 485-508

Liability Exposures

• Accidents: basis for largest number of lawsuits.

• Most accidents result from negligent act.

• Claims based on board negligence in adopting policies are possible.

• Employment practices are a source of litigation.

• Government requirements, e.g. tax code.

p. 486-487

Risk Management Process

Step 1. Identify risk.

Step 2. Evaluate risk.

Step 3. Reduce risk to acceptable level.

Step 4. Obtain insurance or make other financial arrangements as needed.

Step 5. Monitor activities, the environment, and risk-control activities and revise as necessary.

Step 1: Identifying Risk

• Ask others about risks they see.

• Review procedure manuals for legal compliance.

• Get risk check list for nonprofits from insurers or risk management manuals.

• Review safety records (OSHA)

• Consider competence of action and judgment for employees and volunteers.

• Walk premises with eye to hazards.

• Invite insurance agent, lawyer, building inspector, director of similar organization to join you in risk audit.

P 490-491

Step 2: Evaluating Risk

• Review each risk uncovered in step 1.

• Assess probable frequency of risk occurrence.

• Assess potential severity of loss.

IN ORDER TO:

• Make conscious decisions about:

– Which risks can be tolerated.

– Which risks require purchase of insurance.

– Which risks can be reduced or controlled.

– Which risks are too great to bear.

p. 491-492

Step 3: Controlling Risk

• Avoidance: prohibit the activity

• Modification: change the activity so that the likelihood and severity of the risk are acceptable.

• Retention: accept the risk either intentionally or because no alternative exists.

• Transfer: shift at least the financial aspects of risk through contract or insurance.

Step 3A: Avoidance

• Avoid activities that cannot be performed safely because personnel lack expertise.

• Avoid activities that can be performed safely but may involve accident not covered by insurance.

Step 3B: Modification

• Use written guidelines with regular monitoring and enforcement.

• Provide training for the job.

• Conduct on-going safety program.

• Ensure legal compliance.

p. 493-494

Responding to potential liability incident.

• Have response plan in place prior to event.

• Express concern.

• Do not admit liability…repeat…do not admit liability.

• Write down names of any witnesses, take photos of scene.

• Immediately notify insurer, attorney, sponsor.

• Record your recollections and encourage others to do the same.

• Do not talk about the incident without counsel.

• Support the people involved.

Insurance can bring peace of mind. Don’t leave this to amateurs.

• No organization can protect itself from serious liability without insurance.

• Peace of mind and focus on your mission comes with the security insurance can provide.

• The BEST advice is to work with an insurance agent who knows the liability issues and the ways to protect your organization.

• p. 497-505

Liability Insurance Mistakes to Avoid.

• “Premises policy” for nonprofit that sends personnel into field.

• Relying on traditional D & O policy to protect organization.

• Thinking general liability covers employment disputes.

• Switching carriers each year to save a few dollars.

p. 506

• No coverage for personal injury.

• Overlooking liability coverage for volunteers.

• Having no coverage for claims by injured volunteers.

• Ignoring non-owned auto liability.

• Having no coverage for finished products.