Public Risk January 2019 by Moire Marketing Partners

PUBLISHED BY THE PUBLIC RISK MANAGEMENT ASSOCIATION JANUARY 2019

SMART CITIES and the INFRASTRUCTURE REVOLUTION PAGE 6

ALSO IN THIS ISSUE

A LITTLE PREP GOES A LONG WAY Get Ready for Winter Storms

PAGE 10

THE RISK-VALUE CURVE:

How to Optimize Risk and Generate Value for Your Organization

PAGE 14

LEARN ABOUT LOSS CONTROL FROM THE EXPERTS!

INTRODUCING THE ESSENTIAL ELEMENTS OF

For more information, visit primacentral.org/losscontrol.

PUBLIC ENTITY LOSS CONTROL

Loss control is an essential step in the risk management process. This 5-part webinar series, presented by PRIMA, is designed to walk you through the process from the philosophy behind the loss control effort to developing, implementing and improving your program. The five segments are: LC101: Loss Control Mission & Philosophy • AVAILABLE JAN. 3 LC102: Identify & Analyze Exposure to Loss • AVAILABLE JAN. 10 LC103: Examine & Select Your Loss Control Alternatives • AVAILABLE JAN. 17 LC104: Implement Your Selected Loss Control Technique • AVAILABLE JAN. 24 LC105: Monitor & Improve Your Loss Control Results • AVAILABLE JAN. 31 Join us every week in January for a new webinar focusing on how to develop and maintain an effective loss control program in your entity!

Be sure to attend PRIMA’s Loss Control Live Q&A webinar on FEB. 14 at NOON ET.

JANUARY 2019 | Volume 35, No. 1 | www.primacentral.org

CONTENTS

The Public Risk Management Association promotes effective risk management in the public interest as an essential component of public administration.

PRESIDENT Jani J. Jennings, ARM Risk Manager City of Bellevue Bellevue, NE PAST PRESIDENT Amy J. Larson, Esq. Risk and Litigation Manager City of Bloomington Bloomington, MN PRESIDENT-ELECT Scott J. Kramer, MBA, ARM County Administrator Autauga County Commission Prattville, AL DIRECTORS Brenda Cogdell, AIS, AIC, SPHR Risk Manager, Human Resources City of Manassas Manassas, VA Forestine Carroll Risk Manager Memphis Housing Authority Memphis, TN

Connected Communities:

SMART CITIES AND THE INFRASTRUCTURE REVOLUTION By Thom Rickert

Sheri Swain Director of Enterprise Risk Management Maricopa County Community College District Tempe, AZ Donna Capria, CRM, CIC, AINS Risk & Insurance Coordinator WaterOne of Johnson County Lenexa, KS Michael S. Payne, ARM, HEM Risk Manager City of Fresno Fresno, CA Melissa R. Steger, MPA Asst. Director, Workers’ Compensation University of Texas System Austin, TX NON-VOTING DIRECTOR Marshall Davies, PhD Executive Director Public Risk Management Association Alexandria, VA EDITOR Jennifer Ackerman, CAE Deputy Executive Director 703.253.1267 • jackerman@primacentral.org ADVERTISING Jennifer Ackerman, CAE 703.253.1267 • jackerman@primacentral.org

10 A Little Prep Goes a Long Way

Get Ready for Winter Storms By Coleman Brown

IN EVERY ISSUE

The Risk-Value Curve:

How to Optimize Risk and Generate Value for Your Organization By Jennifer Hills, Bobbi-Jo Pankaj, Lauren Pashia, Greg Wallig

Public Risk is published 10 times per year by the Public Risk Management Association, 700 S. Washington St., #218, Alexandria, VA 22314 tel: 703.528.7701 • fax: 703.739.0200 email: info@primacentral.org • Web site: www.primacentral.org Opinions and ideas expressed are not necessarily representative of the policies of PRIMA. Subscription rate: $140 per year. Back issue copies for members available for $7 each ($13 each for non-PRIMA members). All back issues are subject to availability. Apply to the editor for permission to reprint any part of the magazine. POSTMASTER: Send address changes to PRIMA, 700 S. Washington St., #218, Alexandria, VA 22314. Copyright 2019 Public Risk Management Association

| 4 NEWS BRIEFS | 19 ADVERTISER INDEX

JANUARY 2019 | PUBLIC RISK

THINK. SHARE. TRANSFORM. the leading event for public risk professionals

JUNE 9 â&#x20AC;&#x201C;12 2019

MESSAGE FROM PRIMA PRESIDENT JANI JENNINGS, ARM

SAFE and SOUND

he New Year is typically known as the time for a fresh start, the time to make changes and the time for New Year’s resolutions. Why not have a New Year’s resolution at work to improve your employees’ safety? Evaluate your 2018 safety records to gain an overall picture of the safety performance at your entity.

“

The arrival of the new year provides a

great opportunity for risk managers to “start fresh” by introducing and enforcing your

entity’s safety goals. Employees sometimes

When it comes to improving your entity’s overall safety program, here are some goals you can set to get started:

need a reminder that the most important thing

DON’T DISMISS NEAR MISSES: Near-miss incidents are indications that the conditions in the workplace or environment were unsafe and are simply incidents waiting to happen. It’s important to explain what near misses are and stress the importance of reporting them to your employees. Analyze each near miss report and address the hazards that created it.

I encourage you to accept the challenge to

MAKE TRAINING FUN AND MEMORABLE: Disseminate the training material in a manner that will stick--include humor, self-disclosure and storytelling. Additionally, offer the training across a variety of different mediums, such

make 2019 your entity’s safest year!

as laptops and mobile phones. While the traditional in-class training is the most effective, reinforcement training sessions can be delivered on-the-go through e-learning. ENCOURAGE WORKERS TO CREATE NEW YEAR’S SAFETY RESOLUTIONS: Improving safety in the workplace shouldn’t only be tasked to management. In contrast, safety is everyone’s responsibility, including the workers’. As a result, it’s a great idea to get everyone involved with making New Year’s safety resolutions. Encourage workers to make and write down individual New Year’s safety resolutions, such as wearing their PPE, noticing hazards and speaking up about them, engaging in safety training, etc.

“

INCREASE FREQUENCY OF COMMUNICATION: Pay special attention to how employees communicate and interact with one another. In the event of a safety incident or near miss, the responsible employee should notify their supervisor and risk management. If one worker sees another worker ignoring a safety procedure, it’s important that they speak to the violator as well as their supervisor. The goal is to implement a culture where workers feel comfortable when voicing concerns.

at their job is to go home uninjured every day.

introducing and enforcing your entity’s safety goals. Employees sometimes need a reminder that the most important thing at their job is to go home uninjured every day. I encourage you to accept the challenge to make 2019 your entity’s safest year! Sincerely,

Jani Jennings, ARM PRIMA 2018-2019 President Risk Manager City of Bellevue, NE

The arrival of the new year provides a great opportunity for risk managers to “start fresh” by

JANUARY 2019 | PUBLIC RISK

NEWS BRIEFS

NEWS Briefs

FENTANYL PREVENTING RHODE ISLAND FROM REACHING OVERDOSE REDUCTION GOAL Governor Gina Raimondo set a goal in 2015 to reduce the number of accidental drug overdose deaths by one third in three years, but since then a potent and sometimes lethal opioid has emerged, making it impossible for the state to reach the objective, reports WRPI. Last year, Raimondo signed an executive order to form the Overdose Prevention and Intervention Task Force and appointed her senior advisor Tom Coderre to co-chair the group. He said the

emergence of fentanyl means the governor’s goal three years ago “will not be achieved.” “Fentanyl came into the drug stream couple of years back and it changed the trajectory of the opioid crisis,” Coderre said during a taping of WPRI 12’s Newsmakers. “Fentanyl is 100 times stronger than traditional opioids; even a small amount of fentanyl can increase the dose someone is receiving of opioids and cause them overdose very, very quickly.”

$85 MILLION ON INELIGIBLE PATIENTS? LOUISIANA MEDICAID MAY HAVE MISSPENT The Louisiana Department of Health may have spent anywhere from $61.6 to $85.5 million more than it should have on Medicaid recipients who are ineligible for the program, according to an audit released in November.

Fentanyl is 100 times stronger than traditional

opioids; even a small amount of fentanyl can

“

increase the dose someone is receiving of opioids and cause them overdose very, very quickly.

Tom Coderre, co-chair of the Overdose Prevention and Intervention Task Force

PUBLIC RISK | JANUARY 2019

Legislative Auditor Daryl Purpera’s report found that the LDH’s current process of using wage data during the application and renewal process to determine whether people are eligible for Medicaid is insufficient. The LDH relies on Medicaid recipients to self-report changes in their wages rather than using wage data from the Louisiana Workforce Commission to identify any changes in earnings that occur in the 12 months between application and renewal, according to auditors.

RESILIENT COMMUNITIES NEED RESILIENT COMMUNICATION In November, California’s deadliest fire displaced 150,000 people and simultaneously disrupted cell service in the heaviest-hit areas. Two months ago, Hurricane Florence rendered 10.7 percent of cell sites in affected areas of Georgia, the Carolinas, and Virginia out of service, disrupting communications for many in their time of greatest need. Victims of fires and storms alike depend on oftentimes-vulnerable infrastructure to talk to each other. But what if you didn’t need cell towers or WiFi routers to communicate wirelessly? What if refugees could connect with each other using just their smartphones? New technologies such as wireless mesh networks could allow you to talk to your friends and family on a smartphone even when cell towers or wireless services in your area stop working, representing a leap forward for convenience and for public safety. However, to make way for these innovations, we need to clarify the regulatory environment and move away from current spectrum licensing policies that favor big network providers, reports The Hill. It’s especially important because the ability of a community to withstand a disaster depends on secure, reliable systems of communication that allow individuals to share information with each other, form impromptu relief efforts, and coordinate recovery. Recent incidents teach us that such systems are vulnerable, and that there is demand for more channels of communication.

infrastructure, allowing smartphones and other devices to act as routers and hop data from one device to another. While mesh networks face technical difficulties such as limited range which require large numbers of users to overcome, they are already proving their potential. Recently, NPR listed FireChat as a useful app for communication during Hurricane Florence, and large media companies in the Philippines are using it to disseminate information on typhoons. Another mesh networking startup, goTenna, launched an out-of-the-box device that set up a relay node enabling peer-to-peer connection. Their network helped connect Puerto Ricans after Hurricane Maria, and now consists of over 100,000 individual devices spread across the United States that can serve as relays between other user devices. Because mesh networks operate peer-to-peer rather than relying on cell towers, they face fewer legal challenges—but that doesn’t mean there aren’t obstacles.

Before Florence, Hurricane Sandy knocked out 25 percent of cell sites in its path. Hurricane Katrina knocked down over 3 million telephone lines in Louisiana, Mississippi, and Alabama; over 20 million telephone calls did not go through the day after. In the face of jammed lines and widespread service outages, people turned to alternative means of communication such as websites, blogs, and texting to connect with each other.

Mesh networks still operate in an uncertain regulatory environment, as evidenced by previous FCC proposals to ban modifications of wireless routers that threatened at least one mesh network project and prompted router manufacturers to restrict modifications to their devices. Such wide-reaching restrictions make investment risky for entrepreneurs, discouraging mesh network start-ups and other new technologies.

More recently, smartphone apps such as FireChat have begun leveraging mesh networking technology that builds direct peerto-peer networks instead of relying on existing

The FCC should instead maintain an open regulatory environment permissive of experimentation, or at the very least target only specific modifications that could

harm consumers through data theft or other illegal activities. In addition to regulatory uncertainty, small start-ups such as goTenna seeking to invest in infrastructure to expand their peer-to-peer networks risk running into licensing hurdles that favor large network providers over small ones. The FCC, for example, is considering expanding licenses that essentially grant limited monopolies in mid-band spectrum (a section of radio frequencies previously reserved for satellite transmission of TV and radio programs) over large areas for 10 years and on a renewable basis. Larger licenses and contracts that transfer large slices of spectrum to firms such as AT&T make entry into the market harder for smaller enterprises without the funds to put together major bids or purchase large-area licenses. A startup in an urban area, for instance, will likely lack the funds to purchase a license for the whole city. The system also encourages spectrum hoarding from large firms who have less incentive to innovate because government licensing protects them against newcomers to who might have something different to offer. Mesh networks are a resilient way of facilitating communication in the face of disaster, but they need room to grow. Policymakers should maintain an environment of permissiveness for such technologies, and avoid policies that discourage innovation. It’s time to give smaller, innovative firms and individuals a chance to bring new network technologies to the market. Resilient communities need resilient communication networks to weather the storms to come.

JANUARY 2019 | PUBLIC RISK

PUBLIC RISK | JANUARY 2019

SMART CITIES and the INFRASTRUCTURE REVOLUTION BY THOM RICKERT

magine living in a city in which technology makes it possible for sight-impaired citizens to “see” sidewalks and building entrances. Or a city in which your commute time is slashed by 20 percent thanks to digital signage and mobile apps that recommend the most efficient mode of transportation.

This isn’t the future—it’s now. Metropolises from Jakarta to New York are at the forefront of the infrastructure revolution, using technology to help officials, planners and emergency management teams collect and act on metadata to make cities safer and more sustainable. But with the new opportunities that advanced technology offers come new challenges, risks, and questions. For instance, how should municipal governments react when a power outage brings public transportation to a halt, or a cybercriminal hacks an IoT-connected platform? The risks are equally as high as the benefits—and they require meticulous planning by both public entities and their private counterparts.

As smart-city technology gains momentum, cities are at a critical juncture between the legacy technologies of the past and the interconnected infrastructure of the future. Now more than ever, it is crucial for community leaders to understand that smart cities will change their risk landscapes dramatically—and not just insurable risk. Planners need to incorporate assessment of smart-city technology deployment into their existing enterprise risk management plans to ensure all facets integrate with their overall strategies.

THE INTERNET OF THINGS AS THE BACKBONE OF THE SMART CITY

Smart city means many things to many people, but its defining characteristic is what it is not.

It is not a collection of siloed technologies, such as a single commuter app or water-level sensor. A smart city is the way these technologies interconnect—how living spaces, hospitals, schools, bridges, traffic lights, and transportation work together to create the city as a platform. Smart cities establish a connection between people, technology, data, and infrastructure to create efficiencies and improve quality of life. What does this connection look like in practice? First, a modern communications network powered by 5G must be deployed widely. 5G is the foundational technology for the Internet of Things (IoT). It is high speed (10 to 100 times faster than 4G), high bandwidth (to handle a massive load of devices) and very low latency (which is the delay between data being passed

JANUARY 2019 | PUBLIC RISK

CONNECTED COMMUNITIES: SMART CITIES AND THE INFRASTRUCTURE REVOLUTION

between devices). Second, the power of the smart city is unleashed by IoT—devices that can communicate with each other to allow communities to interact and be informed by the very infrastructure that surrounds them. Smart cities use IoT for applications as diverse as public safety (such as sensors that detect potholes in the road), mobility (e-scooters that address the last-mile issue and ease traffic congestion), and city services (smart garbage cans that know when a bin is full and needs to be emptied)—to name a few. And, according to a smart-cities study by McKinsey Global Institute, smartphones are the new keys to the city, connecting with IoT devices to give citizens instant access to information about transit, traffic, health services, safety alerts, and local news.

to better manage limited natural resources, focus on environmental sustainability, and include a broader swathe of the urban population in public services. At the same time, a rising need for efficiency is driving demand for smart-city solutions across health, transit, the sharing economy, utilities, public safety, and city services. For instance, according to a survey conducted by Argo Group, 74 percent of insurance brokers believe autonomous vehicles will reduce the frequency and severity of accidents—resulting in safer cities. The comprehensive metadata gathered by IoT devices helps governments monitor events as they happen, identify patterns, and respond quickly and economically, which is more important than ever as urban populations expand.

As millennials flock to cities in pursuit of opportunities, governments are being forced to better manage

limited natural resources, focus on environmental

sustainability, and include a broader swathe of the

urban population in public services. At the same time, a rising need for efficiency is driving demand for

smart-city solutions across health, transit, the sharing economy, utilities, public safety, and city services. SMART CITIES: OPPORTUNITIES AND RISKS

The benefits of smart cities can’t be ignored. Their biggest advantage can be summed up as quality of life. I will let the statistics speak for themselves: According to the McKinsey Global Institute study, which analyzed dozens of current smartcity applications around the world, smart-city technologies on average reduce fatalities by up to 10 percent, emergency response times by up to 35 percent, commute times by up to 20 percent, the disease burden by up to 15 percent, and greenhouse gas emissions by up to 15 percent. As millennials flock to cities in pursuit of opportunities, governments are being forced

PUBLIC RISK | JANUARY 2019

That’s not all. In the coming years, just as we did on the journey from flip phones to smart phones, we will continue to discover new ways to leverage IoT, improve interconnectivity, and develop more advanced smart-city applications and technologies.

SMART CITIES: RISKS AND CHALLENGES

But the risks and challenges are as significant as the benefits. Smart-city technology has moved out of the lab and is being tested and deployed, which naturally entails uncertainty and a few bumps in the road. The risks for the insurance industry alone are real—for example, current policy terms and conditions are not

clear on many loss scenarios, given the newness of IoT and the relative lack of data to identify long-term patterns. Therefore, at the core of any successful transition to connected communities is an understanding that everything is related to risk, including the risks of adopting smart-city technology, of not adopting that technology, of lost opportunity, of owning IoT devices, of having a third party install IoT devices – the list goes on. In its study, the McKinsey Global Institute predicts that although the public sector will own approximately 70 percent of smart-city applications, the private sector will put up 60 percent of the initial investment. So both municipalities and their private partners must work together on a methodical plan that treats risk as central to their smart-city deployment strategy. This plan includes weighing the benefits and perils of open data, interoperability of disparate technology, reputational risk, and equitable distribution. The starting point, when using an enterprise risk management framework to support the goal of improving the quality of life and drive economic sustainability in the community, is to answer the question: Will deploying smart-city technology help us achieve that strategic goal? The answer to that question will set the stage for answering the questions how, when, and who? Once the stage is set, then details of strategy, governance, enablement, and technology can be explored. Second, cities should deliberately foster a riskaware culture that considers both the positive and negative risks associated with smart-city technology. They should bake risk awareness into their plans and timelines, identifying where exposures exist and pay particular attention to emerging technology that may affect today’s risk decisions. And, most important, they must break down departmental silos that inhibit effective technology integration and critical feedback loops. While enterprise risk management is driven by methods and processes, the process must support the strategic goals of the entity. Local governments should assess recognized risk categories such as infrastructure, land use,

staffing, and regulatory compliance—all pieces that fit together in how and when a smart-city plan is deployed. They should think about what could go right and how to take advantage of it, as well as what could go wrong and how to minimize its impact. They also should ask how much risk they are willing to take in every category, understand the implications of their decisions, and use data to drive those decisions. Some questions to ask during this phase could include (but are not limited to): • Do we have the expertise to understand the risks associated with smart-city technology? If not, how do we gain the expertise? • Are all departments included in the risk assessment process? • Have we modeled the community’s desire for smart technology and incorporated that feedback into prioritization of development? • How will public-private partnerships and federal and state funding affect our risk assessments? • How do we build trust so citizens feel safe and comfortable about the city collecting their data, as well assuring the data is anonymous and protected? • How do we assure equitable distribution of the technology and its benefits throughout the community? • How resilient are we? Do we have a continuity of operations plan? Integration is an important part of planning and assumes its own set of risks. How will the public and private sectors work together? How do cities integrate new technology with legacy infrastructure that has yet to be replaced? And, most important, how do we integrate smart-city technology into our strategic risk management plans and our overall visions for our communities? The stakeholders in smart cities must understand fully the implications of deployment before they even consider deployment itself. Inclusiveness and transparency are key components to gaining civic trust.

WHERE INSURANCE FITS IN The insurance industry has a role to play in helping communities transition to smart-city platforms. Claims expertise and thought leadership are important, because insurers can partner with local governments to share their understanding of tactics that can be taken to support efforts to mitigate risks presented by new technology. It’s not just about damages, claims, or a checklist—it’s about all the pieces of the risk puzzle and how they fit together. The insurance industry has to continue to educate and prepare itself. It must be able to provide smart-city risk management techniques, which will entail a fundamental shift requiring new solutions. The industry must recognize that smart cities present the potential for drastic loss shifts. For instance, there is a potential for lower frequency and severity of auto liability (according to the Argo Group survey, 47 percent of insurance brokers see software malfunctions as one of the biggest opportunities when it comes to covering autonomous vehicles). The narrow category of auto liability loss shift will cascade to other lines, including workers’ compensation, health and life insurance, and auto physical damage. These changes will come from just one smart-city segment—vehicle-to-infrastructure (V2I) and vehicle-to-vehicle (V2V) technology. Consider then all of the other segments in which property losses could be more severe as a result of high-value connected networks. Tech-enabled infrastructure will be more expensive to repair or replace. There will be a shift in perils (e.g. lightning, cyberattacks, programming defects, water intrusions, etc.). Privacy risks will expand due to the vast amount of data being collected: Are we prepared for a dramatic increase in claims regarding privacy? The losses surrounding safety and security may shift from active to passive, such as automatic critical software updates. Once these risks are factored in, the industry can focus on the exciting opportunities smart cities offer by modifying existing insurance products or creating new ones in construction, general liability, cybersecurity, property, professional, and auto. These products can integrate carrier risk control technology with smart technology to drive analytics, resulting in reduced losses and a framework for predictive underwriting. Indeed, there is a market opportunity threat if insurance products—both risk transfer and risk control—don’t keep pace with smart-city technology. If it seizes this opportunity, leading the way in mapping out and managing the risks and opportunities that smart cities entail, partnering with local governments to share data and develop new methods of risk analytics, the industry will become integral to the new community platform.

Thom Rickert has enjoyed a 35-year career in the insurance industry and is currently with Argo Group U.S. as an emerging risk specialist.

JANUARY 2019 | PUBLIC RISK

A LITTLE PREP GOES

A LONG WAY

PUBLIC RISK | JANUARY 2019

GET READY FOR WINTER STORMS BY COLEMAN BROWN

HE PHRASE “WINTER IS COMING” was used as a harbinger of doom on the popular show,

Game of Thrones. Local governments, especially those who work with emergency preparedness, have long shivered in anticipation of the cold weather and all the challenges it brings. Headaches can emerge when a forecast of ice or snow pops up on the local radar. And these

headaches never seem to go away, no matter how many times a community has endured the wrath of Old Man Winter.

The only way to alleviate the pain that winter can cause is by consistent preparation and awareness.

THE WINTER STORM PREPARATION

Municipal, county and state government entities have what is best described as a practice run at the first sign of snow. In the worst case scenario, snow plows and salt trucks can take to the roads without any plan or coordination in place. This often result in chaos on the roads and increased danger. It’s easy to envision a snow plow driving along a small road and hitting a parked car. It’s even easier to imagine the sounds of phones ringing off the hook from residents screaming about their roads being left unplowed. So what can public entities do to tame the winter storm chaos? Clearing the roads is the first order of business, but having a preplan will ensure that the task is completed effectively and efficiently.

Practice may not make perfect. Having salt trucks practice driving with snow plows on board during normal weather can significantly reduce the chances of damaging other vehicles. This can be achieved by holding training and practice exercises to hone their skills especially on those small and narrow roads that can be so troubling. Managers may also want to use Geographic Information System (GIS) mapping to help develop efficient and safe routes for drivers well before a storm starts. With the preponderance of GPS systems in all vehicles can also help track drivers to see where they have plowed and, for bigger roads, what lanes have been cleared. Using these technologies can help clear roads in a very efficient manner. And clear roads means less risks for citizens—and less liabilities for a governing agency.

JANUARY 2019 | PUBLIC RISK

A LITTLE PREP GOES A LONG WAY: GET READY FOR WINTER STORMS

SALT OF THE EARTH

Salt management is also a huge factor in ensuring safety during a winter storm. The city works dept. is usually responsible for keeping an eye on how much salt a community typically needs during a winter and how much is available as well as factoring in how much to budget for salting needs well in advance. But even with all of that preparation ahead of time, all it takes is just a few more inches of snow than what usually occurs to blow the salt savings and budget. Knowing how to efficiently purchase and distribute road salt throughout a season helps mitigate both hazards and potential budgetary concerns. Municipalities and similar entities may also want to look to other alternatives to road salt to help keep roads safe. For instance, certain types of brine solutions stick to roads and help prevent snow and ice from sticking to the ground. In addition, unlike rock salt—which bounces when it hits the ground—brine solutions get into cracks and crevices. Liquid magnesium chlorides are great for anti-icing and pre-treatment. It’s a great idea to take trucks out ahead of a storm to prevent icing by pre-treating roads and making sure they are familiar with their route before the storm hits.

A FAILURE TO COMMUNICATE

Another major stress—perhaps the biggest one—when it comes to the winter is how and when to communicate to the general public. What does a municipality do if the area is getting light rain with temperatures in the 30s? The decision to close a town because of a winter storm should not be taken lightly, it can lead to lost business and productivity for the workforce. Or, even worse, what happens if the suggestion to leave is made too late? Perhaps the most infamous incident of this happening was Atlanta’s 2014 “SnowJam,” in which a scant two inches of snow led to turmoil throughout an entire metropolitan area due to a lack of communication between various municipal, county, state agencies and public school systems. The area was unfamiliar with winter weather and unprepared for the event. The lack of communication from governing bodies ultimately exasperated the situation. Tens of thousands of motorists unaccustomed to driving in wintry conditions took to untreated roads. People were trapped for hours on highways and backroads, with thousands of students stranded all night in their schools. It was an utter disaster and a textbook case of the havoc poor communication can cause during a storm, even one that results in barely more than a dusting on the roadway. It is also imperative that various government agencies communicate well with the public itself. Does local emergency management agencies put out public affairs announcements that stress to residents what they may need in a car (brush, broom, salt or sand along with a blanket and minimum survival kit in the trunk) in case they are stuck in a winter storm? Are snow routes clearly defined and reinforced to the community? Are there stakes that mark out corners to clearly designate where curbs are located? In addition, the local emergency management agencies or municipality should communicate ahead of time exactly what it will do for the community, and what it expects from the community. Some of the questions that should be answered: • Who will be responsible for clearing parking lots? • Who is responsible for ensuring sidewalks are cleared?

PUBLIC RISK | JANUARY 2019

• Does everyone know emergency parking rules and have options to place their vehicle in case it must be moved? • Will one side of the street be kept clear of cars to allow for plows to clear all the way through? Having answers to these questions, and an effective preplan in place to constantly remind the public of this information, goes a long way to ensuring a safe winter.

THE HIDDEN DANGERS OF ICE In many cases, ice is an even harder form of precipitation to cope with compared to snow. Black ice is dangerous. It can’t be seen and can lead to any number of injuries as slips can easily lead to broken bones, serious back injuries and severe lacerations. A government agencies or municipality can face severe liability if black ice on public property is not properly taken care of. Governing officials must keep abreast of all areas that freeze. Making sure they are cleared and salted can aide in the prevention of injuries and a potential lawsuit. A frozen pond, lake or similar body of water can lead to absolute tragedy. Every year, people see an iced over pond and think it is possible to walk and slide across. But, all too often, the ice is nowhere near thick enough to support the weight of a person. In 2017 alone, there were at least four ice-related drowning deaths that occurred because people thought it safe only to lead to tragedy. It is well worth the effort to make sure that signage is posted up and around a body of water that clearly communicates the dangers of thin ice and the potential of drowning. It isn’t just people walking on ice that end up in perilous situations. Driving an ATV or snowmobiles across the ice is a common occurrence in places known for winter weather. However, that requires even thicker ice. Even more tragedies occur that way. Managing the winter weather is a complicated affair. However, good preparation in advance of the storm goes a very long way in diffusing a difficult season. Coleman Brown is vice president of risk control for CBIZ Inc.

Further your public sector risk management education without leaving the office! This Webinar series features top presenters delivering risk knowledge to your desktop!

PRIMA’S 2019 RISK MANAGEMENT

WEBINAR SERIES PRIMA WEBINARS ARE FREE FOR MEMBERS! Visit www.primacentral.org today to register for individual Webinars or for the entire program!

JA N UA RY 16 | 1 2 : 0 0 P M – 1 : 3 0 P M E ST CLAIM ADVOCACY: FACT OR FICTION? S P E A K E R : Melissa Steger, MPA, Associate Director of Unemployment and Workers’ Compensation Insurance, The University of Texas System Julie Saucedo, National Account Manager, CCMSI DESCRIPTION: Go “live” into a workers’ compensation insurance trial and experience the process firsthand. Watch direct and cross-examination of witnesses and weigh the evidence. There will be a mock trial that will show you how an employer, adjuster and doctor can directly impact the mechanics and outcome of a claim. The overarching theme of the presentation is to compare and contrast traditional claims handling against a claim advocacy model. AT T E N D E E TA K E AWAYS :  Understand the importance of a thorough investigation  See how claims handling can drive medical treatment and outcomes  See the impact dignity and respect have on claim outcomes  Understand how to instill a claims advocacy culture into a WCI program

For more information, or to register, visit primacentral.org/webinars.

PUBLIC RISK | JANUARY 2019

THE RISK-VALUE CURVE:

HOW TO OP TIMIZE R ISK AN D GEN ER ATE VA LU E FOR YOU R ORGANIZ ATION

BY JENNIFER HILLS, BOBBI-JO PANKAJ, LAUREN PASHIA, AND GREG WALLIG

HIS ARTICLE DISCUSSES THE ROLE RISK OPTIMIZATION CAN PLAY IN GUIDING THE ORGANIZATION TOWARD TAKING THE RIGHT RISKS TO ADVANCE ENTERPRISE

VALUE. Using a risk optimization mind-set, an organization can promote a risk-aware

culture, expand the conversation to include not just risk mitigation but also value creation, and create a comprehensive view of risks to drive strategic decisions. It provides a riskvalue framework and an example of where it has been used successfully.

JANUARY 2019 | PUBLIC RISK

THE RISK-VALUE CURVE: HOW TO OPTIMIZE RISK AND GENERATE VALUE FOR YOUR ORGANIZATION

Historically risk management was focused on preventing and reducing operational loss through risk avoidance and risk transfer. The discipline has evolved toward enterprise risk management (ERM) which is used by organizations to manage risks and seize opportunities, expanding the focus to a broad spectrum of risks including strategic, reputational, compliance and financial. An ERM approach enriches the conversation with stakeholders by evaluating the strengths and weaknesses of a strategy, and how well that strategy aligns with the organization’s mission and vision. It also supports organizations in managing risks and opportunities within a defined risk appetite toward an optimal balance between risk mitigation and risk taking. This allows the organization to deploy resources effectively in pursuit of their objectives, and maximizes value. Taking risks to deliver value requires a risk-aware culture. Many risk management processes start with the identification, assessment and measurement of risk. Even before this occurs, an organization should have an understanding of their risk appetite, which is the amount of risk they are willing to accept in pursuit of business strategy. This gives permission for managers, supervisors, and front line employees to take informed risks to further the mission. Establishing a risk appetite

ENTERPRISE VALUE

also enables the organization to develop cost-effective and efficient risk response plans within their specified risk appetite. For this to be effective, senior leaders must acknowledge that the risk managers, the Chief Audit Executive or the Chief Risk Officer do not assume risk. Risk is owned by the business units. The risk manager can help assess risks and opportunities and provide structure to risk-taking decisions. When focusing risk management activities on risk optimization, organizations have the option to purposefully engage risk in a positive way to create value. A risk-value approach is useful for decision-making and will support leaders’ abilities to take smart risks that yield a positive value for the organization. The Risk-Value curve is a tool risk managers can use to facilitate risk discussions and help decision makers know how much risk to mitigate or take. The risk-value framework was developed by the Consortium for Advanced Management International (CAM-I). CAM-I is an international consortium of private sector and government organizations who are working cooperatively to solve management problems and critical business issues that are common to the group. Organizations are using this Risk-Value curve to shift thinking

about risk, and support risk taking within the organization’s risk appetite. The concept demonstrates how an organization can take on informed risks to implement an initiative or project and increase value within a risk optimization zone. Continued risk taking beyond an optimal zone could result in value decline and a possible crisis. The diagram depicts the relationship between risk and enterprise value. A traditional view of the relationship between risk and value is inverse; as risk increases value declines. This framework changes the shape of risk to a bell curve. In the first zone, risk is low, but so is value. The organization has placed too much emphasis on mitigating and avoiding risks, and is therefore bypassing potential investments that could yield a positive return for the organization. In the second zone of the diagram, risk is optimized—the organization is taking risk up to its tolerance level. Key risk indicators which signal increasing risk exposures are important in this zone so the organization can engage the right kinds of risk that might otherwise be avoided, thereby increasing enterprise value. Once the high point of the curve has been passed, the organization is moving to the zone where excessive risk taking occurs. The organization may need to apply risk management tools to avoid a potential crisis. In the last zone,

RISK OPTIMIZATION POINT

HIGH

LOW

INSUFFICIENT RISK APPETITE

LOW

PUBLIC RISK | JANUARY 2019

PROACTIVE RISK TAKING

EXCESS RISK EXPOSURE

CRISIS HIGH

RISK LEVEL

Understanding where an initiative or project falls within the

Risk-Value curve provides management with a powerful tool to provide direction and gain maximum value in the face of competing priorities. This process can help an organization take informed risks to pursue an initiative or project to

realize the value. As risks are assessed to inform decisionmaking, it is important to consider the risk of status quo. There is inherent risk in standing still, but sometimes we forget to calculate the risk of doing nothing.

if the organization leverages risk management continuity plans and crisis management tools (insurance, active monitoring, public relations, and increases to reserves) it has the opportunity to make adjustments and move left on the curve to avoid a potential crisis. Understanding where an initiative or project falls within the Risk-Value curve provides management with a powerful tool to provide direction and gain maximum value in the face of competing priorities. This process can help an organization take informed risks to pursue an initiative or project to realize the value. As risks are assessed to inform decision-making, it is important to consider the risk of status quo. There is inherent risk in standing still, but sometimes we forget to calculate the risk of doing nothing.

EXAMPLE OF WHERE THE RISK VALUE METHODOLOGY HAS BEEN SUCCESSFUL King County, Washington, is using the Risk-Value curve to change their culture from risk-averse to risk-optimized. King County, which includes the Seattle-Bellevue metropolitan area, is the 13th largest county in the United States serving a population of

more than 2 million. Throughout the past five years, King County has experienced growth in population, construction, transportation, and business. This economic expansion affects all of King County’s departments and programs, ultimately increasing the complexity of government services. King County, through its 14,000 employees, provides public health and community services, parks and recreation, wastewater treatment, building and land use services, and criminal justice through law enforcement, correctional facilities, courts, prosecuting attorneys and public defenders. King County also operates regional bus, light rail, and street car services with more than 140 million annual passenger trips, provides passenger ferry service, and owns and operates King County International Airport/Boeing Field.

One example comes from the Public Health Department. For decades, Public Health has offered internships to college students in various medical fields. In order to participate in an internship, the student’s college or university had to agree to the insurance and indemnification requirements in King County’s contract. One clause required the educational institution to indemnify King County for the negligent acts of their student interns. Four-year universities would agree to the language, but two-year community colleges would not. Public Health looked at the demographics of students who attend four-year universities and students in two-year programs through an equity lens. King County is committed to equity and social justice, and creating opportunities where all people have equitable opportunities to thrive.

With King County Executive Dow Constantine’s encouragement, King County is changing its approach to risk. They are using the Risk-Value curve as a way to visualize when risk can be optimized versus placing too much emphasis on mitigating or avoiding risk. This has encouraged a more balanced approach to risk, and county departments are starting to take informed risk to increase value for their customers.

Public Health decided it was time to reevaluate their internship program and asked the Risk Management Office for assistance. The team looked at where the internship policy was on the Risk-Value curve (inefficient phase—risk was low but so was value) and where they wanted to be (a more optimal position of increased risk for added value). After analyzing past losses caused by student interns, the value to be gained by developing students’ interest in public

JANUARY 2019 | PUBLIC RISK

THE RISK-VALUE CURVE: HOW TO OPTIMIZE RISK AND GENERATE VALUE FOR YOUR ORGANIZATION

health as a career, and the additional risk to King County from eliminating the indemnity protections, everyone agreed to take the risk in pursuit of value. King County amended their contract, eliminating the requirement that two-year colleges indemnify King County for the negligent acts of student interns, thereby transferring that risk to King County. Under King County’s historic view of risk as something to avoid, risk optimization would not have resonated with leaders in Public Health. King County’s success with ERM gave them the tools to apply the Risk-Value Curve and accept increased risk in the student intern program to add value for Public Health, the students, and the community. The King County Risk Management Office is encouraging smart risk taking from their

own staff as well, with a new approach to negotiating County contracts in alignment with the County’s equity and social justice commitments. Insurance requirements are carefully evaluated in connection with contract exposures. When possible, terms are adjusted to expand contracting opportunities for smaller companies and community-based organizations. In some cases, this may mean accepting a lower level of insurance or allowing for more flexibility in contract provisions to open up opportunities for smaller organizations who have demonstrated effectiveness and are representative of the population needing services.

advance their mission and values. This contemporary approach views risk in two dimensions and has the power to transform an organization’s thinking. We have described the Risk-Value curve and given you an example of how it has been applied at King County. We encourage you to use the RiskValue curve to lead a strategic discussion as you are making decisions on your organization’s next initiative. Jennifer Hills (King County Washington) Bobbi-Jo Pankaj (Grant Thornton) Lauren Pashia (Boeing) Greg Wallig (Grant Thornton)

This Risk-Value curve developed by CAM-I helps introduce the concept of value when analyzing risk which in turn helps organizations take on measured risks in order to

LEARN IN YOUR OWN TIME WITH

PRIMA PODCASTS! PRIMA’s Podcasts are a quick and convenient way to learn on-demand and on your own time!

Meant to provide you with information on specific topics important to the public risk management sector and hot topics, PRIMA Podcasts are the perfect way to fit in education and training into your busy schedule.

Check www.primacentral.org for new Podcasts!

PUBLIC RISK | JANUARY 2019

CURRENT PODCAST TOPICS INCLUDE: Comorbid Conditions The Aging Workforce

AND MORE!

ADVERTISER INDEX

Munich Reinsurance America. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 20 Rimkus Consulting Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Back Cover States Self-Insurers Risk Retention Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inside Back Cover

CALENDAR OF EVENTS PRIMA’s calendar of events is current at time of publication. For the most up-to-date schedule, visit www.primacentral.org.

HAS YOUR ENTITY LAUNCHED A SUCCESSFUL PROGRAM? An innovative solution to a common problem? A money-saving idea that kept a program under-budget? Each month, Public Risk features articles from practitioners like you. Share your successes with your colleagues by writing for Public Risk magazine! For more information, or to submit an article, contact Jennifer Ackerman at jackerman@primacentral.org or 703.253.1267.

PRIMA ANNUAL CONFERENCES June 9–12, 2019 PRIMA 2019 Annual Conference Orlando, FL • Gaylord Palms

FIND US ON FACEBOOK!

June 13–16, 2021 PRIMA 2021 Annual Conference Milwaukee, WI • Wisconsin Center

June 14–17, 2020 PRIMA 2020 Annual Conference Nashville, TN • Gaylord Opryland

PRIMA INSTITUTE October 21–25, 2019 San Diego, CA ISO 31000 TRAINING March 13–14, 2019 Las Vegas, NV November 13–14, 2019 New Orleans, LA

Keep up with what’s happening at PRIMA and connect with your risk management peers! Visit us at www.facebook.com/primacentral.

PRIMA WEBINARS January 16 • Claim Advocacy: Fact or Fiction? February 13 • Generational Leadership & Communication February 27 • Transform Your Organization’s Culture by Becoming a Transformational Leader March 20 • Understanding Actuarial Reports April 17 • Understanding Your Greatest Risks May 15 • Fentanyl and the Safety of First Responders June 26 • Jail Operations: Evolving Changes and Risk Reduction July 17 • Cultivating a Safety Culture August 21 • Avoiding Liability: Early and Regular Communication with Your Legal Team September 25 • Steps to Developing a Risk Appetite Framework October 16 • Integrating ERM with the Strategic Planning Process November 20 • Improving Safety in Government by Changing Driving Behavior December 11 • What Your Attorney REALLY Wants from Risk Management

JANUARY 2019 | PUBLIC RISK

What the Hack! Whoâ&#x20AC;&#x2122;s hacking into your system right now? Your organization could be next. www.munichre.com/whatthehack Products and services provided by Munich Reinsurance America, Inc. (Princeton, NJ)

NOT IF, BUT HOW

MANAGEMENT

STRATEGY IS DIRECTLY SUPPORTED BY STATES’

SPECIALIZED COVERAGE FORM,

PERSONALIZED SERVICES AND PUBLIC ENTITY EXPERTISE.”

DOUG STONE director of risk management

city of springfield, missouri

states member-owner over

4 years

MEMBER-OWNER

“OUR OVERALL RISK

STATES OFFERS YOU: • A BROADLY INTERPRETED EXCESS LIABILITY COVERAGE FORM THAT IS SECOND TO NONE IN THE INDUSTRY. • PREMIUM STABILITY AND SOUND FINANCIAL RESULTS FOR OUR PARTNER MEMBERS – MEMBER PREMIUMS ARE INVESTMENTS IN THEIR OWN COMPANY. • EXCELLENT CLAIMS AND LOSS CONTROL SUPPORT, INCLUDING ON-SITE. • SPECIALIZED PUBLIC ENTITY-ORIENTED SERVICES FROM EXPERIENCED, SERVICE-DRIVEN PROFESSIONALS.

FOR INFORMATION CONTACT: STATES SELF-INSURERS RISK RETENTION GROUP, INC. AT 1-800-640-0345, EXTENSION 3310, OR VISIT OUR WEBSITE AT WWW.STATESRRG.COM