Identify and Analyze Loss Exposures
This is the process of determining the potential sources of loss, or “hazards”, that your school board is exposed to which may result in loss or injury. This is a critical component, as it will assist you in determining where to divert your resources.
There are several ways to identify sources of loss, but the most common approaches are:
- Analyze past claims experience and determine categories or types of losses that you have had (Contact OSBIE Risk Management).
- Analyze past incident report data to determine where minor injuries that did not result in claims were occurring. Based on the law of large numbers, large clusters of incidents from a specific source can be predictors of where claims will eventually occur. (Contact OSBIE Risk Management).
- Conduct a survey of each department or operating division to determine where potential losses can occur. Such surveys can be done professionally, or can be completed in-house using the sample template (Figure 1). Within a department, each activity can also be assessed using this form. Once completed, each risk factor can be ranked Low, Medium or High and appropriate strategies can be documented to address each one (see Risk Management Steps 2 and 3).
- Site inspections can also be used to provide a visual perspective of where your exposures are – e.g. proximity to nuclear facilities, manufacturing plants, transportation arteries, natural hazards, isolated/remote location, high crime area, etc. Again, these inspections can be conducted professionally or could be done in-house.
The types of risk identified by any of the above methods generally fall into the following categories, and can be charted as illustrated in Figure 1:
Financial Risks – Also known as “Net Income Risks” (because they impact the bottom line of an organization), these are the risks that are not paid for by insurance, whether by choice or by exclusion – e.g. Fines, penalties, clean-up orders, losses below your insurance deductible, punitive damages, losses excluded by insurance policy, increases in premiums due to claims experience, etc.
Liability Risks – These are the risks you face of being held legally responsible as the result of an employee’s negligent act causing injury or damage to someone else. That includes all the activities your board approves, organizes, directs, controls and supervises, as well as what is imposed on you by law, such as Occupier’s Liability, Employer’s Vicarious Liability, Joint and Several Liability, etc.
Property Risks – These are the risks you face of losing your buildings or property resulting from natural events (tornado, flood, etc.), technological events (fire, chemical, explosion, electrical, etc.) or man-made events (arson, vandalism, terrorism, etc.)
It must be recognized that all risk elements are not equal in terms of frequency (how often a loss will occur) and severity (how serious the loss is). Since scarce resources cannot be devoted to address all risks equally, it is necessary to rank or prioritize your risks into categories that can be dealt with based on the degree of threat that is posed to the school board.
Risk can be ranked many ways, but a simple and effective method is to use Low/Medium/High rankings, as follows (See Figure 2):
Low – There is an identifiable risk of a loss occurring, but it is either unlikely to occur or would not cause serious injury/damage. Some characteristics of low risk factors include, but are not limited to: sedentary classroom activities, low-impact exercises, walking, computer studies, reading activities, etc.
A particular event or situation may also be considered a low risk if the likelihood of an occurrence is rare or atypical for the school environment or location. Events such as hurricanes, earthquakes, nuclear war, radioactive fall-out, students experiencing fatal heart attacks, etc. are considered examples low risk as they rarely occur and, unless situations or conditions suddenly change, would not warrant an allocation of resources to manage such risks.
Medium – There is a known risk associated with the activity that may cause a loss to occur, but you can takes steps to remove or reduce the risk. Some characteristics of medium risk factors include, but are not limited to: physical contact sports, commercial transportation, water transportation, downhill sports (ski, toboggan, tubing, etc.), water activities (swimming, sailing, canoeing, etc.), physical education programs, etc.
There is also a sub-class in this category called “High medium”, which applies to activities where relatively few losses occur, but because of the nature of the hazards, result in catastrophic types of losses occurring. Activities and operations under this sub-category need to be carefully considered, and if selected, managed with more caution than the medium risks, and includes things like wilderness excursions, rock climbing, high ropes, canopy walks, technical studies programs, etc.
High – The nature of the activity or the presence of obvious hazards results in a High probability of a loss occurring with catastrophic results (high severity); it is foreseeable that a loss will occur, and/or you have no control over the risks that are present. Some characteristics of high risk factors include, but are not limited to: fall heights exceeding 8 feet; severe weather conditions, high speeds, uncontrolled/free falls or jumps, strong water currents or tidal effects, inexperienced or unqualified supervisors and/or participants, students driving vehicles, etc.