storm © strategic risk management zurich municipal management services risk based consultancy 13th...
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STORM STORM ©©
strategic risk management
Zurich Municipal
Management Services
Risk based consultancy
13th October 2004
David Forster
Hampshire Health, Safety and Environmental Group-
an insurers perspective
• Zurich Municipal’s risk based consultancy
• Focusing on high level business risk
• ISO 9001 accredited
• Approved contractors for Office of the Deputy Prime Minister's capacity building programme
• Background in Treasury, Local Government and Education
Who are we?
The ‘state’ of the insurance market in the publicservices
The role of business risk management in the publicservices
Where is it all going?
Two current big business risk issues:
The ‘compensation culture’
The Civil Contingencies Act
Questions please
AgendaAgenda
The state of the insurance market in the public services
• Insurance in the public services is in a state of intense flux
•A market worth several (8?) billion pounds is having to deal with spiralling claims costs ( in some areas costs doubling in less than 10 years)
•In Local Authorities alone, claims costs are in excess of £1 billion
•Public expenditure by Local Authorities is circa. £60 billion
•Estimates in the NHS are as much as £4 billion
•This does not include central government
Public services reaction to this problem
• Recognition that this cannot go on in this way
•The ‘death’ of ‘ground-up’ insurance
•Higher and higher ‘deductibles (£100,000-£250,000)
•Some organisations fully self insure-not always a good idea.
•Attempts to set up pools and mutuals-not always successful
•Some government schemes e.g. N.H.S.L.A.
Public services reaction to this problem
• Recognition that this cannot go on in this way
•The ‘death’ of ‘ground-up’ insurance
•Higher and higher ‘deductibles (£100,000-£250,000)
•Some organisations fully self insure-not always a good idea.
•Attempts to set up pools and mutuals-not always successful
•Some government schemes e.g. N.H.S.L.A.
Insurance organisations’ reaction to this problem
• Better management of contingency fees (no win no fee)
•Recognising the role of risk management
•Managing the causes as well as the symptoms (community impact)
Quick history of risk management in the public services
• Ground up cover until 1993
•Death of Municipal Mutual- failure of public services mutual
•Growth of operational and physical risk management- management of insurable risk
•The emergence of corporate governance and the recognition of the wider role of risk management/controls assurance
Recent evolution
• Recognition that only 20% of risks are insurable
•Government demands on the role of risk management, in particular from the Treasury
All organisations exist to achieve their objectives.
The purpose of risk management is to manage the barriers to achieving these objectives.
Treasury ‘Orange book’ 2001
There are two types of risks:
•direct threats (damaging events) which could lead to a failure to achieve objectives.
•opportunities (constructive events) which if exploited could offer an improved way of achieving objectives , but which are surrounded by threats.
Treasury ‘orange book’ January 2001
Political
Economic Social
Legislative/ Regulatory
Environmental Competitive Customer/
Citizen
Managerial/
ProfessionalFinancial Legal
Partnership/ Contractual
Physical
Techno-
logical
Up to date
Openness & inclusivety
Integrity
Effectiveness
Accountability
Community Focus
Service Delivery
Arrangements
Structures and
Processes
Standards of
Conduct
Risk Management and Internal
Control
CORPORATE GOVERNANCE FRAMEWORK
Members role:Who Their Role Their Responsibility
Cabinet
(Reporting Annually)
To formally approveXXXXX City Council’sRisk ManagementStrategy. IssueStatements ofAssurance annually tostakeholders afterreceivingreports/declarations fromthe Chief Executive /Heads of Service.
Ultimately responsiblefor risk management andto hold Chief Executiveaccountable for theeffective management ofrisk by officers of XXXXXCity Council
Employees andCouncillors
To manage riskeffectively in their job andreport hazards/risks totheir Service Managers.To undertake their jobwithin risk managementguidelines.
Report to ServiceManagers incidents andissues that place thecouncil at risk.
Vulnerability Trigger Consequence
The Decent HomeStandard and rentrestructuring in linewith national levelswill drive up the costof the Council’s socialhousing provision
Housing budget putunder pressure andfails to meet needs
Lack of money for maintenance ofCouncil homes
The condition of the housing stockdeteriorates
Tenants complain Possible health and safety
issues arise Resources diverted from other
services Services suffer Council has to consider LSVT Uncertainty of outcome
RISK SCENARIO
Vulnerability Trigger Consequence
Council provideshigh profile andhigh risk services
High profile incidentleading to sustainedmedia and legalattention
Service is frozen Negative impact on rest of
organisation Loss of confidence in management Criticism of officers Reputation of council damaged Recruitment is inhibited Loss of quality staff Loss of confidence in council
©Zurich
RISK SCENARIO
Vulnerability Trigger Consequence
The CivilContingencies Billrequires the Council toreassess therobustness of itsbusiness continuityplanning process.
A major incidentoccurs in theBorough/Councilfor which there isno effectivebusiness continuityplan
Effective procedures not implemented Disruption to services Key information lost Local community at risk Resources used trying to rectify
situation Community loses confidence in the
Council Council seen to be failing to meet
requirements of Civil ContingenciesBill
Adverse publicity
RISK SCENARIO
RISK SCENARIO
Vulnerability Trigger Consequence
The Council has astatutory obligationto meet recyclingtargets set by theGovernment
Recycling is notseen as a votewinner and hasa low profilewithin thecouncil
Statutory targets missed Censure by audit/inspection Central government confidence in Council
undermined Disillusionment of staff, councillors and
partners Adverse publicity Image of Council damaged
©Zurich
RISK SCENARIO
Vulnerability Trigger Consequence
Council has limited resourcecapacity – at a time when it isundergoing restructuring andtaking on major projects.
Council is dependant on a fewkey officers, some identify thisas between 15 and 20individuals (the ‘usualsuspects’) to take projects /initiatives forward.
Desire exists to takeon new initiativesbut resources(including key staff)not available for ahigh profile project
or
Individuals aredrawn off day job todeal with keyproject
Strategies and projects notdeveloped or delivered
Key services put at risk Council doesn’t move forward Staff frustrated Long hours culture Staff under pressure leading to
stress and absenteeism Key staff leave Day-to-day jobs don’t get done Failure to deliver objectives Authority criticised Adverse publicity
Where next?
• Creating a culture of risk management within public bodies
•Becoming part of the way things get done
•Recognising risk sits at all levels and needs to be managed
•Now part of Government formal inspections e.g. C.P.A.
RISK MANAGEMENT
IN ORGANISATIONS
Strategic Business
Directorate / Programme
Operation / Project
Strategic and cross cutting issues affecting the achievement of business objectives
Issues affecting the achievement of directorate objectives
Man
agem
ent c
o-or
dina
tion
Issues affecting the achievement of operational/ project
objectives
FIVE STAGE PROCESS
Stage 1
Engaging hearts & minds at the top
Stage 2
Corporate & cross-cutting risks
Stage 3
Directorate risks
Stage 4
Service and project risks
Stage 5
Transfer of skills - support and review
b
Strategic
Broad - Corporate
Operational
Specific - SpecialistsMembersDirectorsHeads of ServiceLegalFinancialPersonnelITStrategyPolicy
Specialists (including IT,operation managers,technical staff)Health and SafetyPersonnelITEmergency PlannersFacilities ManagerProperty Manager
The ‘state’ of the insurance market in the publicservices
The role of business risk management in the publicservices
Where it is all going
Two example current big business risk issues:
The ‘compensation culture’ The Civil Contingencies Act
AgendaAgenda
Compensation Culture
‘ Perception of Compensation Culture is damaging’ Task force report says
•‘The Compensation Culture is a myth’
•Is it???
Some figures
• Figures from FOIL (Forum of Insurance Lawyers)during period 1992 - 2000
cost of injury claims rose by 117%claims frequency rose by 3% per annumclaims severity rose by 6.7% per annum
Backed up by IUA report which shows over last 10 years claims cost risen on average 9.9% per annum
The experience
• Highways
•Employers Liability
•Public Liability
•Housing
•Stress
•One City Council at one point was experiencing over £1 million worth of pavement trip claims per annum
Compensation Culture
Tackling this issue is one of the greatest challenges facing many public bodies if claims costs are to be brought under control
Civil Contingencies Act
• New Civil Contingencies Bill has been drafted
•Likely to be en-acted Winter 2004/Spring 2005
•New duties placed on public bodies
•It will become a top item on the agenda
Civil Contingencies Act
• Existing legislation out of date
•Foot and Mouth, Fuel Shortage and September 11th
•Need for modernisation of emergency powers to reflect today’s world
Civil Contingencies Act
Category 1 Responders
- All local authorities
- Emergency services
- NHS Trust/Foundation Trust/PCT
- Port/ Health Authorities
- Environmental Agency
Civil Contingencies Act
An event or situation that threatens serious damage to:
- Human welfare- The environment- Security of the UK or a ‘place’ in the
UK
Covers events including flooding, a terrorist attack (dirty bomb), an oil spill and an epidemic
Therefore the bill’s range is much broader:
It is more than just an extension of emergency planning
It is about maintaining the services provided
Civil Contingencies Act Duty to Assess:
Assess the risk of an emergency occurring (New meaning of emergency)
Consider what are the risks - Think externally as well as internally
2. Duty to Plan:
Maintain Plans necessary to deal with an emergencyArrange for the publication of assessment and plans
3. Duty to provide advice:
Assistance to the public in making arrangements for the continuance of commercial activities.