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The National Alliance for Insurance Education & Research

© Copyright 2009. The Society of Certified Insurance Counselors, Incorporated. All rights reserved. This material includes copyrighted material of ISO Properties, Inc. with its permission. This course or any part thereof may not be reproduced, copied, republished, uploaded, posted, transmitted, or distributed in any form or by any means or stored in any information retrieval system without the express written consent of the National Alliance for Insurance Education and Research and the Society of CIC.

All trademarks and services marks are proprietary to The Society of CIC or its affiliates or licensees. 1

Administering School Risks

The implementation and monitoring of the risk management function in the school organization is the focus of our course. In this step of the risk management process, the risk manager considers his team, his method of communicating with his team, and his processes for delivering resources to the district, such as the request for proposal process. Other critical issues in this area of the five step risk management process, using the risk management information system, and adopting an ongoing program of ethics training for school employees. The Certified School Risk Managers Program was created to fill a void in the educational opportunities for school risk managers, and those agents and other service providers who work with them. By taking and passing all five of these courses, you can earn the prestigious CSRM designation. The Certified School Risk Managers Program (CSRM) is a career-building, five-part designation program for risk management education specialists. The CSRM faculty is represented by the field's top practitioners and leaders. Five intensive courses guide participants through the risk management process, emphasizing practice over theory. The five core courses for the CSRM Designation Program correspond to the five steps of the Risk Management Process. A discussion of the entire Risk Management Process is included for study at the beginning of each CSRM course. We do this because, in the actual practice of risk management, activities in one step influence actions taken in another step, creating interdependent processes.


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Fundamentals of Risk Management (FUN) – The first step in the risk management process is identifying exposures subject to loss, since an exposure cannot be analyzed, controlled, or financed until it has been identified. This course gives an in-depth look at the overall risk management process, delves into the identification step of the process, and examines the function of the school risk manager. Measuring School Risks (MEA) – This course will delve into the mechanics of forecasting and trending losses to be used in determining insurance program retentions and deductibles. Handling School Risks (HAN) – This course studies the development of a safety and health plan, loss control fundamentals (including the six primary risk control techniques), risk control and mitigation for specific exposures, and managing school claims; a post – accident loss control reduction technique. Funding School Risks (FSR) – The purpose of this course is to examine the various loss funding techniques available to school risk managers. This will include guaranteed cost programs, deductibles and retention programs, pools, and transferring risk through contracts. Administering School Risks (ADM) – This course will cover how a school risk manager implements and monitors the risk management program. Some of the topics will include the school risk management team, information technology for risk management information systems, allocating the cost of risk, ethics in school risk management, and requests for proposals. Internet Browser Warning This course is designed to work with Microsoft Internet Explorer 6.0 or above, with JavaScript enabled. Students using Firefox or Google Chrome will have difficulties with interactive pages and self quizzes. If you need technical help with your browser, please contact the OnLine Help Desk.


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How to Receive Credit for Administering School Risks To successfully complete this course, you must pass a final examination in the presence of a disinterested third party proctor/monitor. Some states have special requirements for the proctor/monitor. To learn more about the proctor/monitor requirements for your state, please click on the Proctor Instructions link below. Your proctor/monitor will enter his or her email address to sign in to the exam website. He or she must remain in your presence for the entire hour of the exam. The proctor/monitor certifies your identity, and that you have completed the exam without outside assistance of any kind. Make sure to use your 60 day timeframe to carefully prepare for the exam, and select a person to act as your exam proctor/monitor well in advance. You must pass the exam in order to receive any of the following credit:

Credit towards achieving the CSRM Designation

Credit towards achieving the CISR Designation

8-hour Annual Update credit for the CSRM Designation

State Continuing Education Credits/Hours (for state issued license renewal) Affidavit of Exam and CE Request Form With every successful exam, you and your proctor must sign and submit an affidavit of exam. When you pass your exam, fax the affidavit of exam and CE (Continuing Education) request form to the fax number printed on the cover sheet. Please send the original affidavit by mail (address also printed on the affidavit cover sheet.) We strongly recommend that you keep a copy for your records. Many School Risk Managers will have no need to request Continuing Education credits for an insurance license. Please send the CE Request form even if you are not requesting CE hours/credits for insurance license renewal. Check off the "No CE" box at the bottom of the form. Note: You will receive an email reminding you to send in the affidavit if you pass your exam with a score of 70 or above. Do not submit an affidavit for an unsuccessful exam.


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CSRM Administering School Risks Final Exam The exam is a challenging 100 point randomized test comprised of 50 multiple choice questions worth 2 points each. When you submit your exam for grading you will receive your score immediately. The score page is sent to your email address and to The National Alliance for Insurance Education. The score is recorded in your National Alliance permanent record, but is not certified until you submit the affidavit of exam, signed by you and your proctor. (In New York, the proctor/monitor must mail the affidavit.) Once we receive and accept your affidavit, we will send your notification of passing. Go to your course home page to quickly link to exam and proctor instructions, and other course information. Click on Home on the top navigation bar. Curriculum Support Faculty Members from the National Alliance for Insurance Education & Research are assigned to take emails from students in the Online Courses. Our faculty are experienced practitioners and teachers in the industry. We ask them to respond to each email within 24 hours, or before the end of the next business day. Each course mentor will be happy to clarify any portion of the curriculum that you seek help with. Make sure you have carefully reviewed the course curriculum and clearly note the page or self quiz question number when you contact a Course Mentor. Help Desk The mentors will refer any computer issues you have to the Online Help desk. The National Alliance staff is available by phone or email for technical support issues. [email protected].. To phone the Online Help Desk call: 800-633-2165 and select the online option. Monday through Friday 8:30 am to 5 pm Central Standard Time

mailto:[email protected]


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Course Study and Exam Preparation Have you ever thought about how you learn? The study aids listed below will help you determine your progress and test your understanding of concepts and examples presented in the course.

Learning Objectives: Designed for managing your own learning. The learning

objectives for the course are listed at the beginning of each topic. The learning

objectives are indicated throughout the course pages as well. At the end of the course,

you will have the opportunity to read the learning objectives again, and see how

confident you feel about each one.

Self Quizzes: Another learning management tool. You are required to pass each self

quiz with a score of 70 or above before moving forward in the course, and you can

launch a self quiz as many times as needed. To print the score page of your self quiz,

click on Assessment Results, then right click on the page. The Assessment Results

page makes an excellent study aid.

Glossary: Glossary terms and definitions are critical to insurance professionals, and a

key study aid for your online course. To define a term, click on the Glossary link above.

Definitions of newly introduced terms will also be included on the course pages.

Knowledge Checks: Application level questions. By attempting to apply the concepts

of the course, you will better prepare yourself for the final exam. Make sure you attempt

each knowledge check in the course.

Course Mentor: Don’t forget to email the Course Mentor with your questions about the

curriculum. Our faculty members are distinguished producers and risk managers who

currently work in the insurance industry. The mentors are happy to explain and clarify

the concepts in the course. They will return your email on the next business day.

A note about the CSRM Online Glossary, our online glossary is extensive and features many terms and concepts used by risk managers. Glossary terms that you see on a course page may be a part of the final exam. However, when taking the final exam, you will not be tested on the entire glossary.


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Course Objectives Overview

Section 1 Introduction to Administering School Risks This course is designed to help the student understand:

How administering school risks fits into the Risk Management Process

How to build the risk management team How and when to use outside team members How to effectively communicate with the risk management team How and when to use RFPs and CSBs How to implement and monitor the Risk Management Process

Section 2 The Risk Management Team The risk management team, which is comprised of individuals both external and internal to the district, makes important contributions to a school district’s risk management program. Some team members provide services that may not be available internally, while others use their expertise to contribute to the success of the school district’s risk management program. Section 3 Communicating with the Risk Management Team Communication from the school district’s risk manager is important to the success of the district’s risk management program. Risk managers communicate regularly with members of the risk management team and should use the communication tool that is the most effective for the recipient(s), the message, and the desired outcome. Section 4 Implementing the School Risk Management Program After the school district’s risks have been identified and analyzed, appropriate risk control techniques chosen, and financing methods selected, the risk manager has the responsibility of implementing the risk management program. Section 5 Monitoring the Risk Management Program It is very important for the risk manager to monitor the school district’s risk management program to ensure it is working as planned.


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Section 6 Ethics & School Risk Management Ethics and ethical situations have been a heavy topic of discussion in recent years. Unethical behavior by some has negatively impacted thousands of innocent people and companies. As a result, the study of ethics has become more prevalent, with some professions are beginning to mandate ethics training requirements. School district risk managers and their risk management departments should always act ethically and make ethical decisions. As a new risk manager, you have many opportunities to learn from experienced risk managers. As an experienced risk manager, you will have opportunities to share what you know with others.

Four Ways to Develop your Career as a Risk Manager:

1. Network

school principal

experienced risk manager

board member

2. Join a professional state association that supports school risk management

Public Risk Management Association (PRIMA)

Your state’s school board association

3. Become involved in a qualifies risk management training program

Obtain risk management certifications and knowledge

4. Develop rapport with external insurance agents, brokers and/or consultants

Meet with insurance and risk management vendors


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Florida Residents Only An entity that is required to be licensed or registered with the Florida Office of Insurance Regulation but is operating without the proper authorization is identified as an unauthorized insurer. All persons have the responsibility of conducting reasonable research to ensure they are not writing policies or placing business with an unauthorized insurer. Any person who, directly or indirectly, aid or represent an unauthorized insurer can lose their licenses or face other disciplinary sanctions. Please see section 626.901, Florida Statutes, to read the laws. Lack of careful screening can result in significant financial loss to Florida consumers due to unpaid claims and/or theft of premiums. Under Florida law, a person can be charged with a third-degree felony and also held liable for any unpaid claims and refund of premiums when representing an unauthorized insurer. It is the person’s responsibility to give fair and accurate information regarding the companies they represent.


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Section 1 Introduction to Administering School Risks

Administering School Risks is one of five courses that compose the Certified School Risk Manager (CSRM) designation. This course is designed to help the student understand:

How administering school risks fits into the Risk Management Process

How to build the risk management team

How and when to use outside team members

How to effectively communicate with the risk management team

How and when to use RFPs and CSBs

How to implement and monitor the Risk Management Process Learning Objectives By the end of this section you will be able to:

1. Identify and describe the five steps of the Risk Management Process.

2. Discuss how Risk Administration fits into the Risk Management Process.

3. Understand the importance of a proactive approach to Risk Administration. Risk Management What is Risk Management? While there are various definitions of Risk Management, they all contain a common theme: to protect the assets of the organization. School risk managers have a responsibility to protect the assets of their school district. How does the school risk manager accomplish this? By implementing and following the Risk Management Process. Risk management process: A system for treating risk: identification and analysis of exposures, selection of appropriate risk management techniques to handle exposures, finance at the most reasonable cost, implementation of chosen techniques, and monitoring the results.


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The Risk Management Process The Risk Management Process is a powerful five-step guide that can dramatically increase your effectiveness as a risk manager. Risk management process: A system for treating risk: identification and analysis of exposures, selection of appropriate risk management techniques to handle exposures, finance at the most reasonable cost, implementation of chosen techniques, and monitoring the results.

1. Risk Identification: The process of identifying and examining the potential courses of losses faced by the school

2. Risk Analysis: The assessment of the potential impact (costs) that various exposures can have on the school

3. Risk Control: Actions to minimize, at the optimal cost, losses which strike the school district

4. Risk Financing: The acquisition of funds, at the least possible cost, to pay for the losses that strike the school

5. Risk Administration: Planning, implementing, and monitoring the risk management program. Risk Administration also includes the development of the risk management team, utilizing both internal and external sources

identification analysis

control

financing

administration


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Step 1: Risk Identification The process of identifying and examining the potential sources of losses faced by the school.

Before you can manage risks, you first need to identify them. Risk managers are, among other things, risk detectives. They find risks and bring them into focus. Risk Identification makes risk management possible. Risk Identification Tools & Methods Risk managers use a variety of tools and methods to help them identify and examine sources of loss to their school. We've highlighted just a few.

Physical Inspections: Conduct a walkthrough of all high schools in the district looking for various exposures and hazards.

Policy & Procedures Review: Evaluate field trip guidelines to make sure student safety is not at risk.

Compliance Review: Review fire drill reports to assure compliance with applicable local and state requirements.

Checklists & Surveys: Review driver pre-route vehicle inspection safety checklists.

Physical Inspections

Compliance Review

Checklists & Surveys

Policy & Procedure Review


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Step 2: Risk Analysis The assessment of the potential impact (costs) that various exposures can have on the school.

In the first step of the Risk Management Process, Risk Identification, you collected data. In the second step, Risk Analysis, you analyze this data to find important patterns. You examine these patterns to assess what impact they might have on the cost of loss. This is done through qualitative and quantitative analysis.

In Risk Analysis, the risk manager is often looking for trends and patterns. What tasks are associated with quantitative and qualitative risk analysis? Quantitative Risk Analysis

Claims development

Dollar value of claims (severity)

Number of claims (frequency)

Indexing for inflation

Calculating Ultimate Total Loss

Loss pic calculation Qualitative Risk Analysis

Review incident reports

Contract analysis

Safety audit review

Policy review


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Step 3: Risk Control Actions to minimize, at the optimal cost, losses that strike the school district.

Risk control is the “action step” of risk management. You apply the information you identified and analyzed in the first two steps of the Risk Management Process and take actions that minimize risks. Risk control: The technique of minimizing the frequency or severity of losses with training, safety, and security measures. See also Loss control. Risk Control is handling risk. Risk Control: Two Theories of Risk Most people would agree that both people and things cause accidents. Good risk management addresses both of these. Two theories of risk have been proposed to explain why accidents occur.

Human Approach – People Cause Accidents Problem: Staff and students who are not trained in safety procedures or do not realize the importance of following them Solution: Regularly train and motivate them to follow safety procedures

The Engineering Approach – Things and Energy Cause Accidents Problem: Safety guard missing from the table saw in the Woodshop Solution: Perform regular safety inspections of classrooms


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Risk Control: Techniques Risk managers use a variety of tools and methods to help them identify and examine sources of loss to their school. Avoidance: Eliminating a risk altogether

Example: Not sponsoring a Senior Trip to a foreign country

Prevention: Reducing the frequency (number) of losses

Example: Installing outside lights

Reduction: Reducing the severity (cost) of losses

Example: Requiring the use of safety equipment

Segregation/Separation/Duplication Example: Maintaining backups of computer data in more than one place

Transfer: Physical transfer and contractual transfer

Example: Using a third party to operate Food Services

Combination: Any two (or more) risk control techniques Example: Requiring a hold harmless agreement from the roofing contractor and clocking off walkways close to the roof repair

Complete the Knowledge Check: Section 1 Risk Management Process p13 (ADM)


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Step 4: Risk Financing The acquisition of funds, at the least possible cost, to pay for losses that strike the school.

An earthquake hits a California school, damaging buildings and injuring staff members and students. How will the school pay for this catastrophe? Did it set aside adequate emergency funds? Does it have adequate insurance? Whatever risks your school faces, addressing funding before the risks occur keeps the school’s expenditures in check. The alternative can be extremely costly – both financially and socially. Risk Funding: Funding losses Risk Finance: Two Ways to Finance Risk There are two ways to finance risk: retention and transfer.. There are two types of retention.

Active Retention Retention means using funds from within the school organization to pay for losses. When the school makes a conscious, informed decision to retain all or part of a loss, it is active retention. Passive Retention This refers to the times when the school finds out after the loss that it is financially responsible for paying for the damage or injuries. Passive retention is unplanned and is sometimes referred to as “whoops”. Passive or unplanned retention is something to be avoided.

Retention: 1) Budgeted losses + tolerance corridor (a tolerance corridor is the marginal retention amount beyond budgeted retention that may also be actively retained); 2) Assumption of risk of loss as through the use of non-insurance, self-insurance, or deductibles. This retention can be intentional (active retention) or, when exposures are not identified, unintentional (passive retention); 3) In reinsurance, the net amount of risk the ceding company or the reinsurer keeps for its own account or that of specified others. Transfer of risk : A risk management technique whereby a portion of the financial consequences of a loss are transferred to another party through a contract, e.g., a hold harmless agreement, or to a professional risk bearer, i.e., an insurance company.


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Examples

“What do you mean our insurance doesn’t cover this?” – Passive retention “What a relief! All we have to pay is our $10,000 deductible.” – Active retention

Transfer You can also finance losses with funds from outside the school organization by using a contractual or other arrangement. Insurance Transfer: A formal social device for reducing risk by transferring a portion of the financial consequences of a loss to an insurer. The insurer agrees, for a consideration, to assume, to a specified extent, the losses suffered by the insured. Insurance involves substituting a relatively small known cost for a potentially larger unknown cost. Insurance is the most common form of transfer. If you select insurance as your method to finance the risk of fire to school buildings, the financial consequences of a fire loss have been transferred to the insurance company. It is important to keep in mind that the financial transfer only applies to losses that are covered by the insurance contract and are within the limits of insurance purchased. Schools may also use non-insurance transfers to pay for losses. Risk managers may refer to transfers other than insurance as “physical transfers” (such as outsourcing a service) or “contractual transfers" (such as a hold harmless agreement.) Non-insurance risk transfer: The transfer of risk from one party to another party other than an insurance company. Transfers financial consequences of an activity to another through an agreement or contract, can be physical transfer or contractual transfer. Hold harmless agreement: A portion of a contract that is a promise by one of the parties (first party) not to hold the other party responsible if the other party carries out the contract in a way that causes damage to the party. Many states do not allow schools to hold others harmless; they may, however, be held harmless by another party.


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Physical Transfer A district outsources its food services. The risks associated with this function have been financially transferred to the company now providing food services. While there is a contract involved and the food services company will need to provide proof it has insurance, the school district views this as a physical transfer.

Contractual Transfer

The school has hired a contractor to repair the bleachers at the football field. The contract contains a hold harmless provision that states if a loss occurs, the contractor will assume liability and be financially responsible for all damages.

Step 5: Risk Administration The process of planning, implementing and monitoring the risk management program.

A risk manager is highly dependent on his or her risk management team, a group of dedicated individuals from within and outside of the school who help the risk manager control losses. Risk management team members include: the risk management department staff, insurance professionals, risk consultants, experienced risk managers, concerned community members, and others. In the final step of the Risk Management Process, Risk Administration, the risk manager works with his or her team to plan, implement, and monitor the risk management program – in other words, to make adjustments to ongoing operations and to move it forward. Effective Risk Administration requires excellent communication, teamwork, and project management.


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The Risk Management Process

If you've taken one of our classroom CSRM courses, you'll recognize the image below. This diagram of the five-step Risk Management Process illustrates the flow of Risk Identification, Risk Analysis, Risk Control, Risk Financing and Risk Administration. The feedback gained through implementation and monitoring of the risk management program impacts each of the other steps in the Risk Management Process, as indicated by the arrows on the right-hand side of the diagram.


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How Does Risk Administration Fit into the Risk Management Process?

Administering School Risks This course will cover the elements of implementing and monitoring a school risk management program. 1. The Risk Management Team - a mechanism for

effectively implementing and monitoring the risk management program; this team has a vital role in every step of the risk management process

2. Communication - selecting the most effective communication tools has a significant impact on the risk management process; communications should also be properly documented

3. Implementation - action planning and processes for acquiring resources (requests for proposal, competitive sealed bids, etc.) ensure that control measures and other functions are accomplished

4. Monitoring - using a risk management information system for administering the data and information needs of the risk management department

5. Ethics - a code of ethics and an ongoing ethics programs is extremely important to controlling risks faced by the district

Proactive vs. Reactive Risk Analysis

Proactive risk financing means actively determining and implementing the most effective transfer and retention practices for the school district. Reactive risk financing means funding exposures discovered after the financing program is in place or after they manifest themselves as losses. The benefits of a proactive approach are:

More potential exposures are addressed through one or more active transfer or retention programs.

The organization reduces passive retention problems.

Identification

Analysis

Control

Financing

Implementation & Monitoring


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Reactive Management

Examples: A fire emergency at the school causes a lengthy school closure and multiple additional costs because the school had not properly planned for a major emergency. Stakeholders in the community react negatively to the management of the emergency.

Active Management

Examples: An effective response saves lives and property during a fire at a campus. However, the school discovers later that some of the property was valued at actual cash value when replacement cost valuation would have been appropriate. The district hadn't really looked at what impact the fire would have on the school's budget and must find additional monies to help the school complete the school year after re-opening.

Proactive Management

Examples: An effective response saves lives and property during a fire at a campus. The school must close for a week while repairs are made, but plenty of damage was avoided by appropriate fire suppression equipment and alert employees. Except for an item or two, the school is satisfied with how insurance indemnified them for the damages. Business continuation and other types of planning allowed this school to resume operations as quickly as possible.

Please refer to the end of Section 1 to go over the section exercises and self quiz.


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Section 2 The School District Risk Management Team The risk management team, which is comprised of individuals both external and internal to the district, makes important contributions to a school district’s risk management program. Some team members provide services that may not be available internally, while others use their expertise to contribute to the success of the school district’s risk management program. Learning Objectives By the end of this section you will be able to:

1. Understand the value and purpose of having a risk management team.

2. Understand differences and similarities among internal, external and informal team members.

3. Identify and select members of the risk management team.

4. Determine when a school district risk manager might find it necessary to get assistance from outside service providers.

5. Know differences and similarities among agents, brokers, and consultants.

6. Identify and discuss different types of agents. How does the Risk Management Team Produce Value for the Organization? An effective risk management program not only requires the obvious involvement of the school district’s risk management department, but also relies on the experience and expertise of others.

School district risk managers cannot perform every risk management function alone. The risk management department needs information and expertise not only from individuals within the district, but also from individuals outside of the district.

These individuals are all members of the school district’s risk management team. The risk management team brings stakeholders together so they can jointly address issues and concerns. Stakeholder: A person or group with a direct interest, involvement, or investment in the school district.

A team is required for a successful risk management program!


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Risk Management Team Members Risk management team members can be internal or external to the school district.

Internal

Risk Management

Administration

Human Resources

Security

Faculty

Business Department

Operations

Maintenance

External

Risk Management Consultants

Financial Consultants

Actuaries

Legal Consultants

State Associations

Educational Service Centers

Safety Consultants

Claims Administration


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Internal

Risk Management

Administration

Human Resources

Security

Faculty

Business Department

Operations

Maintenance

Internal Risk Management Team Members Internal members come from within the school district. These individuals provide important information and assistance to the risk manager and the risk management department. As team members, these representatives add value to the district’s risk management program. They experience the impact of risk management in their day-to-day work. They can share firsthand what is working, what is not, and offer ideas for improvement. The risk manager should use caution not to overlook or underutilize internal support. These individuals can be the “eyes” and the “ears” of the risk management program in their environment. Internal members, when allowed and willing to actively participate, can be instrumental to the success of the district’s risk management program.


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External Risk Management Team Members External members are from outside of the school district and include outside service providers. The range of services provided by outside service providers is broad, depending upon the issues requiring support. (Outside service providers will be discussed in more detail later in this section.) State associations and educational service centers can also serve on the risk management team. These organizations provide information that, while not necessarily specific to the district, would apply to school districts as a whole. Educational Service Center (ESC): Many states use regional support centers, sometimes known as Education Service Centers or ESCs, to support local school districts. Support can include professional development, curriculum development and supervision, technology, media library and other administrative services.

External

Risk Management Consultants

Financial Consultants

Actuaries

Legal Consultants

Safety Consultants

Claims Administration

State Associations

Educational Service Centers


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Informal Risk Management Team Members In addition to formal members, risk management teams can also include informal members. Informal members can be either internal or external and are relied upon by the risk manager to periodically provide information or assistance. For example, the risk manager often works with finance and accounting departments, and administrative assistants in other departments throughout the district, to obtain information or assistance needed by district’s risk management program. While these individuals are not part of the “formal” risk management team, they do provide valuable resources to the risk management department.

Risk Management

Team

Internal

• Formal

• Informal

External • Formal

• Informal


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Risk management teams are often comprised of all three types of members.

internal, external, and informal

Complete Knowledge Check: Section 2 Team Members p10 (ADM) Selecting Risk Management Team Members

Identifying and selecting appropriate team members requires the school district risk manager to understand the needs of the risk management program.

What are the are the risk management department’s goals and objectives?

Which one(s) require immediate attention? Can expertise be found internally or are outside

services required? When outside service providers (external team members) are selected, the risk manager needs to understand how to:

1. contract with the provider, and

2. manage the provider in order to obtain the desired risk management objective.


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Who Can Be On the Team? Agents/Brokers

Agents and brokers provide a variety of insurance protection services and may provide other services such as risk management.

Risk Management and Insurance Consultants Consultants may be hired by the district to conduct an analysis of the district’s current insurance and/or risk management programs and make recommendations for improvement.

Consultants may conduct site inspections for risk identification and/or safety inspections to recommend appropriate risk control techniques.

Legal Counsel and Services The district may need legal counsel or services for matters including statutory filings, lawsuits, Workers Compensation claims, litigation management, claims settlement, etc.

Claims Administration, Third Party Administrators, and Case Management Nurses Depending on the risk financing option used, a district may have claims management responsibilities.

An outside service provider may be hired for claims administration including claims investigations, payments and management.

Safety and Security, Loss Control, Engineering and Environmental Specialists in these areas provide expertise in the areas of safety inspections, evaluating onsite security of students and employees, working with the district’s Safety Committee, or conducting private investigations as needed for claims.

Human Resource Professionals Human Resource services may be needed for payroll, benefits, hiring and terminations

Accountants, CPAs, Financial Consultants These individuals can offer expertise in budget containment and other financial-related business office activities

Actuarial Services Actuaries (statisticians) might be hired to conduct audits of insurance programs, determine appropriate reserves, and calculate development factors. (CSRM Funding School Risks course)

Medical Providers Medical providers bring expertise in first aid, injured employee care, long term care and disability care.


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Other Team Members There are other individuals who contribute to the school district’s risk management program. Other risk management team members could include:

Complete Knowledge Check: Section 2 Identifying the Team p15 (ADM)

Providers of:

Certificates of Insurance

Bonds

Department & Division Managers, such as:

Operations Facilities

Food Services

Transportation

Providers of:

Motor Vehicle Records Workers Compensation

History

Risk Managers from Other Districts


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When to Use Outside Service Providers Should a school district risk manager hire an outside service provider? After all, the cost associated with an outside service provider could impact the district’s cost of risk (COR). While that is correct, it doesn’t always result in an increase – it could result in a decrease in the district’s COR.

Outside Services This includes the cost for services obtained external to the school district such as the fees to hire a risk management consultant for a project, the cost of a Third Party Administrator for handling the claims from the district's self-insured workers compensation program, fees to hire a risk control or safety expert, cost of actuarial services to help the risk management department with services such as trending and development legal services for a specific claim, or the fees paid to an insurance agent or broker.

Cost

Of

Risk

Risk Management Departmental

Charges

Insurance Premiums

Retained Losses (Active

& Passive)

Outside Services

Other Considerations


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Reasons to Use Outside Service Providers 1. The provider has access to products or services that the school district wishes to

purchase. The district is using insurance as a risk financing option and purchases insurance from an insurance company.

2. There are areas in which the school district risk manager is not an expert and an

outside service provider can more efficiently and effectively augment the risk management team. Elaine is the risk manager for the district. She needs to evaluate the current retention level for the district’s workers compensation coverage. Based on the district’s losses the past few years, she will make a recommendation to the administration about whether the retention level should remain the same or if it should be increased. Elaine needs to know the district’s projected workers compensation losses for the next year. Since statistical analysis is not a major strength of hers, an actuarial firm is hired to analyze the data and consult on projected losses.

3. Internal skill or talent is unavailable for a particular project.

The school district‘s general liability insurance policy has a $250,000 retention. The district does not currently have staff claims adjusters. The district has contracted with a third party administrator (TPA) for all aspects of general liability claims within the retention level.

4. An outside or objective viewpoint is required. The district has received three proposals for its property insurance. The district hired a risk management consultant to evaluate the proposals and make a recommendation as to which proposal best meets the needs of the district.

5. The project must be done quickly and internal resources are not available. The district is required to provide anti-harassment and anti-discrimination training to all employees. The staff person who would normally provide the training is on medical


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disability. To meet the state mandated deadline for this training, the district hires a consulting firm to provide the required training.

6. Use of outside experts may be more cost effective.

The district hires a safety inspector on an as-needed basis rather than incur the expenses to have one on staff.

7. Verification is needed that the ongoing risk management program is meeting the

school district’s needs.

The district hires an actuarial firm to audit the district’s self-insured insurance program. The firm will audit paid losses, the district's loss reserving practices, and other areas of the program.

8. Administration such as the superintendent or school board requests outside

assistance.

After a large fire loss that was only partially covered by insurance, the school board has requested the district to hire an outside consultant to determine current insurance values for all district buildings.

Complete Knowledge Check: Section 2 Outside Providers p20 (ADM)


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ABCs of Agents, Brokers and Consultants Effective risk management programs incorporate some form of insurance, whether at the primary, excess, or reinsurance level. As a result, the school district risk manager will work more often with the insurance agent, broker or consultant than with any other outside service provider. The risk manager should have an understanding of the differences between an agent, a broker or a consultant. What is an Agent An agent is considered to be a representative of the insurance company. In this capacity, the agent has the legal authority to act on behalf of the insurance company (or companies) that the agent represents. The agent also represents his or her insurance agency. Agents are required to be licensed by the state or states in which they conduct business. The scope of authority varies, but an insurance agent is typically authorized to bind coverage and collect premiums. In some cases, the agent can also issue policies. The insurance company is legally responsible for commitments the agent or agency makes on its behalf.


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What is a Broker? A broker is the representative of the insured, and not a representative of an insurance company. Therefore, the insurance company is usually not responsible for the acts or omissions of the broker. The broker may place coverage directly with an insurer or through an intermediary insurance agency.

A broker typically cannot bind coverage. Note: In practice, there is very little difference between an agent and a broker. A growing number of states are replacing agent’s and broker’s licenses with a producer’s license. The producer’s license allows the individual to act as either an agent or a broker. For information on the type of insurance licenses in your state, contact your state insurance department.

http://www.naic.org/state_web_map.htm

http://www.naic.org/state_web_map.htm


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What is a Consultant? Consultants differ from agents and brokers in that they are not selling insurance; they are selling their advice and services. Insurance consultants may be hired by the district to review insurance proposals or the district’s current insurance program and to make recommendations. Consultants provide independent advice and guidance. Several states require a consultant to be licensed as an insurance consultant. In states not requiring a separate consultant’s license, insurance agents and brokers (or producers) frequently provide consulting services to school districts.

The Insurance Agent/Broker and the Risk Management Team The agent/broker relationship plays a very important role in the overall risk management program. They are valuable members of the risk management team as they often provide insurance expertise, loss control, training and access to coverage. Consultants can offer independent advice and guidance; however they cannot bind insurance. Since effective risk management programs incorporate some form of insurance, either at the primary, excess, or reinsurance level, the school district risk manager will work more often with the agent/broker or consultant than any other outside service provider.


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Compensation Methods for Agents, Brokers, and Consultants The source and amount of compensation paid depends on whether the insurance professional is an agent, a broker, or a consultant. If the school risk manager has questions regarding the compensation method used to pay the district’s agent, broker, or consultant, he or she should consult with the district’s legal counsel. In fact, all contractual issues should be reviewed by legal counsel.

Complete Knowledge Check: Section 2 Agents, Brokers, Consultants p29 (ADM) Types of Agents Different types of agents look the same to the school district. Insurance agents can be categorized as:

Direct Writer Exclusive Agent Independent Agent The primary difference among these three types of agents is the insurance company (or companies) where they may place the school district's insurance coverage.


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Direct Writers

The insurance company markets products directly to the consumer through an employee sales force.

Direct writers are agents who represent only their company’s products, and have little flexibility with respect to underwriting.

If his or her insurance company does not write the insurance, the direct writer cannot place it with another insurance company.

Exclusive Agents

Exclusive agents are independent contractors who primarily represent one insurance company.

The insurance company will usually have “first right of refusal” for any business the agent writes.

Independent Agents

The independent agency system involves self-employed parties who enter into a contract to represent the insurer in dealings with the public.

They typically represents several insurance companies and can write insurance coverage through any of the insurers with whom they have a contract.



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Section 3 Communicating with the School District Risk Management Team Communication from the school district’s risk manager is important to the success of the district’s risk management program. Risk managers communicate regularly with members of the risk management team and should use the communication tool that is the most effective for the recipient(s), the message, and the desired outcome. Learning Objectives By the end of this section you will be able to:

1. Understand the importance of communication with members of the risk management team.

2. Know the reasons why technical jargon should be avoided when communicating with team members and others.

3. Understand the difference between one-way and two-way communication.

4. Select the most effective communication tools to administer the risk management program.

5. Understand the tools available for communication of risk management issues. Importance of Communication

Communication among risk management team members is an important part of managing risks in a school district. Effective communication by the school risk manager improves cooperation with internal, external, and informal members of the risk management team.


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1. Kevin is the risk manager for a large school district. At his

recommendation, the district hired a safety consultant to work with the risk management department to reduce the frequency of losses in its transportation department.

2. The safety consultant asked for information, some of which Kevin will obtain from the district’s transportation and human resources departments. Additional information will be obtained from the third party administrator (TPA) for the district’s Workers Compensation program.

3. Kevin requests the information from the individuals who can provide and/or obtain the information needed. Once this information is received from these internal, external and informal risk management team members, Kevin will incorporate it into his report to the consultant. Whether requesting or providing information, Kevin needs to determine the most effective communication tool to use and to use language or terminology that the individual understands.

Finally, effective communication allows the risk manager to identify and readily adapt to environmental changes or internal influences related to school district goals, stakeholder expectations, and school district performance. Imagine some of the challenges that can come up for the district during any school year.

District Budget Constraints

Unfavorable School Audit

School Violence

School Closures


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Example In response to recent events, the school district’s risk management department implemented a new approval process for teachers or coaches planning student field trips or other student activities. All faculty members and coaches have received notification of the new approval process. The risk management department’s website has a document entitled "Field Trip Approval Process" that can be downloaded. The document includes a flow chart showing the steps that must be followed for the faculty member or coach to gain approval. In addition, all required forms (with titles such as "Release and Waiver," "Risks Associated With," "Chaperone Core Competencies," etc.) are listed on and attached to the approval process document. See flowchart example in Section 3 Importance of Communication p6 (ADM) for a closer view.) We have reviewed the importance of communication to the district’s risk management program. The remainder of this section will present the tools for effective communication. Ineffective communication is a major obstacle in accomplishing the risk management department’s goals and objectives. Avoiding Tech Jargon Effective communication requires the risk manager to use language and terminology that the listener or recipient will understand. If the communication, whether written or spoken, is filled with insurance or risk management terms – jargon – the message may not be understood. No Jargon Jargon!


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How is the risk manager impacted if the communication is confusing to the recipient?

The recipient provides incorrect information back to the risk manager.

The recipient puts it aside and delays responding to the risk manager.

The recipient communicates with the risk manager requesting a clarification.

The time spent by the risk manager explaining jargon and re-delivering the message is time that could have been spent elsewhere. The same is true for the confused recipient. Both experience wasted time. The risk manager’s communication with one member of the risk management team may be different than with another team member. For example, correspondence to the district's insurance agent or broker is likely to be worded differently than internal correspondence to individuals without an insurance or risk management background. The risk manager can use insurance terms or risk management terms or jargon with the insurance agent or broker as they "speak the same language." For others, the risk manager should avoid using insurance or risk management terms or jargon whenever possible. Hint: Some word processing programs have built-in tools for determining the comprehension difficulty of a document based on: Reading ease (use of passive voice, etc.) Reading level (grade level)


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These are some of the terms that might cause confusion if used when communicating with team members who do not have an insurance or risk management background. Aggregate limit: The maximum amount of protection for all losses occurring under an insurance policy or funding arrangement during the specified term of the contract (usually one year). Self-Insured, Self-Funded, Self-Insured Retention (SIR): A term for a type of funding arrangement that the school district has implemented for certain types of losses (for example, Workers Compensation claims). In a self-funded plan, the district retains (pays for) a substantial portion of the cost of claims in a certain category, generally purchasing excess insurance to cover claims that exceed the retention amount. Subrogation: Subrogation 1. The right of a person to assume a legal claim of another; the right of a person who has paid

a liability or obligation of another to be indemnified by that person; an insurer's substitution in place of the insured in regard to a claim against a third party for indemnification of a loss paid by the insurer.

2. The substitution of one person in place of another with reference to a lawful claim, demand, or right held or owned by the original party.

Development Factor: A factor designed to correct errors in estimating the reserves for known but unsettled losses and to make an allowance for incurred but not reported (IBNR) losses. Exposure: 1. Units used to measure loss costs. (Payroll is often used as an exposure base for Workers

Compensation losses.) Forecasts of exposures can be used to forecast future losses. 2. The state of being subject to loss because of some hazard or contingency. 3 A situation, practice or condition which might lead to a loss; an activity or resource (assets,

people). Transfer: A risk management technique whereby risk of loss is transferred to another party through contractual language, such as a hold harmless agreement, or to a professional risk bearer, such as an insurance company. Retention 1. Budgeted losses (planned and budgeted for) + tolerance corridor (unplanned but allowed

for). 2. Assumption of risk of loss, as through the use of non- insurance, self-insurance, or

deductibles. This retention can be intentional (active retention) or, when exposures are not identified, unintentional (passive retention).

3. In reinsurance, the net amount of risk the ceding company or the reinsurer keeps for its own account or that of specified others.


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IBNR Represents the liability for unpaid claims not reflected in the case reserve estimates for individual losses. The two components of this liability derive from additional development on known cases and the reporting of claims that have occurred but not yet been recorded as of the evaluation date. Hint: If insurance terms are necessary in written communication and one or more of the recipients may not be familiar with them, include the definitions or, in a large document, include a glossary of the terms used. Complete Knowledge Check: Section 3 Avoiding Tech Jargon p12 (ADM) One-Way and Two-Way Communication

Communication can be one-way or two-way. While both can be effective methods

to communicate, each has a specific purpose and use.

One-Way Two-Way


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One-Way Communication 1. Disseminating information for which the risk manager does not want or does not

need feedback, and

Disseminating Information: Links on the risk management department website for field trip request forms, volunteer

driver requirements and chaperone requirements. Posters are used to encourage students to report bullying, threats or weapons.

2. Communicating to large groups of people

Communicating to Large Groups: Email to all school district employees reminding them of the alarm procedures when

entering/exiting school property during non-school hours. Newsletter

Types of One-Way Communications One-way communication has a significant downside: The sender is never certain that the message has been received and is understood.


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“The single biggest problem in communication is the illusion that it has taken place.”

-George Bernard Shaw

Two-Way Communication Unlike one-way communication, two-way communication allows for feedback. Feedback is one of the essential elements of good communication. What is the shortest word in the English language that contains

the letters: a, b, c, d, e and f?

Feedback

An essential element of good communication.

Two-way communication is effectively used by risk managers when: 1. They need information, ideas, or guidance.

The risk manager needs the human resources department to provide the number of employees by classification.

2. They are looking for feedback to ensure they are on the right track. The risk manager is gathering feedback on current risks and exposures from across the school district.

3. They need collaborative assistance.

The risk manager is working with a risk management consultant to develop safety training for the maintenance department.

4. They need to know their message has been understood.

The risk manager is submitting a claim to the insurance company.


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Active Listening Two-way communication implies that both parties are actively listening to one another. Two-way communication does NOT take place if either party fails to listen to what the other has to say. Active listening skills include:

Attending, hearing

Paraphrasing

Checking understanding

Summarizing

“Man’s inability to communicate is a result of his failure to listen effectively.”

-Carl Rogers

Complete Knowledge Check: Section 3 One & Two Way Communication p21 (ADM)


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Selecting the Most Effective Communication Tool There are a variety of communication tools available to the risk manager. In addition to the traditional methods of communication, technology has introduced “new” methods of both verbal and written communication. Risk managers use a variety of communication tools in their day-to-day work. Communication tools, both verbal and written, are shown below. Each of them will be discussed later in this section. Verbal Communication Tools; • One-on-One • Training Session • Video or Video Conferencing • Group(Meeting) • Telephone • Teleconferencing • Webcast/Webinar • Voicemail

Written Communication Tools: • Letter or Memo • Email & Instant Messaging (PDA) • Newsletter • Report • Poster • Website

Not all individuals are receptive to all of the various types of communication. This results in the risk manager possibly needing to use multiple types of communication.

Linda: Prefers classroom training with a “live” presenter. Robert: Prefers webcast over classroom for training. Katie: Prefers email, instant messaging and obtaining information from the website. Jack: Wants written correspondence (hardcopy) instead of email whenever possible.

Which method is best? All communication tools will not achieve the same results. To know which is the best communication tool, the risk manager must also understand:

the purpose of the communication,

the audience,

the urgency, and

the cost.


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Selecting the Most Effective Communication Tool: Purpose The first consideration in selecting the most effective communication tool is to understand the need.

What is the purpose of the communication?

What is the desired outcome?

Is two-way communication needed? Common Purposes for Communication There are six primary purposes, or reasons, risk managers communicate with others. We will look at each purpose and the risk management responsibilities it may encompass.

1. Providing Direction, Instructions, or Information

2. Information Broadcasting

3. Gathering Information

4. Coordination

5. Decision Making

6. Seeking or Giving Guidance Providing Direction, Instructions or Information Two-way communication can give the risk manager certainty that the message was heard. The risk manager provides direction, instructions, or information when:

meeting with transportation employees to introduce the district’s new fleet safety program;

explaining loss reporting requirements to new district employees;

providing additional loss information to the insurance company adjuster;

meeting with parents to explain the new security procedures following a gang-related fight on school grounds.

Information Broadcasting Two-way communication for this purpose can be difficult, but not impossible. (May use webcasts, teleconferences or conference calls.) The risk manager may use information broadcasting to:

explain to all district employees the revised security requirements for campus visitors, and


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inform faculty and coaches of the new approval process for field trips and other events.

Gathering Information Two-way communication is always required for gathering information. The risk manager may gather information from:

district employees when determining risk management-related training needs, and

insurance agents/brokers interested in providing insurance protection for the district. Coordination Coordination generally requires two-way communication; however, it is frequently attempted by the use of ineffective one-way communication. The risk manager may need to coordinate activities including:

working with the risk management team to develop a request for proposal (RFP) for the district’s insurance coverage, or

scheduling campus safety inspections.

Decision Making Two-way communication is definitely required here. Decision making is a process that involves the following:

1. Identification of the problem or opportunity

2. Developing alternatives

3. Evaluating alternatives to decide which is best

4. Selecting and implementing the best alternative. The risk manager makes decisions on a regular basis which could include:

Determining whether or not to outsource transportation

Selecting outside service providers

Claims administration

Implementing new risk management policies or procedures


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Seeking or Giving Guidance Giving guidance is more than just two-way communication and often requires the give and take of in-person conversations. Guidance is providing leadership, direction, advice, or counseling. The risk manager typically uses in-person communication when either seeking guidance from others or providing guidance to others. By its nature, guidance requires dialogue and discussion and it benefits from an in-person meeting

Complete Knowledge Check: Section 3 Communication Tools p34 (ADM)


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Selecting the Most Effective Communication Tool: Audience The second consideration in selecting the most effective communication tool is to determine the needs of the audience. Needs of the Audience There are two factors to consider when evaluating the needs of the audience.

1. Level of knowledge on the subject matter

2. Size of the audience

Level of Knowledge on the Subject Matter Overestimating the audience’s knowledge on a given subject can cause the risk manager to use language and terminology that is not understood by the audience. He or she may even omit information that the audience actually needs. Does the communication require a group meeting or training session with time to present the information at a more basic level? Or, can email or a website be used?

Be sure to review the verbal and written communication tools: Section 3 Communication Tools p23 (ADM) Size of the Audience Size of the audience impacts the way the risk manager communicates. Two-way communication with a very large audience can be difficult. The risk manager should look for ways to open feedback channels from these audiences such as online discussion boards, suggestion boxes or surveys. Technology (webcasts, video conferencing, etc.) make it easier for the risk manager to have two-way communication with a large audience. It may be beneficial to conduct a post-survey of those who attended to evaluate the effectiveness of the technology used.


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Selecting the Most Effective Communication Tool: Urgency The third consideration in selecting the most effective communication tool is to determine the urgency of the communication. Communication Urgency Some communications from the school district risk manager will not be urgent. Other communications may be extremely urgent. The risk manager should prioritize the communications going in and out, making sure the more urgent situations are addressed first. Routine communications, such as waiting for the receipt of an endorsement, can probably wait a week or two without negative consequences. The risk manager should not wait that same week or two to communicate the need to repair a broken railing on the main staircase of the school that is used by several hundred students a day. Selecting the Most Effective Communication Tool: Cost The fourth consideration in selecting the most effective communication tool is to determine the cost, in terms of both time and money, to the school district. Communication Cost Cost of time - the time spent on an activity takes the risk manager away from other productive activities. Cost of material – What is the cost of a webcast or videoconference compared to a meeting or posting the information on the risk management department’s website? Consideration should also be given to the amount of time spent by the recipients of the communication, especially if they are internal to the school district (on payroll) or paid by the school district (such as an outside provider who charges by the hour). These are also real costs to the district. Before selecting a communication tool, the risk manager should understand not only the material costs, but also the time and effort costs associated with implementing the tool.


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Purpose, Audience, Urgency, Cost All four of these areas should be considered by the risk manager when selecting the most effective communication tool. Is one more important than the other? Not necessarily, although from a practical standpoint the more urgent the communication, the more likely a higher cost of communication can be justified. Communication Tools The communication tools available for the risk manager’s use were introduced earlier in this section. We will now take a closer look at each one. Verbal Communication Tools:

One-on-One Training Session Video or Video Conferencing Group(Meeting) Telephone Teleconferencing Webcast/Webinar Voicemail

Written Communication Tools:

Verbal Communication Tools:

One-on-One One-on-one meetings are an excellent way to maximize two-way communication. They are effective for getting or giving advice or guidance and for developing a richer understanding of information.


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Verbal Communication Tools:

Group Meeting: Effective group meetings require the risk manager to have:

1. The right people at the meeting, and

2. A clear purpose and agenda.

These two guidelines will ensure the right message is getting to the right people. Having and following an agenda ensures the discussion will stay on track. The risk manager should pay close attention to two-way communication issues. Everyone should know, prior to the meeting what the feedback process will be. Will the agenda include a time for questions and answers? Should questions or concerns be sent to the risk manager, prior to the meeting? Setting effective ground rules for the meeting and making them known to those attending prior to the meeting can help avoid potential conflicts during the meeting itself.

Training Session: A training session does not have to be one way. Effective training should provide opportunities for the trainee to participate and give feedback. Video or Video Conferencing: A video by itself offers very limited opportunity for two-way communication; however, it can be an effective tool for communicating complex issues to a large audience in a consistent fashion. Cost of creating the video may be an issue. If the district has the necessary equipment, video conferencing could be an option. It does allow for limited two-way communication.

Telephone: As face-to-face communication is not always practical due to distance or time, telephone communication is a frequently used verbal communication tool. The telephone should not be the only communication tool used if a permanent record of the communication is necessary. If written documentation is necessary, follow up with written communication after the telephone conversation. While the telephone is an effective two-way communication tool, both parties to the conversation should remember that only 14 percent of what the other party hears comes from the words actually spoken; the remaining 86 percent comes from the tone of voice.


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Verbal Communication Tools: Teleconferencing: Risk managers can use conference calls to extend the advantage of the ease of a telephone conversation when needing to communicate with multiple people about the same subject. An effective conference call requires planning. Just as with a physical meeting, the right people should be invited and a concise agenda prepared. Pre-meeting coordination ensures that everyone participating in the call has been provided with instructions for dialing in and the access code if one is required. Webcast/Webinar: A webcast is an increasingly useful tool for linking distant groups. It allows for effective two-way communication, while the use of the internet allows for good visual communication and presentations. The procedures for effective conference calls also apply to a webcast with an additional emphasis on coordinating the technological aspect. Each participant should receive detailed instructions for logging on and calling in.

Voicemail: One of the challenges with voicemail is whether a message might be more effectively communicated in an email. If the recipient will need to take long notes, an email may be more effective. Voice messaging can be used as an effective tool for providing school closure information. Employees and students call in to a special number to hear a recording advising callers if the school is closed or opening late due to weather or other situations.


Letter or Memo: Letters are typically used for formal communication, and for information requiring an audit trail or a formal signature. Because signatures are an important part of the contractual basis of much risk management activity, risk managers will find letters a necessary part of their communication tool bag.


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Email & Instant Messaging: Email is becoming a replacement for the traditional memo, and sometimes even for the letter. They can be effective, quick carriers of information. Emails are also increasingly used as an audit trail. Time spent making sure they actually communicate the intended message is time well spent. Email is not inherently two-way communication. The sender doesn’t always know if the email was received, read or understood by the recipient. The email should clearly inform the recipient that an action is expected, such as reply with requested information, acknowledge it was read, etc. Take the time to think about feedback and response processes. For example, when a broadcast email is sent, does the sender want everyone on the distribution list receiving the replies? If not, recipients should be asked not to use “Reply All” or better yet, the email should be sent to the sender with the recipients’ email addresses as a bcc (blind carbon copy). Any “Reply All” will go only to the sender. Email or text messaging can be an annoyance for those who receive too many of them, or do not think clearly when reading or writing them. Forethought and planning is important when writing an email. Always reread your emails before hitting the “Send” button.

Newsletter: Newsletters can be an effective way to broadcast information to large groups, particularly if the information being provided has multiple aspects, can change over time, or requires ongoing attention. Newsletters also provide the risk manager with the opportunity to share risk management success stories such as the number of days without an injury or to highlight a bus driver who assisted a student during a medical emergency.

Report: Reports are needed by the school risk manager to gather and share information. The school risk manager typically has to file a report annually on the state of the school district’s risk management program.


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Reports are an effective tool; however, they are generally only used by those who have a base of knowledge to be able to interpret them. This should be kept in mind when creating risk management reports.

Some information contained in a report can be more effective in a chart or graph format as opposed to the written word.

Poster: A poster is a good way for broadcasting information to large audiences. Keep them simple and visually appealing. Website: Much of what can be accomplished with a newsletter can be done with a website. The challenge of an effective website is attracting people to visit the site. Time should be taken when planning the risk management department’s website. How will feedback from the website be received? If possible, survey the users to find out what they think will need to be on the site, what information is most useful for them, etc.


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Planning for Communication This section introduced the importance of communication to the risk manager, the difference between one-way and two-way communication, and the communication tools available. When selecting the most effective communication tool to use for a given situation, the risk manager needs to understand the purpose for the communication, the intended audience, the urgency of the message and the cost. When planning for a communication activity, the following questions can help determine the most effective communication tool to use


What is the purpose of the communication?

Is two-way communication required? If not, could it be made more effective by the inclusion of some two-way communication options?

Who is the audience? How large is the audience? What it their level of knowledge about the topic?

How urgent is the communication?

What are the cost restrictions? What resources are needed?


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Section 4 Implementing the Risk Management Program After the school district’s risks have been identified and analyzed, appropriate risk control techniques chosen, and financing methods selected, the risk manager has the responsibility of implementing the risk management program. Learning Objectives By the end of this section you will be able to:

1. Perform basic action planning, including 3W charts (what, who, when) and calendaring.

2. Discuss delivery methods for acquiring risk management resources.

3. Understand when to use a Competitive Sealed Bid (CSB), Request for Proposal (RFP), Competitive Sealed Proposal (CSP).

4. Understand the Request for Proposal (RFP) process.

5. Understand the importance of the project timeline to the RFP process and what should be included in the timeline.

6. Identify and discuss common sections of an RFP.

7. Know what is included in the RFP cover letter.

8. Know the factors that can contribute to a successful proposal evaluation.

9. Know what criteria the risk manager could also consider when awarding a contract.

10. Understand how to properly finalize the RFP process.

11. Know how to recognize and avoid a conflict of interest. Action Planning It is not enough to merely decide upon a solution to a given problem or concern. The solution will need implementation. This means that someone (who) will have to do something (what) within a certain timeframe (when). A simple form of action planning is a 3W chart. The chart has three columns. What, Who and When as shown in the example below.


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People listed in an action plan need to understand what they must do and be committed to perform the task. The risk manager should review action plans regularly to ensure everyone is on target to get actions completed by the deadline. Calendaring School district risk managers often have multiple projects that need to be managed simultaneously. A simple calendaring tool can help in this process of managing multiple projects.


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FYI For more complex projects, such as those where completion of certain tasks are dependent upon others, the risk manager may consider using sophisticated project management tools such as a Gantt chart (below) or a Responsibility Assignment Matrix. The Gantt chart (named for Henry Laurance Gantt, an American engineer) depicts progress in relation to time. Gantt Charts are often used in planning and tracking a project.

Acquiring Risk Management Resources Resources are needed to effectively manage a risk management program. Resources come in the form of people, services and/or materials.

People Examples: Auditors, risk management consultants, actuaries, claims adjusters, case management nurses Services Examples: Insurance, legal, printing, TPA, loss control Materials Examples: Safety posters, hard hats, safety video library, sprinkler system

How does the school district acquire the people, services or materials it needs? There are several mechanisms that can be used by the school district to obtain the needed resources.


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Let’s take a closer look at each of these methods.

Request for Qualifications (RFQ) Characteristics: The request for qualifications, (RFQ), is used by school districts to select outside service providers who are interested in delivering a service or product to the district. The RFQ is useful for vetting providers of either services or products. That is, evaluating the persons and/or organizations who respond to the RFQ and selecting the ones that best meet the qualifications desired by the district. For example, the school district may choose to allow only three insurance agents or brokers to provide quotes for the school district’s insurance. The district may use a request for qualifications to identify and select the three that are most qualified to provide the district’s insurance. They would then be allowed to provide the district with a proposal through another mechanism, such as a competitive sealed bid or request for proposal. See the Appendix for a sample RFQ.


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Competitive Sealed Bid (CSB) or Invitation to BID (ITB) Characteristics: CSBs and ITBs are normally used when the school district is able to clearly define its needs. For example, the district is seeking competitive bids for the purchase of metal detectors for each of its junior and senior high schools. Each vendor would submit a sealed bid. CSBs will be discussed in more detail, along with requests for proposal (RFP), in the next topic section.

Request for Proposal (RFP) or Competitive Sealed Proposal (CSP) Characteristics: A request for proposal process begins with the preparation and publication of detailed requirements by the school district, in order to receive certain provider services. For example, the district is seeking a third party to provide all student transportation within the district. Prospective vendors, service providers, etc. respond to the request for proposal document. RFPs will be discussed in more detail shortly. See the Appendix for a sample RFP.


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Interlocal Agreements Characteristics: Interlocal agreements are agreements between local city or county governing bodies and school districts in compliance with the provisions of the Interlocal Cooperation Act. The most common use of an interlocal agreement is a formal contract to purchase services from another governmental entity for an agreed-upon price. For example, the school district enters into an formal agreement with the city’s transit company to provide transportation for the district’s students.

See the Appendix for a Template for Interlocal Agreement.

Catalogue Purchases and Open Purchase Orders Characteristics: Open purchase orders are used when multiple orders are placed with the same vendor during the same fiscal year. Design/Build Contracts Characteristics: Design/Build contracts are frequently used in projects involving construction.

FYI Risk managers need to know if any state laws govern the school district’s purchases of goods and services. State law may require the district to use competitive sealed bids, requests for proposals, or other mechanisms for the purchase of goods or services that exceed a threshold (such as $50,000 or more in the aggregate during the fiscal year). State law may also identify the factors the district must use when deciding to whom to award a contract. See the Appendix for a sample state statute.


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Complete Knowledge Check: Section 4 Delivery of Resources p15 (ADM)

Comparison of a Competitive Sealed Bid (CSB) and Request for Proposal (RFP) We've mentioned earlier that state law may require the school district to use a competitive sealed bid (CSB) or a request for proposal (RFP) when seeking goods or services. These requirements are found in the state’s educational code. When these mechanisms are used for purchasing insurance, it can produce a more competitive agent and carrier marketplace. The formats of a competitive sealed bid and a request for proposal are essentially the same. Let’s now look at their differences. See the Appendix for a sample RFP. Competitive Sealed Bid

Normally used when the school district clearly defines what it needs.

Bids do not allow for negotiation with the buyer.

The school district is typically required to go with the lowest bidder.

Request for Proposal

Publication of detailed requirements by the school district in order to receive provider services.

The RFP allows for negotiation of any part of the proposal.

Complete Knowledge Check: Section 4 CSB, RFP, CSP p18 (ADM)


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Understanding the Request for Proposal (RFP) Process The RFP is much more than just a document. The RFP is a process. The process begins with the determination of the need for an RFP and continues through the decision on the proposal and notification to the supplier(s). While not all RFPs follow the same sequence of steps, the following process is typical of most RFPs. We will study each of these in the next few topic sections.

Complete Knowledge Check: Section 4 RFP Process p20 (ADM) Preparation The school district should begin the RFP process by establishing an objective and determining the work that needs to be done to ensure a successful RFP process. An RFP Initiation Checklist provides an organized way to manage the preparation for the RFP. The checklist provides information on the need for the RFP, the scope, and the people inside the district that will be involved in the RFP process, the schedule, project justification, identification of risks involved, and the approval of the required parties.

See the Appendix for a sample RFP Initiation Checklist.


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In addition to the RFP Initiation Checklist, the risk manager should also consider:

RFP Sponsor: Will administration agree to spend money for an outside service provider or is it expected that services will be performed internally? For example: Does administration except the risk management department to conduct all safety inspections or is it willing to spend funds to bring in a safety consultant or loss control specialist to perform the inspections? Schedule: How will the timeline of the evaluation and decision-making processes be determined? When will delivery be expected? When will work be completed? The development of the project timeline is an important part of the preparation step.

Project Timeline The success of the RFP process depends on communicating both the critical steps of the process and the deadlines the providers must meet in order to have their proposals considered. The timeline is a tool for both the school district and the providers who wish to submit proposals. The timeline should include:

The steps the district must take before, during and after the publication of the RFP. (Not all internal steps need to be published in the RFP; however, these steps should be carefully evaluated before deciding not to include them.

The date of the pre-proposal meeting if one is scheduled. (Be sure to communicate whether or not providers must reserve a place for this meeting, the date by which they are to do so, and whether questions for the pre-proposal meeting to be submitted in advance.)

All deadlines that impact the submission of proposals should be clearly and precisely expressed in the published timeline.


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This is a sample timeline for an RFP using the 3W Chart discussed earlier in this section. While it is not necessary to commit to a firm date for awarding the contract, an estimated timeframe should be communicated to the providers. Regardless of the types of responses received, providing a clear, precise timeline will ensure the selection process is kept on a schedule, potentially saving money for the school district.

Needs Assessment The next step in the RFP process is needs assessment. A thorough understanding of the need(s) addressed by the RFP will help ensure the RFP documents and proposals submitted will meet the RFP objective. The risk manager should be sensitive to the amount of time and costs a provider will invest in preparing a proposal. Research, completed before writing the RFP document, will help organize and focus the proposal process. It will also ensure the provider’s time and cost invested in the process is an added value to both the school district and the provider.


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There are five additional areas that should be considered by the risk manager during the needs assessment phase. Service, Provider and Terms Requirements

The first step is to decide how the district's needs will be identified: Example: Will both formal and informal team members identify district requirements? Requirements can be divided into three areas which we will study more closely on the next page:

Service Requirements

Provider Requirements

Terms Requirements Expectations

Decide what is to be expected from the provider: Examples: What product or service is the school district seeking? or Will the new TPA adjust the district's claims using the district's claims management system or their own data system? or The district expects the TPA to notify the district of any changes in a claims reserve amount within 24 hours of the revision.

Minority Hiring/Contracting Requirements

Identify Statutory Requirements Impacting the RFP: Examples: Is the district required to have a minimum number of providers providing proposals? Does the RFP require a bid from a company owned by a minority, a woman or a person with disabilities?

Timeframe for Services

Determine the length of the relationship with the provider: Examples: How often or long will these services be needed? Is it one time or on an ongoing basis over a long period of time?


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Risk Management Team

Will the provider be a part of the school district's risk management team? Examples: The TPA may locate an employee within the district and work directly with district employees under the general supervision of district administration. or A provider of security or food services can be a valuable member of the risk management team, while a vendor providing pencils and paper would probably not be.

How will the district’s needs be identified? Service Requirements

Examples of Services Requirements include:

Scope: Is the product or service to be delivered to all locations, all employees, all students?

Level of Service: Which Services will be purchased? Which services will NOT be purchased.

Length: Timeframe for the relationship with the vendor/provider, length of the contract, etc.

Provider Requirements

Examples of Provider Requirements Include:

Scope: Is the product or service to be delivered to all locations, all employees, all students?

Level of Service: Which Services will be purchased? Which services will NOT be purchased.

Length: Timeframe for the relationship with the vendor/provider, length of the contract, etc.

Terms Requirements

Examples of Terms Requirements include:

Termination

Cancellation


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Documentation Documentation is the next step in the RFP Process. Documentation consists of two elements:

The Cover Letter

The Request for Proposal

Effective documentation in the RFP is essential to the success of the RFP. The RFP should be clear and accurate and written to the provider’s level of knowledge as discussed in Section 3. As a precaution to ensure that the content – the message – of the RFP is clear and accurate, it is a good idea to have members of the RFP team review the documentation before it is published. Common Sections in an RFP* There are twelve common sections in an RFP.

*How to Write Professional RFP Documents, http://rfptemplates.technologyevaluation.com/


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Twelve common sections in an RFP

Statement of Purpose: This section describes the extent of products and services the school needs, as well as the objectives of the contract. Background Information: This section presents a brief overview of the school district, its operations, strengths and weaknesses. It should include contact, title and role information about the people who will handle future correspondence. Scope of Work: Use this section to enumerate specific duties to be performed by the provider, expected results, and a detailed listing of responsibilities. Outcome and Performance Standards: This section should include outcome targets, minimal performance standards expected from the provider, methods for monitoring performance and the process for enforcing the contract. Deliverables: Deliverables are the school district’s requirements for the proposal, e.g. expected products, reports, and plans and delivery schedule. It also specifies the structure, preferred format and number of copies to be provided. Term of Contract: The length, start and end dates, and options for renewal of the contract are listed in this section. Payments, Incentives, and Penalties: List the terms of payment for adequate performance in this section. Be sure to highlight the basis for superior performance and the penalties for inadequate performance or lack of compliance. Contractual Terms and Conditions: Standard contracting forms, certifications, and assurances should be attached, along with requirements specific to the particular contract. Requirements for Proposal Preparation: A consistent format in terms of content, information, and document type(s) simplifies the process for those evaluation the proposals. Therefore, include page formatting information for the proposals that are returned by respondents. Make sure to list the required documents that prospective vendors are expected to submit with their proposals.


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Evaluation & Award Process: This section specifies the procedures and criteria used for evaluation proposals and making the final contract award. Schedule: Clearly and concisely present the timeline for steps leading to the final decision, such as the dates for submitting the letter of intent, sending questions, attending the pre=proposal conference, submitting the proposal, etc. Contracts: Include the single point of contact and any others who will provide information about the RFP or answer related questions. The list should include names, titles, responsibilities, and various ways of contracting them. The process for answering questions should be included. A common best practice today is to publish questions and answers on the school district website. Providers may also be able to submit questions on-line.

FYI The school district risk manager should use a single point of contact for collecting and disseminating information. This ensures consistency in dealing with various providers. Complete Knowledge Check: Section 4 RFP Sections p33 (ADM) The Cover Letter The cover letter should be on formal school district letterhead and should accompany the RFP questionnaire. It should be professional and concisely present the project. The cover letter provides the school district with a unique opportunity to emphasize the details of the RFP process, particularly the dates on which different documents are due.


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Let’s review the information that should be included in the Cover Letter.*

1. First, invite the provider to submit a proposal based on the requirements defined in the RFP document attached to the cover letter.

2. Next, present the provider with a brief description of the school district’s objectives from the RFP and a link to the school district’s website.

3. Then, describe the project (size, budget, scope, etc.) and how the project is to be aligned with the school district’s business objectives.

4. Present the project timeline.

5. Thank the providers for their time, effort and interest in the project related to the issued RFP.

6. Close the letter formally with a “Sincerely” or similar polite expression. The school district risk manager should specify his/her name and title; signing the letter with a blue pen. Making the signature stand out from the rest of the cover letter gives it a personal touch.

"How to Write Professional RFP Documents" September 2009 http://rfptemplates.technologyevaluation.com/ Complete Knowledge Check: Section 4 RFP Cover Letter p36 (ADM) Publication Publication is the next step in the RFP process, which means the RFP is ready for release to providers. How the RFP is made known to providers and the time allowed for responses to the RFP may be dictated by state law.

http://rfptemplates.technologyevaluation.com/%3ehttp:/rfptemplates.technologyevaluation.com/


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Publication requirements can be dictated by state law or school board policy. For example, the school district may be required to advertise the RFP in a newspaper. If not, the school district may choose to select the providers that will receive the RFP.

Care needs to be taken in selecting providers to avoid conflicts of interest or the appearance of conflicts of interest.

The school district also needs to follow state and local regulations applicable to the RFP Publication process.

In those cases where there is both a state law and board policy regarding publication, the risk manager should adhere to the most restrictive requirement.

The school district may choose to hold a pre-proposal meeting. A pre-proposal meeting provides an opportunity for two-way communication. The school district meets with the providers interested in responding to the RFP. This meeting helps ensure proposal requirements are effectively communicated. A key aspect of the publication process is the effective and even-handed implementation of methods for answering questions, publication of alterations in the RFP after the publication date, and other processes to ensure all providers are treated equally. Include the pre-proposal meeting in the project timeline discussed earlier. Example: After the pre-proposal meeting a provider asks the school district for additional information. The request for the information and the response from the school district would be given to ALL providers and not just the one that asked for the information. The playing field must be kept level for all providers. In order words, all providers must receive the same information from the school district.


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FYI The following represents one state’s requirements for school districts selecting providers.

1. The school district determines which method of delivery to use (usually either CSP or CSB).

2. The school district must advertise the RFP for two (2) consecutive weeks in a newspaper of general circulation in the city or county where the bid is taking place.

3. The proposal or bid can be opened 10 days after the second advertisement date. In this example, the two (2) weeks and 10 days above are minimum requirements, and the school district has liberty to advertise longer or wait longer before opening proposals. Note: Because of the nature of insurance, it is advisable to give prospective agents, brokers or insurance companies more time to respond. Evaluation The deadline for providers to submit their proposals has arrived. The next step in the RFP process is the evaluation of all proposals and ultimately the selection of the provider to be awarded the contract. We have identified the evaluation and award process as one of the common sections in an RFP. Since this information was included in the RFP, the providers should already know the procedures and criteria that the school district will use for evaluating proposals and making the final contract award.

The school district wants a successful proposal evaluation; that is, evaluating all proposals and selecting the provider that best meets the district’s needs as identified in the RFP.


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Factors contributing to a successful proposal evaluation involve the careful vetting of the proposals received:

Proposals should be reviewed for accuracy and completeness of responses, as well as adherence to the mechanics and requirements outlined in the cover letter and the RFP.

Does the proposal include all of the information requested including any addenda?

A bid opening tabulation sheet is useful in documenting receipt of all required documents.

Click on the image in Section 4 Proposal Evaluation p42 (ADM) for a sample Bid Opening Tabulation Sheet Additional factors contributing to a successful proposal evaluation rely on clearly stated criterion:

Evaluating the RFP must be done based on predetermined evaluation criteria as written into the RFP by the evaluation committee.

Did the RFP include the weighting of the various components of the RFP? Click on the image in Section 4 Proposal Evaluation p44 (ADM) for a sample Bid Tabulation Finally, the management of the evaluation team contributes to the success of the evaluation process:

Evaluation team members should have a common understanding of the criteria. Criteria must be consistently and conscientiously applied to all proposals. If insurance is the subject of the proposal, cost-to-coverage aspects of the proposals should be analyzed.

Evaluation decisions and rationale should be clearly and unambiguously documented.

Use the same evaluation team and criteria for all proposals.

FYI School Districts may use an interview team to meet with providers as part of the evaluation process. There are techniques that should be followed to ensure effective team interviews:

1. Use a consultant to train the team prior to evaluating proposals.

2. Use standardized questions.

3. Use the same evaluation form for all proposal respondents. Complete Knowledge Check: Section 4 Proposal Evaluation p47 (ADM)


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When determining to whom the contract should be awarded, the school district risk manager could also consider the following criteria:

Purchase price

Reputation of provider and its good and services; references should be verified

Quality of the provider’s good or services

Extent to which the goods or services meet the school district’s needs

Provider’s past relationship with the school district.

Impact on the ability of the district to comply with laws and rules relating to the contracting with companies owned by minorities, women or people with disabilities

Total long-term cost to the district to acquire the provider’s goods or services. Notification and Implementation After the school district has completed the evaluation step and selected the provider to whom the contract will be awarded, it is time for the final step in the RFP process:

notify participants in the process and implement the new relationship with the provider.

In order to appropriately finalize the proposal decision, the school risk manager should:

1. Make an appropriate purchase recommendation.

2. Notify the selected provider of the district’s decision.

3. Notify the providers not selected and disclose the reason.

4. Review implementation plan with selected provider including the timeline.

5. Monitor implementation of the project and evaluate performance. Note: Timely notification to all submitters (not just the selected provider) is good business practice and helps ensure future RFPs will be well received by the outside service provider community.


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RFP for Insurance Services School districts may frequently put out an RFP for its insurance coverage. Here are some tips for success for both the school district and the agent/broker/producer. School District

Review the RFP from the point of view of the insurance providers. Be sensitive to their time, cost and efforts.

It is in the school district’s best interest that the agent, broker or producer be able to successfully and effectively complete the requirements of the RFP.

Any deviations from original specifications should be clarified and submitted to all providers in writing.

Insurance Agent, Broker or Producer

They should read the RFP completely and make margin notes. It is easy to read the first few pages and not read the remaining pages well.

Any questions they may have should be asked early. Some school districts end the period for questions two weeks before the RFP is due.

They should ensure that all RFP requirements are met. If the proposal is not complete, the bid may be disqualified. This could be as simple as failing to answer a single question or omitting one necessary form.

Recognizing and Avoiding a Conflict of Interest You may recall from the Publications Step of the RFP Process: The risk manager must exercise care when selecting providers to avoid any appearance of a conflict of interest. There are four main causes of a conflict of interest.


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Four Main Causes of Conflict of Interest Let’s look at each cause and examples of acts that fall within it.

Greed Greed causes a conflict of interest. This includes accepting kickbacks, expense account padding, and stealing either time or money from the district. For example, a vendor contract has been put out for bid for the next school year. Knowing the risk manager’s love of football, the sales representative for the current provider told the risk manager if the contract is renewed with his company, he will make sure the risk manager gets tickets to a couple of NFL and college football games. Ignorance Ignorance can cause a conflict of interest. This includes accepting gifts from providers because the school district risk manager is unfamiliar with the district’s gift-receiving policies. For example, the risk manager received a fruit and wine basket from the district’s insurance agent during the holiday season. The risk manager was unaware the district has a policy that prohibits district employees from accepting any gift valued at more than $25. In this scenario, the gift basket may not have impacted the risk manager’s decision to recommend the agent the next renewal; however, others knowing of the gift may have assumed otherwise. Lack of Effort Conflict of interest can also be caused by lack of effort. For example, the risk manager only sent the RFP to providers he or she has worked with in the past and did not make the effort to identify other equally qualified providers. Nepotism Nepotism can create a conflict of interest. This occurs when a person favors relatives and friends over others. For example, the risk manager sent the RFP for insurance coverage to her brother-in-law’s agency, knowing his agency meets the basic requirements of the RFP, and to two other agencies she knew could not meet the basic requirements. The risk manager's actions in this example are not just unethical; they are likely to be illegal as well!


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Responding to Conflict of Interest There are situations when a conflict of interest clearly exists or when it could appear to others that a conflict of interest exists. What should the risk manager do?

1. First, the risk manager should take the time to understand the criteria that constitutes a conflict. Review relevant regulations, local policies and discuss the criteria with the school district business manager and others whom you trust. Example: Amy is an administrator with the Marysville School District and is serving on the evaluation team. While reviewing the proposals received in response to the district's RFP for food services, Amy is surprised to see that one of the proposals is from BEK Industries, a company owned by her son-in-law's family. The evaluation teams reviews the district's conflict of interest policy to see if there is a potential conflict of interest.

2. If a person feels a conflict of interest is present, he or she should review the situation

with trusted advisors including the immediate manager making the details of the conflict of interest clear to them. Example: After working with Amy and the evaluation team regarding this potential conflict of interest, the risk manager decides a conflict does exist. The risk manager meets with the school district business manager, who has years of experience administering RFPs for the district.

3. Complete a Conflict of Interest Questionnaire when appropriate and as advertised by the district. This form makes the school district and others away of a conflict of interest or a potential conflict of interest.


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Example: The business manager agrees that a potential conflict of interest exists. The risk manager completes the district's form entitled "Conflict of Interest Questionnaire," which is required in order to make all concerned aware of the issue.

4. Avoid socializing with any personnel from providers who have submitted a proposal under after an away has been announced. This could be viewed by other proposal submitters as favoritism and give a wrong impression. Example: The Marysville district's guidelines concisely explain the permitted and prohibited communication between the district and provider personnel during the RFP evaluation process. All inquiries from providers should be directed to the contact person identified in the RFP. Guidelines typically prohibit meeting with those for any reason, including lunches, dinners, social activities, etc. until after the decision has been reached.

5. Keep information confidential until an award has been made. The importance of confidentiality should be emphasized to all evaluation committee members. Example: It is a good business practice, and in many cases the law, that all participants in the bid awarding process be required to sign a non-disclosure agreement and acknowledge in writing that they understand their responsibilities as a member of the bid awarding team. The Marysville evaluation team's district followed this good practice. One time, an evaluation team member received a phone call from a bidder asking for clarification of a requirement in the RFP. This happened, though, AFTER the question period had expired. The team member innocently answered the question and reported the call to the risk manager. The risk manager, in turn, reported the event to the ethics officer and the team member was asked to withdraw from the RFP evaluation team.


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6. If a conflict of interest exists, the involved person or persons should not participate in the evaluation or selection process.

Example: Remember Amy and her relationship to BEK Industries? It is decided that a conflict of interest clearly exists. Amy removes herself from the evaluation team and will have no input into the selection process.



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Section 5 Monitoring the Risk Management Program It is very important for the risk manager to monitor the school district’s risk management program to ensure it is working as planned. Learning Objectives By the end of this section you will be able to:

1. Understand types of data that need to be collected and maintained in order to effectively monitor the risk management program.

2. Identify and discuss tools used to monitor the risk management program.

3. Distinguish between external and internal benchmarking.

4. Understand when benchmarking is beneficial.

5. Discuss advantages and disadvantages of benchmarking.

6. Understand the purpose of a risk management information system (RMIS).

7. Understand functions a RMIS can perform.

8. Identify and discuss various methods of assessing the quality of loss data.

9. Discuss how a school district risk manager can ensure data quality. Monitoring The school district’s risk management program has been implemented. Does that mean the risk management process is completed? Not at all. If you have completed CSRM Fundamentals of Risk Management, you may recall that risk management is an on-going process. The “on-going” part of risk management now gives the risk manager the responsibility of examining and evaluating the results of risk management actions and plans previously put into place.


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Every aspect of the risk management process and all components of cost of risk need to be monitored. The risk manager should be aware of what is working as planned and what is not. If not, appropriate adjustments should be made to the risk management program. Risk management process: A system for treating risk: identification and analysis of exposures, selection of appropriate risk management techniques to handle exposures, finance at the most reasonable cost, implementation of chosen techniques, and monitoring the results. Cost of risk: All components that are allocated to cover losses and expenses. Usually includes insurance premiums, retained losses, risk management department costs, and outside services (such as consultants). Can also include loss of productivity, cost of overtime, and opportunity costs. The risk management process has components that are both internal and external to the school district. Both internal and external components should be monitored by the risk manager.


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Internal Monitoring Each step in the risk management process should be analyzed and evaluated. The district‘s risk management program should also be evaluated to determine if it is meeting the needs or expectations of internal stakeholders such as the school board, superintendent, faculty, staff, and students. Risk Identification: Did the district proactively discover exposures and potential liabilities within all areas of operation? Risk Analysis: Are actual losses different (in either severity or frequency) from what the district projected based on loss trending and development? Risk Control: Did the risk control technique or techniques implemented reduce the severity and/or frequency of losses as expected? Risk Finance: Did the risk financing methods provide adequate funds for district losses? Risk Administration: Did exposures or losses increase as a result of lack of familiarity with risk management policies and standard operating procedures? Internal Stakeholders: Board, Superintendent, Facility, Staff, Students.


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External Monitoring These external components of the school district’s risk management program should also be examined and evaluated. Federal, State and Local Regulations: Is the school district in compliance with all federal, state and local laws? Insurance Markets: Are the district’s insurance companies in a strong financial condition? Have insurance companies responded promptly to claims? Outside Service Providers: How many days is it taking the Third Party Administer (TPA) to close a claim once the claim is reported? Did the Safety Consultant provide the training required by the RFP, and did the training have a positive impact on the district? What Data Needs to be Collected and Maintained Data is examined and evaluated by the risk manager when monitoring the district’s risk management program. This data is available from various sources, both internal and external to the district.

Loss history, loss reports and incident reports

List of current and non-current insurance policies

Certificates of insurance

Audit findings and reports

List of assets Incident: An event that disrupts normal activities and may become a loss or claim; “a near miss.” Lifecycle of an incident: pre-incident, incident, immediate post-incident, post-incident, rehabilitation (repair, recovery)


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Let’s take a closer look at each type of data.

Loss history, loss reports and incident reports

Losses of the district including incident reports*

List of current and non-current insurance policies

This list should include the coverages provided and the exclusions

Certificates of insurance Includes both certificates issued by the district and those received by the district from others

Audit findings and reports Includes both internal and external audits that are conducted by actuaries, regulatory authorities or the district itself

List of assets Assets owned by the district

*(Incidents and the importance of incident analysis are discussed in detail in the CSRM Handling School Risks course.) Maintaining Collected Data Once this data is collected, it should be maintained by the district. Information is typically maintained on a Risk Management Information System (RMIS). Risk Management Information Systems will be discussed later in this section. Complete Knowledge Check: Section 5 Types of Data p10 (ADM) Monitoring Tools After obtaining the needed data, the risk manager has six tools that can be used to monitor the district’s risk management program.

Risk Management Team

Audits and Inspections

Insurance Program Audits

Insurance Company/TPA Loss Runs or Other Loss Reports

Benchmarking

RMIS


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The Risk Management Team Risk management team members are critical to the monitoring process because each brings unique skills and talents. They can help the risk manager to evaluate the data and to make recommendations for improvement. Audits and Inspections Audits and inspections can be performed by internal or external team members.

Physical inspections and audits are usually performed by safety professionals; however, teachers are the eyes and ears of the risk management department. They can keep the risk manager aware of any concerns they may have or situations that may cause a loss to occur. Insurance Program Audits An insurance audit can be performed internally by a knowledgeable team member; however, the expertise is usually found externally. Risk management consultants, insurance agents or brokers, and actuaries are capable of performing an insurance audit. The audit may include analyzing :

1. coverages provided or not provided,

2. limits of coverage,

3. accuracy of rate basis or classifications,

4. premiums, and

5. solvency of insurance companies. Insurance Company/TPA Loss Runs or Other Loss Reports Analyzing loss runs and other loss reports can be analyzed externally by an insurance agent/broker or third party administrator. They can also be analyzed internally by the school district’s risk manager or business manager.


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Benchmarking Benchmarking is any measurement used as a point of comparison. Schools use benchmarks to compare their own performance over time, or to compare their performance to another district's. Benchmarking will be covered in detail later in this section.

Risk Management Information System (RMIS) An RMIS is an information system that supports the school district’s risk management program. You may think of it as a repository for district data related to risk exposures and loss information. RMIS will be covered in detail later in this section.

Setting Standards by Benchmarking We learned at the beginning of this section that a benchmark is any measurement used as a point of comparison. A benchmark is often considered an indicator of success or excellence. Benchmarking is a management tool through which the school district’s plan for evaluation, measurement and improvement is implemented. It motivates the risk management team to improve, and leads to superior performance. The risk manager uses benchmarks that are internal or external to the district. He or she needs to know when to use benchmarks, with an understanding of both the advantages and the disadvantages of this tool.

Benchmarking can be based on either internal or external measures. External Benchmarking

This method compares the school district’s performance against that of other school districts, or other comparable organizations, in order to further monitor the school district’s performance and to develop ideas for improving performance. External benchmarking also known as cross-sectional analysis.

Internal Benchmarking

This method compares the school district’s performance from one year to another, one department to another, one school to another, etc.

Internal benchmarking is also known as time series or trend analysis.


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Example The Mills School District is evaluating the losses that have occurred on its school playgrounds. The district recently put rubber mulch under and around all playground equipment to reduce the severity of losses. Internal benchmarking would compare the district’s playground losses this year to last year’s losses to determine if there was an improvement. External benchmarking would compare the district’s playground losses this year to another similar school district. If the district had fewer/smaller losses, the Mills School District may be able to get additional ideas from the other districts on ways to reduce playground losses. Benchmarking is most beneficial and should be used for the following situations. To determine a baseline before a new program is implemented.

Determine a Baseline: The school district is implementing a new safety program to reduce the number of bus accidents. In order to determine a year from now whether or not accidents were actually reduced, a benchmark will be established today. Setting a baseline will answer the question: “Where is the district today?”

When internal trending and comparisons are needed. Internal Comparisons: As part of the monitoring of the risk management program, the district wants to compare the workers compensation loss frequency and severity for each school in the district. Using internal trend analysis and comparison asks the question: “Where is the district now, and where does it want to be?”

When environments are stable and trending is more likely to provide relevant information.

Trend analysis of data from stable environments: Trending in an unstable environment will provide less relevant information. It is ineffective to benchmark when environments are unstable as there are too many variables. Unstable environments include:

A hard insurance market when premiums drastically increase;


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Comparing losses in its food services department when it just brought the food services function back into the school after using a third party for the past three years;

Due to district realigning, 1,000 additional students are in the district; etc. When looking for ways to improve the school district’s risk management program.

Seeking a Better Program: The district wants to lower its cost of risk, number of losses, claims dollars, insurance premiums, etc.

When a similar school district’s risk management program is successful and the school district wished to use elements of its program.

Emulating Other Successful Programs: Lewis & Clark School District has learned that a similar-sized district in the state has a lower cost of risk. Lewis & Clark plans to mirror some parts of the other district’s risk management program in an attempt to lower its own cost of risk.

Complete Knowledge Check: Section 5 When is Benchmarking Beneficial p19 (ADM) It is important for the risk manager to consider both the advantages and disadvantages when making recommendations or decisions based on a benchmark. We will start with the advantages.


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Allows tracking of continuous improvement: The risk management department has implemented several risk control techniques to reduce school violence. By benchmarking, the risk manager is able to demonstrate the reduction in frequency &/or severity of losses attributed to school violence. Encourages “out-of-the-box” thinking and creativity: What can the risk manager or risk management department do to improve? Prioritizes areas that need improvement: What needs to be fixed first based on frequency, severity and legal issues? Allows awareness of common problems and issues faced by other school district risk managers: If other school districts have faced the same problems, what did they do to improve their loss experience? FYI Risk managers, whether they are school district risk managers, corporate risk managers, or public entity risk managers, often face very similar problems, issues, and concerns. Risk managers use external benchmarking to recognize common concerns. They are able to see how these concerns are not necessarily any different from experiences faced by other risk managers. Benchmarking is a tool, but not the only tool. It must be combined with judgment. Just as there are advantages to benchmarking, there are also disadvantages.


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Sometimes implies more precision in the results than actually exists: For example, the benchmark indicates the district has fewer reported worker compensation claims this quarter as compared to last quarter. In actuality, there was such a push by the district to promote safety that some employees who were actually injured did not report their injuries. They didn’t want to be the ones to break the “29 days without an injury” record. Unfortunately, the injuries do not go away and not the district has employees reporting late claims. These claims could possibly cost the district more money because the injuries were not treated early. There may be a problem with the data such as insufficient data, unknown data, and statistically “messaged” data: There may not be enough credible data to have it be statistically sound. All of the data might not be in the RMIS yet; the district may not have all of the most current information. Some of the data may have been “messages”; meaning some of the data may have been removed. For example, a large unique loss might have been removed when projecting future losses using the rationale that it is unlikely a large loss of the same type would ever occur again. Statistically invalid comparisons and inconsistent comparison data: The district changed TPAs for its workers compensation program. The new TPA records losses differently than the previous TPA. The data from both years, while expected to be similar in type of data captured, is not. Problems with comparing one set of benchmarking results with another:

Concluding only one factor is to blame.

Comparison to a group population that is not similar in size and demographics.

One-time, point-in-time comparisons.

“Slightly” different comparison data. FYI The school district risk manager must be careful not to “over read” benchmarking results. Benchmarking must be combined with judgment to be effective. Complete Knowledge Check: Section 5 Benchmarking p24 (ADM)


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What is the Purpose of a Risk Management Information System (RMIS)? An RMIS (risk management information system) is an information system that supports the school district risk manager with identifying, measuring, and monitoring the school district’s risks. A RMIS can be a simple computer spreadsheet or a complex commercial application.

How can a School District Risk Manager Use a RMIS? There are many functions that can be performed by a RMIS. Let’s take a closer look at each of the primary functions of a RMIS.

Collection and Use of Data to Control or Reduce Risk

Insurance Program Summary

Reports, Chart and Diagrams for Management

Cost of Risk


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Collection and Use of Data to Control or Reduce Risk We studied the type of data that should be captured and maintained by the risk management department in Section 4. The risk manager can now use this data, maintained on the RMIS, to help control or reduce risk.

Identify Areas Where Action Needs to be Taken to Control or Reduce Risk

Trend and Forecast Losses

Track Exposure Bases

Index Losses to an Exposure Base

Assist with Tracking Any Other Data the Risk Manager is Responsible for Tracking.

The risk manager should analyze the loss data to see if there are trends with regards to injured employees, amount paid in losses and causes of the accidents.

Are the same employees getting injured? Is the same type of accident occurring?

Are newer employees getting injured more frequently than long-time employees? Knowing this information can help the risk manager identify and select the most appropriate risk control technique(s) to reduce losses. Identify Areas Where Action Needs to be Taken to Control or Reduce Risk

When was injured, any repeaters and how much did the accident cost?

What was the cause of the accident(s)?

How can this type of accident(S) be prevented in the future?


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Trend and Forecast Losses A Loss Development Factor and an Inflation Index Factor turns today’s loss values into tomorrow’s estimated final payout. This helps the risk manager to estimate the district’s future losses. Track Exposure Bases Risk managers must know the exposure bases for their district before they can index losses to an exposure base. Revenues, vehicles, miles driven, units produced, payroll, number of employees, number of students, number of meals served, etc. This information is used to index losses to an exposure base which is beneficial to a risk manager when comparing one year to another – “Trend Analysis” Example: The district has calculated "indexed ultimate loss costs" for their workers compensation claims for a certain time period. ("Indexed ultimate" means that the loss costs have been adjusted to take into account the growth in claims costs and the impact of inflation. More on this topic is available in CSRM Measuring School Risks. These calculations are not within the scope of this course.) To understand the district's loss rate for the period, the indexed ultimate loss cost would be divided by an appropriate exposure base, such as #full time employees or payroll. The RMIS can track the data that makes up the exposure base information, and also the data used to calculate indexed ultimate loss costs. Index Losses to an Exposure Base Indexing to an Exposure Base was covered in both CSRM Measuring School Risks and Funding School Risks courses. Determining auto liability accidents per miles driven, employee injuries per number of units produced, injuries per student, etc.


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Collection & Use of Data Summary With the right data maintained on the RMIS, the risk manager can use the information to control the district’s losses.

Identify Areas Where Action Needs to be Taken to Control or Reduce Risk

Trend and Forecast Losses

Track Exposure Bases

Index Losses to an Exposure Base

Assist with Tracking Any Other Data the Risk Manager is Responsible for Tracking. Insurance Program Summary A second function of a RMIS is to maintain the district’s insurance information. This includes not only the information specific to the district’s policies, but also information about the coverage provided if the district is using a pool as a financing method. It is also important for the risk manager to know the status of all certificates of insurance, both incoming and outgoing.

Pool: 1) An organization of insurers or reinsurers through which particular types of risk are underwritten with premiums, losses, and expenses shared in agreed ratios. 2) A group of organizations (generally not large enough to self-insure individually) that form a shared risk pool.


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Reports, Charts and Diagrams for Management A third function of a RMIS is to develop reports, charts and diagrams for management. Charts and diagrams are effective communication tool as they capture pages and pages of text in one chart or graph. See the Appendix for sample Loss Data.

Cost of Risk The fourth function of a RMIS is the calculating, forecasting and allocating of the district’s Cost of Risk. The components of cost of risk were discussed in CSRM Fundamentals of Risk course. The RMIS can “add up” each of the components to come up with the district’s Cost of Risk, doing the same when forecasting the district’s cost of risk. The RMIS can also calculate the allocation of the district’s cost of risk to departments, divisions, activities, etc., using on a formula that can be based on actual losses, property values, number of employees, etc.


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Complete Knowledge Check: Section 5 RMIS Functions p36 (ADM)

Quality of Loss Data With all of the decisions made by the risk manager relying on the data, the quality of the data is crucial. School risk managers must be able to evaluate the quality of data being used. After all, the information generated from the district’s RMIS is only as good as the data that was input. Garbage In Garbage Out (GIGO). Data integrity is an ongoing problem; however, the real concern is the extent of the error rate when the information is input into the system. There are four areas that can help to ensure the quality of data relied upon by the school district risk manager.

1. Completeness

2. Consistency

3. Integrity

4. Relevance Data Quality – Completeness An adequate amount of loss data is needed to make a reasonable judgment. There should be at least 5 years of data; preferably 10+ years. Sufficient data is needed about each claim or accident to create a meaningful analysis. The risk manager’s use of the loss data to identify areas where action needs to be taken was previously discussed. If an insufficient amount of loss data is input, all of the information needed to identify “problem” areas will not be there. For example, if the cause of the accident is not input, how can the risk manager analyze the data to identify a trend? If the trend is not identified, how can it be controlled or reduced?


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Data Quality – Consistency The same types of data should be provided for each claim or accident. A change in the policy year, accident year, or calendar year might suggest the data would have to be interpolated to make it consistent. Inconsistencies can occur when there is a change in the recording method. This may occur when the district changes TPAs as the new TPA may record claim data differently than the previous TPA. Data Quality – Integrity Lack of data integrity can be caused by absence of standards for timing of data input, input errors, conversion errors when converting from one RMIS to another or data transfer problems from the district’s TPA or insurance carrier. Regardless of the source, (TPA, insurance company or in-house staff), data should be checked for input accuracy. Data needs to be timely; that is, current. It needs to be up-to-date so that decisions are being made based on what is taking place today. Accurate loss reserving should be checked with whomever is reserving losses whether it is a TPA, insurance company or in-house claims. Data Quality – Relevance Data needs to yield information on matters related to the school district - it needs to be relevant information for it to serve any purpose. However, not all data should be included. Data from Discontinued Operations: Do not include data from operations and activities no longer a part of the school district. Data from Acquired Operations: When adding an operation, include loss data from the portion of the acquired operation only. Irrelevant Data: Do not include extraneous data even if it is consistent, accurate, and timely.


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Commingling of Data: Do not combine data from diverse operations when trying to analyze losses. If data from one operation is not relevant to the other, the frequency, severity, types, and causes of losses will not be consistent. How to Ensure Quality Data Understanding the importance of using quality data when making decisions and recommendations, the risk manager can take steps to ensure data quality.

Evaluate incoming data and advise data providers of problems.

Work with data providers to develop more effective and useful ways to transfer and present the data.

Compare incoming data with data collected by the school district to ensure consistency.

When data is received electronically, the school district risk manager should be an integral part of the data conversion process.

Conduct data audits on a scheduled basis.

Back up, Back up, BACK UP! FYI Insurers and TPAs will sometimes use claims databases that are not compatible with the school district’s database. In these cases, it is necessary that the insurer or TPA provide the school risk management department with a computer program that will convert the data from their database system to the school district’s database. The school district risk manager should obtain:

documentation (data mapping) for future programmers,

access to computer codes, and

either ownership of the code or assurance that the third party has a computer code in trust for future use

If it is not possible to obtain ownership, the school district risk manager should require non-proprietary programming language and database format. If non-proprietary programming language is not available, the school district risk manager must make sure the data is exportable to the school district’s RMIS. Please refer to the end of Section 5 to go over the section exercises and self quiz.


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Section 6 Ethics and School Risk Management Ethics and ethical situations have been a heavy topic of discussion in recent years. Unethical behavior by some has negatively impacted thousands of innocent people and companies. As a result, the study of ethics has become more prevalent, with some professions are beginning to mandate ethics training requirements. School district risk managers and their risk management departments should always act ethically and make ethical decisions.

Learning Objectives By the end of this section you will be able to:

1. Understand the practical definition of ethics.

2. Understand the reasons and benefits of establishing a “code of ethics.”

3. Understand what issues should be included in a “code of ethics” for the risk management department.

4. Learn to manage ethics in the workplace. Before we begin the study of ethics, we will consider four scenarios specific to a school district. Scenario 1 You are a newly hired risk manager in a prominent school district. The superintendent has asked you to analyze all insurance policies to ascertain if they provide the coverage the district needs. He also has told you to recommend increases in coverages if you felt it was needed, but doesn’t want you to change carriers. After completing your review, you found the premiums to be excessive and coverage insufficient to meet the district’s needs. You know there hasn’t been a request for proposal in several years and have found the carrier to have an extremely strong relationship with the superintendent. What would you do? Scenario 2 After reviewing the construction contract for the new high school, you found certain line items that might be questionable if reviewed under state regulations.


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The contractor has been building new schools for the district for several years. You have noticed the construction manager for the district has quite a few appliances and gadgets in his office. He is always going on golfing outings and has even taken the Superintendent along. He also enjoys fishing trips and dining outings. What do you do? Scenario 3 You have received Request for Proposals for the district’s vehicle insurance. Two vendors are very close in coverage and pricing. You ask for a best and final offer from each of the vendors. One vendor submits a written response, but the other vendor wants to take you to dinner and a ballgame to discuss his best and final offer. What would you do? Scenario 4 You have an independent consultant under contract for your healthcare and workers compensation programs. You are paying the consultant a fee-for-service to assist you in these two programs. You find out the consultant has also been receiving commissions for products and services he has placed with the district. What should you do? Introduction to Ethics What is business ethics? According to various sources, school business ethics is:

1. Knowing what is right or wrong in the work place and then doing what is right; business ethics is a learned behavior;

2. The fundamental ground rules of our work lives; and

3. A form of applied ethics. It involves instilling into the district’s employees a sense of how to conduct business responsibly.


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Today, ethics in the workplace can be managed through the use of:

Codes of Ethics; Codes of Conduct

Roles of Ethicists and Ethics Committees

Policies & Procedures

Procedures to Resolve Ethical Dilemmas

Ethics Training Ethical problems typically stem from two human qualities: Ignorance and greed. Either way, the district has an ethics problem to resolve.

Greed Lapses in ethical behavior cause by greed are easily recognizable.

Stealing time or materials from employer

Expenses account padding

Kickbacks Ignorance Lapses due to ignorance are more difficult to recognize, but appear often with questions of conflict of interest.

Failing to report significant risks to the underwriter unless specifically asked about them

Accountants accepting consulting assignments from audit clients

Accepting Large Gifts from Vendors If any degree of conflict exists, that person should not make the decision or be involved in the decision-making process.


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For example, a brother-in-law of an employee in the risk management department is a principal in an insurance agency that has responded to the district’s RFP. If the district selects that agency for its insurance protection, could it be alleged there was a conflict of interest? What should the risk manager do? The school district must determine what constitutes a conflict. The best time for this determination is before a situation arises. A group of disinterested experts should develop guidelines – a code of ethics – with as much specific detail as possible. This has been done by many professional societies. This code of ethics will provide ethical guidelines to all district employees and outside service providers. FYI Many school district’s Codes of Ethics are accessible through the internet. Search “school district code of ethics.” Complete Knowledge Check: Section 6 Definition of Ethics p15 (ADM) Why Have a Code of Ethics? The reason to have a code of ethics: A reputation and track record for ethics, full disclosure, and integrity is vital for establishing the trust that is the basis for all successful business relationships. The school district benefits from having a code of ethics and an active ethics program which:

promotes high standards of business practice;

causes the district to develop an awareness and sensitivity to ethical issues;

defines and communicates accepted and acceptable behaviors;

integrates ethical guidelines into decision-making and establishes mechanisms for resolving ethical dilemmas;

helps to cultivate teamwork and employee productivity and provides a benchmark for employees to use for self-evaluation;


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A code of ethics also promotes a strong positive public image and adherence to good public practice, especially in the fiduciary responsibilities that exist with either public or private funds.

Code of Ethics

Enhances conformity to the spirit, intent, and letter of all laws and governing regulations

Helps avoid criminal acts of “omission” and helps lower possible fines and penalties

Serves as a mechanism that provides for continuing feedback, evaluation and update of the Code of Ethics

Most important of all, focusing attention on ethics in the workplace is the right thing to do!

Code of Ethics for the Risk Management Department

The following thirteen requirements or issues are typically addressed in a district’s risk management code of ethics.

1. Provide balanced and accurate reporting.

2. Present only factual information. Be prepared to offer options so informed decisions can be made.

3. Avoid conflicts of interest or the appearance of a conflict of interest.

4. Follow the district’s code of ethics as it pertains to entertainment and gifts from third-party service providers.

5. Avoid the intent and appearance of unethical or compromising practice in all relationships, actions and communication.

6. Do not do business with any organization in which the risk manager or any family member has any financial interest.

7. Be in compliance with and uphold all state, federal, municipal and foreign laws, rules and regulations governing the policies and activities of the district.

8. Make no effort to unduly influence underwriters, agents, brokers, inspectors, auditors, examiners, or others in a position to evaluate or criticize district or risk management activities.

9. Refrain from reciprocal agreements that restrain competition.

10. Be courteous, professional and ethical in the district’s dealings with all service providers, customers, the public and employees.

11. Strive to be aware of all cultural differences regarding business customs and ethical behavior and avoid any behavior that is, or may appear to be, unethical according to local customs or laws.

12. Be aware of the ethical issues involved in risk management consulting. (See Checklist in Appendix.)

13. Do no intentional harm.

http://magma.magma.scic.com/Elearning/ADM/ADMExhibit2.pdf


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Managing Ethics Just as the risk management process is an ongoing process, so is managing ethics in the workplace. An ethics program should never be created and then ignored. From time to time the district’s Code of Ethics and ethics program needs to be evaluated and updated as needed. An ethics program should produce deliverables. These deliverables can come in the form of an ethics code, policies and procedures, budget items, minutes from meetings, authorization forms, and newsletters. However, the most important aspect from an ethics management program is the process itself. That is, the reflection and dialogue that produces these deliverables. It is during the development process that potential conflicts of interest or ethical dilemmas can be brought up, discussed, and hopefully resolved.

“The very exercise of developing a code is in itself worthwhile; it forces a large number of people to think through in a fresh way,

their mission and the important obligations they, as a group and as individuals, have with respect to society as a whole.”

Richard T. DeGeorge in Military Ethics: A Code of Ethics for Officers


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The best of ethical values and intentions are relatively meaningless unless they generate fair and just behaviors in the workplace. That is why practices that generate lists of ethical values or codes of ethics must also generate policies, procedures and training that translate those values to appropriate behaviors. The bottom line of an ethics program is accomplishing preferred behaviors in the workplace. An ethics program provides no value if there isn’t evidence of its existence in the day-to-day activities of the district. Effective Practices for Managing the Ethics Program

The best way to handle ethical dilemmas is to prevent their occurrence in the first place.

Integrate ethics management with other management practices

Make ethics decisions in groups, and make these decisions public, as appropriate

Use cross-functional teams when developing and implementing the ethics management program.

Note that ethical perfection may not be realistically achievable and so making a few mistakes is better than not trying at all.

If not already doing so, include policies and procedures to address ethical dilemmas to ensure training of employees about the ethics management program, to reward ethical behavior and to impose consequences for unethical behavior.

Always include a grievance policy for employees to use to resolve disagreement with supervisors and staff.

The district may also want to consider establishing an ethics “hotline.” See the Appendix for the Twelve Questions to Address Ethical Dilemmas. What is Include in the Code of Ethics What should be included in the code of conduct or code of ethics. Examples of topics typically addressed are listed on the right:

1. Complying with laws and regulations

2. Reporting illegal or questionable activity

3. Avoiding age, racial, or sexual discrimination

4. Avoiding substance abuse

5. Not using district’s property for personal use

6. Avoiding conflicts of interest


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7. Not accepting personal gifts from stakeholders given because of position with the district

8. Maintaining confidentiality

9. Following instructions of superiors

10. Being reliable and prompt

11. Following district’s dress code The district should go beyond these traditional legalistic expectations in their codes – adhere to what's ethically sensitive in their district as well. Once the code of ethics is created, it needs to be communicated to all district employees. Some risk management departments also share their code of ethics documents with their outside service providers. It is important to remember that it is not possible to include preferred behaviors for every possible ethical dilemma that might arise. The Ethics Quick Test

1. Is the action legal?

2. Does it comply with our values?

3. If you do it, will you feel bad?

4. How will it look in the newspapers?

5. If you know it is wrong, don’t do it.

6. If you are not sure, ask.

7. Keep asking until you get an answer. Ethical Analysis Checklists Situations will arise from time to time that require the district to analyze a situation from an ethical perspective. Ethical Analysis Checklists are tools that can be used to help the risk manager evaluate the situation and provide assistance in making appropriate decisions. See the Appendix for Ethical Analysis Checklists


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Summary The superintendent must fully support the ethics program for it to be successful. The district might also consider:

establishing an ethics management committee, and

assigning and developing an ethics officer.

Ultimately, one person must be responsible for managing the ethics management program. Please refer to the end of Section 6 to go over the section exercises and self quiz.


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Review the learning objection for each section. Section 1 Introduction to Administering School Risks Make sure you feel confident that you have understood the objectives of Section 1. Learning Objectives

1. Identify and describe the five steps of the Risk Management Process.

2. Discuss how Risk Administration fits into the Risk Management Process.

3. Understand the importance of a proactive approach to Risk Administration. Section 2 The School District Risk Management Team Make sure you feel confident that you have understood the objectives of Section 1. Learning Objectives

1. Understand the value and purpose of having a risk management team.

2. Understand the differences and similarities among internal, external and informal team members.

3. Identify and select members of the risk management team.

4. Determine when a school district risk manager might find it necessary to get assistance from outside service providers.

5. Know the differences and similarities among agents, brokers, and consultants.

6. Identify and discuss different types of agents. Section 3 Communicating with the School District Risk Management Team Make sure you feel confident that you have understood the objectives of Section 1. Learning Objectives

1. Understand the importance of communication with members of the risk management team.

2. Know the reasons technical jargon should be avoided when communicating with team members and others.

3. Understand the difference between one-way and two-way communication.


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4. Select the most effective communication tools to administer the risk management program.

5. Understand the tools available for communication of risk management issues. Section 4 Implementing the Risk Management Program Make sure you feel confident that you have understood the objectives of Section 1. Learning Objectives

1. Perform basic action planning, including 3W charts (what, who, when) and calendaring.

2. Discuss delivery methods for acquiring risk management resources.

3. Understand when to use a Competitive Sealed Bid (CSB), Request for Proposal (RFP), Competitive Sealed Proposal (CSP).

4. Understand the Request for Proposal (RFP) process.

5. Understand the importance of the project timeline to the RFP process and what should be included in the timeline.

6. Identify and discuss common sections of an RFP.

7. Know what is included in the RFP cover letter.

8. Know the factors that can contribute to a successful proposal evaluation.

9. Know what criteria the risk manager could also consider when awarding a contract.

10. Understand how to properly finalize the RFP process.

11. Know how to recognize and avoid a conflict of interest. Section 5 Monitoring the Risk Management Program Make sure you feel confident that you have understood the objectives of Section 1. Learning Objectives

1. Understand types of data that need to be collected and maintained in order to effectively monitor the Risk Management Program.

2. Identify and discuss tools used to monitor the Risk Management Program.

3. Distinguish between external and internal benchmarking.

4. Understand when benchmarking is beneficial.

5. Discuss advantages and disadvantages of benchmarking.


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6. Understand the purpose of a risk management information system (RMIS).

7. Understand functions a RMIS can perform.

8. Identify and discuss various methods of assessing the quality of loss data.

9. Discuss how a school district risk manager can ensure data quality. Section 6 Ethics and School Risk Management Make sure you feel confident that you have understood the objectives of Section 1. Learning Objectives

1. Understand the practical definition of Ethics.

2. Understand the reasons and benefits of establishing a “code of ethics.”

3. Understand what issues should be included in a “code of ethics” for the Risk Management Department.

4. Learn to manage Ethics in the workplace.