By Michael J. Bemi
Most recently in our series on moving “beyond insurance,” we examined Risk Retention. Now, we undertake the next step in our journey: Risk Control.
We previously identified that Risk Retention can provide a number of very substantial and significant benefits that ultimately can enhance the provision of our ministries. These include: reduced premiums, improved claims management and risk control, enhanced cash flow, and greater risk management program control.
However, it is axiomatic that these values of Risk Retention are diminished — and potentially destroyed — if an entity does not control its losses. After all, Risk Retention is not simply about eliminating the phenomenon of “trading premium dollars” with your insurers; it is primarily about controlling your entity’s risk management fortunes and results.
So, how do we go about ensuring that the value and benefits of Risk Retention are obtained via Risk Control?
Start with Risk Identification, Analysis & Evaluation
First, we begin where we actually began this series months ago; namely, with Risk Identification, Analysis and Evaluation.
It follows logically that we can’t properly determine what level of retention to employ — and what we need to control — if we have no record and analysis of our entity’s loss experience. We also can’t decide what measures to employ to reduce those losses, if we have no understanding of how our ministries actually create risk for us, and further, in what ways that risk can damage us. So, you need to inventory the many and variant ways in which your entity is exposed to loss. (Examples: your leased and owned buildings and premises; your equipment, supplies, furniture and fixtures; your fleet vehicles; your employees and volunteers; your specific ministry related services; your legal environment; etc.) Then, analyze the manner and magnitude in which those exposures to loss have — or might — actually cost you money.
Once you have accomplished the necessary Risk Identification, Analysis and Evaluation, you can turn your attention to Risk Control. And it is critical that you do so, because Risk Control provides the strategies, policies, procedures and mechanisms to help you prevent losses in the first place, or to mitigate the value of the losses you could not prevent (and in this imperfect world, we will never prevent all the nasty things that can happen). Only by pursuing Risk Control, can you maximize the benefits of Risk Retention.
Risk Control can be both complex and expensive; but seldom so when considered in the context of a church’s operations and activities.
Generally speaking, with very few exceptions (e.g., hospitals or skilled nursing facilities), the Church does not undertake operations and activities that produce the type of exposure to loss demanding significant outlays for effective and efficient Risk Control. Even in the few circumstances where implementation and employment of Risk Control measures might demand some significant outlay (perhaps retrofitting a fleet of 15-passenger vans or installation of a sprinkler system or a central station smoke / heat / flame / burglar alarm system), when compared to the costs (financial, time expenditure, reputational and emotional) of resolving large claims, Risk Control clearly demonstrates itself to be a genuine bargain.
Further, it is inarguable — from both Christian and financial perspectives — that preventing any loss from occurring is vastly preferable to doing an excellent job of handling the claim(s) from a loss that you did not prevent.
Risk Control protects and preserves the physical, financial and human resources that the Lord has blessed us with and in regard to which he expects us to exercise responsible administration.
Risk Control also protects the people to whom we minister. Risk Control protects our reputations — and thus, our ability to effectively minister — by demonstrating to everyone in our communities that we are committed and dedicated to the protection, preservation and nurturing of people.
Finally, Risk Control protects and preserves our ability to successfully derive all the benefits of Risk Retention. Clearly and unquestionably, Risk Control meets the test of good stewardship.
Michael J. Bemi is president & CEO of The National Catholic Risk Retention Group, Inc. (Lisle, IL) — a recognized leader in risk management. To learn more about available coverage — and to get valuable tools, facts and statistics — visit www.tncrrg.org.
