Municipalities provide a variety of services that are of a real benefit to their residents. If accidents or other events that result in bodily injury, damage to private property, or financial losses occur, injured persons may make claims against the municipality of their losses. The process to reduce the exposure to these types of events is called "risk management".
"Risk management" is a term that describes the process used to decrease exposure to risk and help provide protection from risk. Risk management generally means identifying circumstances that could result in accidents, unsafe conditions, or exposure to hazardous substances and a plan to decrease, eliminate, or transfer the risk. An effective risk management program reduces exposure to risks and the high costs of accidents associated with certain risks through safety programs and training, or transfers the risk to an insurer.
An effective risk management program puts into place certain protections and lessens some liability. Frequently, risk management may be a relatively low priority until an incident occurs that brings to light the need for certain protections. Without an active risk management program an organization is vulnerable to losing everything. By buying appropriate insurance, having a risk management program that identifies risks and works to reduce the possibility of an accident, and a safety-training program, an organization can dramatically reduce its risk potential.
Why is risk management important?
Risk management protects people, property, and resources. It lessens the risk of unsafe or hazardous conditions and the possibility of serious injury, property damage, or loss and provides certain protections in the event of injury, death, or damage to or loss of property.
Is insurance required by law?
Yes. AS 23.30.075 requires workers' compensation insurance. Granting and other funding agencies and contracting entities also require insurance as part of the agreement between the parties. AS 29.20.380, AS 29.20.610, and AS 29.35.660 require bonding (insurance against theft or embezzlement) for certain municipal employees and officials.
Who should be concerned about risk management?
Everyone should be concerned about risk management, but especially those organizations that have a lot of public contact and/or conduct business activities that could increase exposure to risk such as use of hazardous substances, construction activities, equipment use, etc.
How do you put a risk management program in place?
Risk management is done through a process of identifying potential risks and planning steps to lessen and control risks and indemnify (insure) against certain risks. The steps can include developing and implementing safety programs, conducting training, and paying to insure against damages in the event an accident should occur.
Who can help with risk management?
There are several public and private organizations that provide assistance with risk management. The U.S. Department of Labor and Alaska Department of Labor & Workforce Development administer the Occupational and Safety Hazard Act (OSHA), and have a wide variety of resources and "e-tools" available. The National Safety Council and various private insurance and risk management companies also provide information and assistance in this area.
There are insurance programs available to Alaskan municipalities called joint insurance arrangements, or insurance pools. The Alaska Municipal League Joint Insurance Association (AMLJIA) and Alaska Public Entity Insurance (APEI) are both insurance pools that provide affordable insurance coverage to member cities and a cost-effective resource to control insurance and risk management costs.
What types of insurance should an organization have?
At a minimum an organization would want to consider buying general and auto liability insurance, replacement insurance, errors and omissions insurance, and an insurance bond on staff that handle cash to protect against theft or embezzlement. Commerce's "Local Government Handbook" chapter on "Municipal Risk Management" contains a detailed discussion of risk management and the types of insurance a local government might want to have in place.
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