Risk Management Best Practices NCGFOA Summer Conference July 18, 2011

Presented by: Greg Gaskins Chief Financial Officer City of Charlotte Dan Pliszka Manager, Risk Management City of Charlotte Mecklenburg County Charlotte-Mecklenburg Schools

Why Risk Management?? Legal Humanitarian Economic $$$$$$

Risk Management History Hard market of the mid to late 80’s. Workers’ Comp Crisis early 1990’s  GASB 10 reporting requirements  Required loss funding of $17 million Increased emphasis on cost containment. Increasing losses with multiple cost drivers.

Increasing Losses and Drivers High risk exposure as part of our business. Public Safety Functions Construction and Engineering Right of Way and Property Management Increase in settlement and litigation costs. Exponential increase in claims settlement costs over the past several years. Increasing jury awards. Litigated claims are receiving record jury awards both locally and nationally.

Increasing Losses and Risk Drivers Industrial Commission Rulings. Adverse rulings on Workers’ Compensation cases. Changing definitions of compensable claims. Need for Workers’ Compensation reform. Increase in High Profile and Large Losses. Large and severe losses are increasing. Large losses can be mitigated by reducing the high number of smaller losses. Losses tend to be cyclical !!

Losses are Cyclical

What did we do??? IRMA (Insurance and Risk Management Agency) Self Funded Program Established DIRM (Division of Insurance and Risk Management) Risk Management Division Consolidated Program. City of Charlotte, Mecklenburg County, Charlotte-Mecklenburg Schools Comprehensive Program: Auto, General Liability, Workers’ Compensation Risk Control Services Risk Financing Insurance and Contracts

Successes Created Loss Metrics. Actuarial Funding of Losses. Implemented Cost Allocation Outsourced City operated Health Clinic. Find the Dent on the Police Car. Strengthened relationships with Legal and Human Resources. Citywide Safety Team. Incorporate County Safety Position.

Successes Began providing loss metrics to business unit management.  What gets measured gets done !!

Efforts Opened the Charlotte Vehicle Operations Center In response to dramatically increasing vehicle claims frequency and severity.

CHARLOTTE VEHICLE OPERATIONS CENTER (C.V.O.C.) RISK MANAGEMENT DIVISION 2725 BEAM ROAD

Where are we now?? Still having unacceptable losses.  ~$31,000,000 including IBNR Formed an Executive Risk Management Task Force Comprised of KBE’s of the seven top loss KBU’s. Led by Assistant City Manager. Review Data Enhance the Risk Management Culture Create Goals for Risk Reduction Establish Scorecard Objectives Establish Critical Incident Reviews Establish Working Groups

Current Efforts Organizational Culture Change  Loss accountability  Employee ownership of safety and risk. Six Sigma)  Losses are no longer a “Cost of Doing Business”  Safe Production vs. Safety AND Production Enterprise Risk Management  Mecklenburg County  Compliance Driven Transparent Organization  Board and Senior Management Support  Insurance Broker Assistance Risk Management Gap Analysis  Insurance Broker Assistance  Interview management and line employees.  Identify potential Gaps and areas for improvement.  Focused on Leadership, Culture, Programs and Process

Private Sector Example Coca Cola Consolidated Metrics  Safety – Measured by frequency  # of Vehicle Claims  # of Workers’ Comp. Claims  # of Days Lost due to Workers’ Comp claims.  # of General Liability Claims  People – Measured by Employee Turn Over  Quality – Measured by internal index and consumer complaints.  Responsiveness – Measured by internal schedule adherence.  Cost Management – Measured as a cost per unit produced.

Keys to Successful Efforts Efforts must be driven and supported from the top.  City / County Manager  City / County elected officials Efforts must be sustained for the long haul.  Remember losses are cyclical over time. Deliver the same message in different ways. Culture Change is Key Efforts must be multifocused.  Concentrating on one loss type is like playing a game of Whac-a-Mole.

Auto Liability Risk Management Whac-A-Mole Workers’ Compensation General Liability Public Officials Liability Health Insurance

Risk Management NC Government Finance Officers Association July 18, 2011