STORM © strategic risk management Zurich Municipal Management Services Risk based consultancy 13th October 2004 David Forster Hampshire Health, Safety and Environmental Group- an insurers perspective

Zurich Municipal’s risk based consultancy Focusing on high level business risk ISO 9001 accredited Approved contractors for Office of the Deputy Prime Minister's capacity building programme Background in Treasury, Local Government and Education Who are we?

Agenda

The state of the insurance market in the public services Insurance in the public services is in a state of intense flux A market worth several (8?) billion pounds is having to deal with spiralling claims costs ( in some areas costs doubling in less than 10 years) In Local Authorities alone, claims costs are in excess of £1 billion Public expenditure by Local Authorities is circa. £60 billion Estimates in the NHS are as much as £4 billion This does not include central government

Public services reaction to this problem Recognition that this cannot go on in this way The ‘death’ of ‘ground-up’ insurance Higher and higher ‘deductibles (£100,000-£250,000) Some organisations fully self insure-not always a good idea. Attempts to set up pools and mutuals-not always successful Some government schemes e.g. N.H.S.L.A.

Public services reaction to this problem Recognition that this cannot go on in this way The ‘death’ of ‘ground-up’ insurance Higher and higher ‘deductibles (£100,000-£250,000) Some organisations fully self insure-not always a good idea. Attempts to set up pools and mutuals-not always successful Some government schemes e.g. N.H.S.L.A.

Insurance organisations’ reaction to this problem Better management of contingency fees (no win no fee) Recognising the role of risk management Managing the causes as well as the symptoms (community impact)

Quick history of risk management in the public services Ground up cover until 1993 Death of Municipal Mutual- failure of public services mutual Growth of operational and physical risk management- management of insurable risk The emergence of corporate governance and the recognition of the wider role of risk management/controls assurance

Recent evolution Recognition that only 20% of risks are insurable Government demands on the role of risk management, in particular from the Treasury

All organisations exist to achieve their objectives. The purpose of risk management is to manage the barriers to achieving these objectives. Treasury ‘Orange book’ 2001

There are two types of risks: direct threats (damaging events) which could lead to a failure to achieve objectives. opportunities (constructive events) which if exploited could offer an improved way of achieving objectives, but which are surrounded by threats. Treasury ‘orange book’ January 2001

Physical Risks Risk Management? Fire Security H&S Liability Financial

Political Economic Social Legislative/ Regulatory Environmental Competitive Customer/ Citizen Managerial/ Professional Financial Legal Partnership/ Contractual Physical Techno- logical

Up to date Openness & inclusivety Integrity Effectiveness Accountability Community Focus Service Delivery Arrangements Structures and Processes Standards of Conduct Risk Management and Internal Control CORPORATE GOVERNANCE FRAMEWORK

Members role:

Examples of some common ‘big picture’ risks

RISK SCENARIO

©Zurich RISK SCENARIO

©Zurich

RISK SCENARIO

Where next? Creating a culture of risk management within public bodies Becoming part of the way things get done Recognising risk sits at all levels and needs to be managed Now part of Government formal inspections e.g. C.P.A.

RISK MANAGEMENT IN ORGANISATIONS Strategic Business Directorate / Programme Operation / Project Strategic and cross cutting issues affecting the achievement of business objectives Issues affecting the achievement of directorate objectives Management co-ordination Issues affecting the achievement of operational/ project objectives

FIVE STAGE PROCESS Stage 1 Engaging hearts & minds at the top Stage 2 Corporate & cross- cutting risks Stage 3 Directorate risks Stage 4 Service and project risks Stage 5 Transfer of skills - support and review

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Agenda

Compensation Culture ‘ Perception of Compensation Culture is damaging’ Task force report says ‘The Compensation Culture is a myth’ Is it???

Some figures Figures from FOIL (Forum of Insurance Lawyers) during period cost of injury claims rose by 117% claims frequency rose by 3% per annum claims severity rose by 6.7% per annum Backed up by IUA report which shows over last 10 years claims cost risen on average 9.9% per annum

The experience Highways Employers Liability Public Liability Housing Stress One City Council at one point was experiencing over £1 million worth of pavement trip claims per annum

Compensation Culture Tackling this issue is one of the greatest challenges facing many public bodies if claims costs are to be brought under control

Civil Contingencies Act New Civil Contingencies Bill has been drafted Likely to be en-acted Winter 2004/Spring 2005 New duties placed on public bodies It will become a top item on the agenda

Civil Contingencies Act Existing legislation out of date Foot and Mouth, Fuel Shortage and September 11th Need for modernisation of emergency powers to reflect today’s world

Civil Contingencies Act Category 1 Responders - All local authorities - Emergency services - NHS Trust/Foundation Trust/PCT - Port/ Health Authorities - Environmental Agency

Civil Contingencies Act An event or situation that threatens serious damage to: - Human welfare - The environment - Security of the UK or a ‘place’ in the UK Covers events including flooding, a terrorist attack (dirty bomb), an oil spill and an epidemic Therefore the bill’s range is much broader: It is more than just an extension of emergency planning It is about maintaining the services provided

Civil Contingencies Act Duty to Assess: Assess the risk of an emergency occurring (New meaning of emergency) Consider what are the risks - Think externally as well as internally 2. Duty to Plan: Maintain Plans necessary to deal with an emergency Arrange for the publication of assessment and plans 3. Duty to provide advice: Assistance to the public in making arrangements for the continuance of commercial activities.

Civil Contingencies Act Driving home the importance of effective business continuity planning

Questions, please