Magazine article Risk Management


Magazine article Risk Management


Article excerpt

On behalf of the Public Risk Management Association (PRIMA), I would like to offer a few clarifications and additions to Mr. Jeff Marshall's recent article titled, "If ERM is So Good, Why Isn't Government Using It?" [October 2007].

It is important for readers to understand that Mr. Marshall's broad references to government seem to be based upon the structure and function of state government. Most local governments are not nearly as decentralized (agency-to-agency) as state government. Also, not all state government is as segmented as Mr. Marshall implies.

In addition to his broad generalization of all forms of government, there are a number of statements in the article that don't do justice to the practice of public risk sector management and the emerging area of enterprise risk management in the public sector.

One example early in the article states that, "Meanwhile, the government's approach to dealing with the risk was to update sovereign immunity reduce either the frequency or the severity of losses." Mr. Marshall is referring to a period of time between the late" 1970s and the mid-1990s. There certainly were some states focused on sovereign immunity laws during that time period because of the significant erosion of those protections, but that activity was slight when compared to how risk management began to emerge in the public sector.

It was during this period that government was also abandoning the "insurance model" or "risk transfer model" because it was systematically being priced out of the market due to the same erosion of immunities.

Also, during that time, public sector risk managers organized themselves into the Public Risk Management Association, formed in 1978, and hundreds of public entities organized alternative risk transfer mechanisms (besides pools and captives) such as layered and self-insured programs. These activities permanently changed the insurance marketplace as it relates to public entities.

Public sector risk managers work closely and cooperatively with their administrators, managers, sheriffs, police departments, teachers, school bus drivers, garbage collectors and others to reduce risk through prevention, early identification of risk, claims management, appropriate insurance placement and the creation of a risk management culture.

One major difference between private and public sector risk management is the fact that risk avoidance is rarely an option in government. …

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