What Is Risk Management?
The Board of Regents has approved a policy giving responsibility for the preservation of assets, both human and physical, to the Office of Risk Management. This is accomplished by identifying, evaluating, and controlling loss exposures faced by the University. Risk Management's goal is to minimize the adverse effects of unpredictable events. For example, it is not known if a fire will ever occur in your office, but if it does, the adverse effect of that fire will be reduced if proper risk management tools have been utilized.
What Are The Tools of Risk Management?
There are four basic tools of risk management:
- Loss Prevention and Reduction
- Transfer (to another entity)
Avoidance: Many times it is not possible to completely avoid risk but the possibility should not be overlooked. For example, at the height of a blizzard, Car Fleet may not release vehicles for travel until the weather begins to clear, thus avoiding the risk of auto accidents during severe weather. Some buildings on campus have had repeated water problems in some areas - by not allowing storage of supplies in those areas, some water damage claims may be avoided.
may be determined that it is more practical to retain a risk even
though other methods of handling the risk are available. For example,
the University retains the risk of loss to fences, signs, parking
meters, gates and light poles because of the difficulty of enumerating
and evaluating all of these types of structures. When losses occur,
the cost of repairs is absorbed by the campus maintenance budget,
except for those situations when we can collect from a negligent
Loss Prevention and Reduction: When risk cannot be avoided, the effect of loss can often be minimized in terms of frequency and severity. For example, our office encourages the use of security devices on all computers, to reduce the risk of theft. We require the purchase of health insurance by students who are studying abroad, so that they might avoid the risk of financial difficulty, should they incur medical expenses in another country.
Transfer: In some cases risk can be transferred to others, usually by contract. When outside organizations use University facilities for public events, we require that they provide evidence of insurance and name the University as an additional insured under their policy, thereby transferring the risk from the University to the user. The purchase of insurance is also referred to as a risk transfer since the policy actually shifts the financial risk of loss, contractually, from the insured entity to the insurance company.