Risky Business

By Rick Purnell

It’s easy to think of risk management as the latest hedge or great rate on the last operating loan. But risk management can cover everything from hailstorms to helium balloons. When risk management strategies are fully applied throughout a business, the awareness of risk and ways to mitigate it become part of the workday culture and increase the likelihood of long-term success.

sally alexanderSally Alexander, chief risk officer and director of risk management and insurance for Colorado State University (CSU) in Fort Collins, Colo., and her team manage the university’s self-insurance reserves and buy insurance for insurable exposures. In her 12-year tenure, she’s seen awareness of risk management and a greater understanding of it rise among university personnel.

“Risk managers have to add value to our organizations,” she says. “The best success we can have is when somebody else is talking about risk management.”

Creating awareness of risk management among department heads, managers and directors in a large university system may seem a gargantuan task. It can be just as hard in farming where key players, such as retailer agronomists, bankers and consultants aren’t on site every day.

Susanne Johnson, director of risk management at Iowa State University (ISU) in Ames, Iowa, also with a 12-year tenure, addresses this challenge by offering her team up as a resource to help departments, units, students and faculty make decisions that help them achieve their objectives.

“We help them navigate ways to get things done, including policies, procedures, event logistics and the more traditional side of risk management, insurance and claims,” she says. “We get involved across the university in multiple ways. We are responsible for the oversight of the youth activities policy. We administer the program, including background checks, program registration forms and outreach. We help departments have appropriate volunteer agreements in place. We also recently added an international risk analyst since ISU is active around the world.”

susanne johnsonThe types of risks universities share are relatively common across the country. They include human disease, foodborne illnesses, lab accidents, weather, cybercrime or infrastructure scares with information technology, racism, discrimination, violent incidents, active shooters and reputation risks that includes improper employee behavior and utilities. The latter is especially vivid as Johnson retells an incident of a helium balloon connecting with electric lines in Ames and shutting down the electrical system in the city and at the university.

Finance Your Risk

“Having insurance doesn’t manage your risk,” Alexander says. “All insurance does is finance your risk. When I work with a student organization or other group, I always explain that having insurance is not going to stop anything bad from happening. Rather, how we plan programs and events from an operational point of view will more likely reduce risk of something going wrong.

“Now, insurance will help pay for bad things that happen,” she continues. “So, part of our annual renewals and underwriting process is to ask stakeholders across campus about the operational practices they engage to manage risk. This really helps me understand what a department head or program manager is trying to achieve. From the framework this process gives me, I can then encourage CSU to underwrite the program or know we need to look toward an outside insurer.”

CSU is highly decentralized, autonomous and has what Alexander calls a healthy risk appetite. That’s why she says it is important to make sure there are enough diverse voices at the decision table so that someone can say, “Wait a minute. Have we thought about enough of the possibilities so that we can move forward?” A perspective from someone unfamiliar with the business or college may shed light on a risk not previously considered.

Manage for Weather

risky businessAs with farming, weather is one of the bigger risks universities face. Johnson says her team completes an annual hazard analysis that takes into account rain, flooding, hail, tornadoes, high winds, ice and snow. Alexander says Colorado experienced devastating hail loss in the last year.

In addition to sporting events, weather is a risk that warrants caution during field days, plot test observations and livestock events. Alexander’s team works with CSU Extension, as does Johnson’s team with ISU Extension and Outreach, to ensure the right protocols are in place.

“When someone is planning an event, I always ask questions about its objective and purpose,” Alexander says. “Whatever the event is, you have to think about the types of hazards that could happen, followed by how you will manage against them occurring.”

She says this includes having a plan to move an outside activity indoors in case of a weather event. Also, planners must consider their audience. A group of youths or minors raises the risk profile. It is less so with adults, but you still have to make sure the field or facility is safe, and people aren’t falling into holes or tripping on things that should have been removed earlier.

Seek Help with Compliance

Whether it be a private business or a university, understanding regulatory compliance is critical to managing risk, Johnson says.

“Following federal, state and local laws, including labor regulations and OSHA requirements is important,” she says. “Awareness is a big part of knowing which regulations apply to your situation. It’s important to understand why. As a public institution, there are some things that ISU may be exempt from that a private business may not be or vice versa.

“Know who your resources are when it comes to compliance,” Johnson adds. “None of us has all the answers. Even if there is a compliance office, staff won’t know all the ins and outs of OSHA, Department of Transportation, Fair Labor Standards Act and such, but they know who can help. Just like farmers go to their accountants, tax attorneys and insurance agents, these relationships and the knowledge they bring are what help professionals stay in compliance.”

She stresses the need for continuing education on regulations because the rate of change continues to increase. UAV (unmanned aerial vehicle) regulations are but one example of shared learning by university officials and farm owners and managers.

Everybody’s Business

“Risk management is everybody’s business. I see it as a decision-making and management framework. It is a process to get everybody thinking about identifying risks and hazards,” says Alexander. “Risks can also be opportunities, but you have to have all the information you need to make informed decisions. When you see it as a management tool, risk management is valuable.”