The Ins and Outs of Risk Management
By Dawn Klingensmith
t is well understood, or ought to be, that risk management plays a vital role in any sports and recreation program, and that the consequences of not assessing, controlling and financing risks range from increased lawsuits and insurance claims to financial devastation. But have you considered how poor economic times make risk management all the more important? That's because during a downturn "economic motivation leads people who have debts or are unemployed to pad insurance claims or develop insurance fraud schemes," said attorney and consultant Katharine Nohr, Nohr Sports Risk Management, Kaneohe, Hawaii.
Even in the best of times, organizations must protect themselves and maintain a safe place for all participants, she added. As it happens, though, "We see an increase in lawsuits in economic downturns," in part because budget constraints and being short-staffed can lead to inadvisable shortcuts and omissions, said Nohr, author of "Managing Risk in Sport and Recreation: The Essential Guide for Loss Prevention" (Human Kinetics, 2009). "If an organization chooses to skimp on safety and risk management practices, they likely will see an increased incidence of injuries and worker's compensation claims," she added.
For example, in a 2007 lawsuit against a golf course, "There was a handrail in very poor condition, which the golf course knew about but didn't repair," Nohr said. "As a consequence, an injury occurred. This might seem relatively insignificant, but with the poor economic times, facilities that are struggling to remain in business must consider the consequences of delaying repair of known hazards."
In a downturn, individuals who encounter a faulty handrail may stage a fall or, if they have a legitimate injury, exaggerate its severity. Even if an organization maintains a comprehensive risk management program and uses safe practices, insurance fraud might increase in the form of padded claims and staged or deliberate accidents.
Nohr also stressed that in this day and age, emergency disaster planning is particularly important. Terrorism is an ongoing threat, for example, and flooding and other natural disasters have increased in some areas, perhaps as a result of global warming, she said.
Though some geographic regions are more at risk than others, it is critical for all organizations to think about weather-related emergencies and other potential disasters when evaluating their loss exposures.
All things considered, "I believe that facilities and organizations could be more proactive," Nohr said. "My concern is with budget reductions and economic problems, which face so many organizations. Proactive risk management takes a back seat to what appear to be more pressing problems. Reacting to lawsuits and insurance claims is a normal way to approach risk management, but not the best way."