the municipal secretary desktop reference manual - Southwestern ...

F. MUNICIPAL RISK MANAGEMENT
A municipality=s exposure to losses and risks exists due to:
! owning of real estate,
! engaging in contractual arrangements,
! providing public services, and
! possessing highly liquid assets.
Risk management is the process of identifying the risk associated with each type of exposure and
controlling those risks to the greatest extent possible.
Protecting the local government solely through the purchase of insurance policies does
not constitute risk management. A better strategy is to eliminate or control the exposure in the
first place. A comprehensive risk management plan involves four major components:
! identification of risks/potential losses
! evaluation of the scope of that loss
! control over manageable factors influencing potential losses, and
! purchase of coverage or pledging assets to cover losses.
Five principal developments within the past several years mandate that local governments of all
sizes pay increasing attention to risk management:
! erosion of traditional tort immunity has expanded governmental officials= and
employees= exposures to claims.
! increasing inclination of the general public to litigate grievances against government
in an attempt to adjust alleged wrongs.
! awards by the judiciary for wrongs are often based upon the concept of “deep
pockets” or that a government has unlimited capacity to generate revenues to
compensate those wronged.
! costs for insurance coverages are dynamic and can increase significantly from time to
time.
! assumption by many local governments of new or expanded services responsibilities
results in an ever increasing exposure to risk.
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