|
by Ed Schirick
Camp
directors sometimes overlook identifying the risks that might cause interruption
of their camp business. Once they have identified the risks, many camp
directors prepare incompletely for managing them. Because of the catastrophic
implications resulting from an interruption of camp, directors should
annually evaluate the risks of business interruption using the risk-management
process.
The Risk-Management Process
The first step in the risk-management process is risk identification.
Experienced directors will want to start this process themselves. However,
getting input from different perspectives is one of the keys to a successful
process, so include staff, board members, and other interested parties
in the process. Approach the risk identification step as a brainstorming
session. Develop your list of business-interruption risks without passing
judgement or discussing the items. Don't prioritize the list, just develop
a comprehensive list of possible situations.
There is a tendency to think only of events that cause physical damage
to the camp property. The risk-identification
process should be expanded to include other risks as well. While many business
interruption risks are common among camp businesses, every camp has unique
circumstances that require an individualized approach to the risk-identification
process.
Examples of risks that might be on your list include:
- Destruction of your dining hall as a result of fire, tornado, or
earthquake.
- Destruction of your entire facility from a forest fire, tornado,
hurricane, or other catastrophic weather event.
- Illness associated with contaminated food or water.
- Incident of sexual abuse, neglect, or misconduct.
- Restricted access to your property or being asked to evacuate your
location because of an order from a civil authority responding to an
emergency on an adjacent property.
The second step in the risk-management process is risk analysis. What
do we mean by analysis? Webster's dictionary defines analysis as "separation
of a whole into its component parts." How do we analyze risk? By breaking
the situation in which the risk occurs into several pieces. Consider
the activity itself, where it is done, who does it, what can go wrong,
and the interaction of the various aspects of the situation. This helps
identify the causal elements and how they relate to each other.
Perhaps the best way to explain this step is with an example a camp
director shared at an ACA conference several years ago. The circumstances
are real, and the risk analysis and solution are brilliant in their simplicity.
One of the activities offered at the director's camp was miniature golf.
The camp director had a management system that generated daily incident
reports from all of the camp activities. While he was reviewing some
incident reports shortly after camp opened, he noticed a pattern of minor
injuries from miniature golf. Further analysis and investigation lead
him to realize that campers were using their putters for other purposes
while they were waiting for their turn. Some swung it like a baseball
bat, and others used the putters like swords - typical behaviors for
kids. It was misuse of the putters during this activity that was causing
the injury.
The director felt the potential for injury in this situation was great,
so he called a meeting of his counselors to discuss what to do and how
to manage this issue. During the discussion, one counselor volunteered
that he had no injuries among his campers during the miniature golf activity.
The director asked why. The counselor responded that he let the campers
use only one putter! When the director limited each group to one putter,
the injuries stopped.
While this example does not relate directly to the risks of business
interruption, it shows how one camp applied risk analysis and the risk-management
process to solve a problem very effectively.
The third step in the risk-management process is risk evaluation. Generally,
this step includes determining the likelihood that an event will occur
often or occasionally and whether the injury or damage to the business
has the potential for being minor or severe.
The fourth step in the risk-management process is selection of a method
to manage the risk. Methods to manage risk include avoidance, reduction
or prevention, retention or assumption, and transfer.
Don't Assume Risk Blindly
Most risks that cause business interruption have catastrophic or severe
potential and don't happen frequently. This catastrophic potential is
one of the reasons camp directors transfer as many business-interruption
risks to an insurance company as possible. However, some business interruption
risks are not insurable, easily avoided, or prevented. It is important
to know this and plan accordingly. One of the risks you want to avoid
as a risk manager is blindly assuming risk.
To avoid blindly assuming risk, you should take some time to learn more
about the insurance coverage available for business interruption. Your
insurance agent or broker can help with this education process. Following
are a few thoughts to consider:
- It is important for a service business like camp to stay open. Emphasis
should be placed on staying open at all costs. This means becoming
an expert at developing and executing Plan B and knowing costs in advance.
If you don't know the costs, how can you purchase an adequate amount
of insurance?
- Business-interruption insurance is designed to replace income that
would have been earned during the time repairs are being made to your
buildings. The physical damage to your buildings must be from a covered
cause of loss. Reimbursement is for "actual loss sustained." If you
don't make a net profit - that is, don't sustain a loss of net income
- you may not have a business-interruption claim.
- Extra-expense insurance is designed to pay for increases in operating
expenses that result from continuing makeshift operations while permanent
repairs are made. This insurance will provide you with financial resources
and help you stay open.
- Camps need a combination of business interruption and extra expense
insurance.
Failing to identify the risks of business interruption and how to manage
them could result in the failure of your business. Take the time to estimate
how long it will take to resume operations in a worst-case scenario for
each of the risks you identify. Determine how much additional expense
you will incur in the process. Have your insurance agent or broker help
you determine which of the risks and costs are insurable. Purchase the
appropriate amount of insurance. Don't over-insure.
Camp directors should develop plans for staying open in response to
those risks that are uninsurable. Establish a reserve fund to help you
respond and stay open when you can't transfer the risk or when you decide
to assume or retain it yourself. Never risk a lot for a little and, keep
your eyes wide open by staying informed and involved in planning for
business-interruption risks.
Originally published in the 1999 November/December
issue of Camping Magazine. |
