Albany officials: Risk management about much more than insurance

Aug. 02--ALBANY -- Few outside individuals trained in the art of governance and finance understand fully the concept of institutional risk management. Perhaps that is why it's difficult to find professionals in that industry willing to talk specifically about one of their own.

A number of professionals in risk management-type positions willingly talked with The Albany Herald about their profession when contacted by the newspaper, but none would comment on the record about the issue of city of Albany risk manager Veronica Wright's request -- and subsequent awarding -- of a bonus for her efforts on behalf of the city.

"I'll say that a good risk manager can be a valuable asset for a government," one said. "Whether or not (Wright's) case was warranted ... it's not for me to say. There are a lot of variables to consider."

One other such professional did allow that it was "unusual" for anyone to receive a bonus based primarily on insurance savings, which was a large part of Wright's justification for requesting a bonus.

"Insurance is such a volatile industry," the risk manager said. "If you work with a broker or a consultant to shop for lower premiums, you may save your organization a ton of money over the short term. But have a bad year or two, and you better believe the premiums and the costs are going to increase sharply.

"There are just too many variables when it comes to group insurance."

Wright's request for an $8,840 annual pay increase in May and her request of a $41,685.25 bonus in June were based primarily on savings she said in emails to city Human Resources Director Henry Cohen that had to do with insurance savings she'd had a hand in earning for the city.

In a May 22 email to Cohen, Wright wrote: "I would like to request a pay increase due to a significant increase of additional duties and responsibilities. ... The insurance program for the Utilities Department (Water, Gas & Light Commission) was completely merged (with the city) and the cost saving totaled one hundred seventy thousand dollars. ... Just to name a few additional duties and programs would be: completing the risk brokerage service for both COA (city of Albany) and Utilities, completing the risk allocation fund program for the utilities department, training and implementing of the new vendor insurance requirements."

In a June 4 email to Cohen, Wright noted: "As part of the combine(d) services initiative, the Workers Compensation program was moved under one provider. ... The utilities risk program received a total savings of $166,741. ... I am requesting 25 percent of $166,741, which is $41,685.25."

Then-City Manager James Taylor eventually authorized a bonus payment of $20,374 for Wright, and fallout from that matter -- even after it was declared "within Mr. Taylor's authority" by the Albany City Commission -- hastened Taylor's decision to retire from his position.

While many in the community questioned whether Wright deserved such a bonus, there was one question that rose above all others in the aftermath of that episode: Just what is risk management?

Interim City Manager Tom Berry, who replaced Taylor, has spent what most consider a distinguished career overseeing city utilities and government management. And Berry does not hesitate for a second when asked if risk management is an essential part of a city like Albany's government.

"You look at Albany, and they do just about anything a city can do for its citizens," Berry said. "The risk area is huge; there are a lot more employees and a lot more services (than most smaller cities). Risk management, essentially, does just what the name implies. It works to control risks.

"I've only just begun to get a little deeper into the various departments of the city, and I expect to learn more about each as I spend more time in this office. But my sense of the Albany risk management team is that they do a pretty good job. To be honest, they're not quite as proactive as I'd like. They're more reactive. But with more training, I believe we'll create a mechanism by which they'll become more proactive."

Wright is one of four employees in the city's risk management department. The department is budgeted for five employees, but only four are on the payroll. In addition to coordinating -- with the help of brokers and consultants -- costs of the city's insurance program, risk managers are also tasked with determining what action will help lessen the city's risk of lawsuits.

"Safety training is a big part of risk management," Berry said. "By conducting training and controlling risks, we're pre emptively diminishing the number of accidents. And as anyone knows, attorneys and some citizens will sue you at the drop of a hat."

Berry points to the ongoing complaint by an Albany citizen over the planned removal of an "at-risk" tree on Dawson Road that city officials say could cause injuries or worse if not cut down. A local citizen has petitioned to halt the tree removal, and a court case is pending.

"I won't talk about specifics because there is a court case, but forget about the potential cost (of lawsuits resulting from falling limbs)," Berry said. "Consider the potential injury. These are the kinds of things we have to look at to make sure citizens are safe."

Assistant Dougherty County Administrator Mike McCoy serves as the risk manager for the county, and he said that position has involved him in issues involving everything from insurance coverage for county employees to roadway obstructions to personal injury cases.

"When we're made aware of a potentially dangerous situation -- a pothole on a county road, an issue with a sidewalk on county property -- part of risk management is mitigating the situation," McCoy said. "We certainly are much more likely to have a problem if we've been warned about a (potentially dangerous) situation and we do nothing about it.

"That's why training is so important."

So, too, is the input of consultants like Jim Britt with Charlotte, N.C.-based Scarborough & Britt, whose specialties are benefits, insurance and risk strategies.

"Because the city of Albany is completely self-insured, they assume a lot more risks than the county," McCoy said. "We have a hybrid-type insurance program where we accept liability up to a point, and at that point our outside insurance takes over coverage. Because we're assuming a large part of the risk, we're able to get premiums at a reduced rate."

Britt has also helped the county set up a "safety committee" made up of management-level employees who are "coached to be the eyes, ears, the role models" for safety training and awareness.

"By managing these safety issues internally, Dougherty County is taking a more pro-active approach," Britt said. "We help the county find patterns of concern in both frequency and severity. By focusing on these patterns, we can clip unfavorable ones more quickly."

McCoy said that, by utilizing the hybrid approach to employee insurance coverage, he's able to save money on premiums that allow him to utilize experts like Britt to manage the county's risk.

"This worked really well for us in the first year of using it (Fiscal Year 2014)," McCoy said. "We'll monitor it over the next three or four years to determine if this is the best approach for us. When you're working with a limited budget, these 'outside-the-box' ideas can have a big impact."

In light of the Wright situation, both Berry and city CFO JoEllen Brophy say they're in the "beginning stages" of developing an incentive program that will clearly define the guidelines for future bonuses.

"I love incentives; they work," Berry said. "If employees' work helps the city decrease expenses and increase revenue, they deserve to be rewarded. I believe everyone should know up front what the structure for such a program is, but the bottom line is our employees must be aware that every penny they spend doing their job gets into the pockets of our citizens."

Brophy said city managers are looking at ways to make cuts of a targeted goal of $6 million from the city's budget by the end of the current fiscal year.

"The planning is vital, but the employees have to make that happen," she said. "The challenge we now face is finding a way to reach that goal and a way to include those employees in the -- for lack of a better word -- profit-sharing."

Time will tell if that's a risk worth taking.

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