Survival Risk: Managing Risk in a Recession

Survival Risk: Managing Risk in a Recession | Risk & Insurance | The current economic outlook for most of our organizations is bleak, as corporate bailouts have become the norm and economic stimulus is our hope. The outlook for municipalities all across the nation, and especially in California, is not any different. What the private sector is already dealing with, and has been for years through efficient cost-cutting and being nimble, is what municipalities and other public agencies must now learn to do quickly. After much struggling the state of California recently adopted a budget that addressed a $40 billion deficit.

By VICTOR PARKER, risk management director for the city of Los Angeles

At the city of Los Angeles, where I work as risk management director, it is estimated that we will have a budget deficit of $430 million in fiscal year 2009-2010 (starting July 1, 2009) and will fall further in the red to the tune of almost $1 billion for FY 2010-2011. The city faces severe challenges from loss of revenues and an underfunded pension system.Next year, we may face laying off as many as 5,000 employees.

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I do not know what risks will look like in our organization in the future, and I am not sure what resources I will have to address those risks. Already, other public sector programs are on the chopping block with proposals that cut back risk management to one person, the risk manager. I think we all can say that we have good programs and strategies to handle our most challenging financial and operational risks. But what happens if we do not survive?

Is risk management an internal cost center that does not provide enough value to taxpayers? After all, we do not patrol or pave our streets. If we cannot keep our parks and libraries open, then what will keep risk management from closing shop? Our mayor has made it abundantly clear that public safety is a top priority, and those of us not in uniform must all be more creative and reinvent the way we do business.

Recessionary times bring proposals on a daily basis that offer cost savings and revenue ideas for every city department. My concern is that many of these proposals are not fully vetted, and from a risk perspective we face more challenges to get our voice heard. I also worry about an organization with far fewer employees in operations that promotes a "cutting the corners" approach with risk management not a top priority.How many employees will opt for the workers' compensation line to avoid the unemployment line?

As risk management, we have to maintain our viability by making our organization successful and continuing to provide cost-effective, quality service to the city.

That is enough doom and gloom.The environment is what it is, so what are we in risk management going to do about it? What am I going to do about it? I have been through it before in the city of Los Angeles, but it has never been this bleak. Over the years, however, I have developed a healthy awareness about potential downsizing and know the importance of providing value to our organization. For what it's worth and based on my experience, I offer the following 13 lucky survival tips from a municipal risk manager:

1. Diversify your funding so you are not dependent on one source.

2. Become revenue generating in anyway possible.

3. Save money!

4. Create organizational excellence and seek awards that publicize this excellence, both internally and externally.

5. Educate continuously and learn from everyone, including colleagues, professional organizations, employees and supervisors.

6. Understand your role in your organization and know when to push the envelope and when to back off.

7. Stay aggressive and be resilient--nothing happens overnight.

8. Just say "yes" and avoid the public sector employee motto, "It is not my job."

9. Take risks--it is better to have tried, failed and learned from the experience than to be completely risk adverse.

10. Don't let the culture of your organization get you down and stop you from making those risk management improvements every day. Help them help themselves.

11. Politics from time to time will trump logic. When that happens, move on!

12. Maintain your positive mojo.

13. Have fun! In these tumultuous times it's important to find ways to enjoy and find meaning in one's work.

While we cannot predict the future, there is one thing that I am reminded of by the famous Gloria Gaynor song. That is, "I've got all my life to live ... got all my love to give, and I'll survive, I will survive, hey, hey." And so will we.

April 15, 2009

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