Workers' compensation, being the statutorily defined and administered animal that it is, may on its face appear to not need a risk standard applied to its day-to-day management, but I maintain that the opposite is true.
All risk exposures lend themselves to better management when approached with consistency, rigor and principled purpose.
Having just returned from presenting at the 2nd Annual ISO 31000 Conference, I couldn't help but wonder if the focus on enterprise risk management (ERM) and governance, risk management and compliance (GRC) was causing risk managers with more narrow accountabilities to ignore the potential assistance that standards can offer them, their companies and their risk strategies.
The fact is, for many risk managers, their sandbox is one defined by property and casualty exposures; an important area of risk management but one that doesn't often apply ISO 31000 or any of its competing standards to their day-to-day practice.
There appears to be some thinking that standards are only relevant if you have an "all risk" accountability. Is that a problem?
First, a bit about risk standards.
Beginning with the pioneering efforts of the Aussies and Kiwis, led by Kevin Knight, the AS/NZ4360 standard was introduced in the late '90s and laid the groundwork for ISO 31000, now increasingly recognized as the global standard for risk management. (The American National Standards Institute, ANSI, blessed it as the appointed U.S. standard in 2011.)
What is it? Simply put, it is a set of principles, a framework and a process for managing any kind of risk. This standard, like most, implies an application to all risks, but if that's not your purview, then it's nothing to get hung up on.
In fact, I would argue that, even if your direct responsibility is limited to just one exposure, be it for example, employee injury (worker's comp) or non-occupational disability (i.e., short-term disability and/or long-term disability), a standard can help apply the rigor and consistency needed to excel in managing any exposure.
The elements of a risk framework and process are much the same as they would be applied from one exposure to another. Each provides discipline where it is often missing and is usually much needed to drive anything more than average results.
Similarly, a set of principles to guide the development and deployment of both a framework and the process itself (execution: where the rubber meets the road) facilitates the cohesion needed among the various stakeholders with interests in any exposure area.
If there's a key difference in application, it lies primarily in the sheer depth and breadth of execution (i.e., in one exposure versus multiple). In practice, a standard helps bring stakeholders together through consistency and commonality of approach. It helps drive discipline and rigor around the many methods and practices used to identify, assess, measure, mitigate/leverage, monitor and report on one or more risks.
If we consider the worker's compensation exposure specifically, it would be easy to fall back on the many statutes that prescribe the things we must do, when we must do them and, to some degree, how they must be done. But, in fact, the statutes are only the fundamentals that drive a regulatory interest in worker protection and fair treatment when hurt on the job; noble interests for sure.
It is only in few instances that the statutes drive decisions and actions within even a rudimentary risk framework.
For example, I know of no worker's comp statute that facilitates the identification of risk or, more precisely, risk events that would help ensure that the many sources of loss (i.e., causes) are minimized from a prevention standpoint.
Similarly, show me a worker's comp statute that even touches on the risk management imperatives of risk assessment and measurement. And while this is not to say risk practitioners are not engaged in these important activities, it is to suggest that standards and frameworks enable and facilitate more complete attention to the many aspects of exposures to which they are applied.
Thus, these tools are useful for ensuring a more comprehensive and thorough treatment of all aspects of the risk management paradigm applied to each exposure of concern. In effect, to do any less would be irresponsible for risk professionals. Why not allow standards to guide our actions to achieve both the best result for the injured worker and for his or her employer?
So don't be dissuaded from considering the use of a standard when designing your strategy for managing risk in your organization, no matter what exposure(s) for which you're responsible.
And while there's more than ISO 31000 to choose from, a huge plus for this standard is the fact that it requires no certification and thus avoids the bureaucracy of regular recertification and all the time and aggravation that entails. For more on this standard, visit ISO.org or G31000.org.
CHRIS MANDEL is senior vice president, strategic solutions for Sedgwick. He is a long-term risk management leader and a former president of the Risk and Insurance Management Society Inc. He can be reached at firstname.lastname@example.org.
June 11, 2013
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