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Church Risk Management in 5 Simple Steps

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Risk management is the process of protecting the tangible and intangible assets of your church or ministry. Tangible assets are physical properties, such as cash, buildings, furnishings, sound systems, computer equipment, etc. Intangible assets are the reputation, public image or “brand” of the ministry. Intangible assets are also the people who attend the church, its staff, and its volunteers. Protecting those assets requires five steps:

  • Identifying Risks
  • Analyzing Risks
  • Controlling Risks
  • Financing Risks
  • Administration

Identifying Risks

Identification is the most important step in the risk management process. We must know the risks or hazards that threaten our ministry so that we can effectively analyze, control, finance, or administer them. There are several ways to effectively identify your risks:

  • Physical Inspections include walking through the facilities and property looking for those things that may pose a hazard. Slipping, tripping, and falling accidents account for the vast majority of liability claims, so pay careful attention to anything on your premises that might post a threat.
  • Checklists, including a vehicle inspection prior to trips, help to detect a potential problem.
  • Insurance Policy Reviews should take place on a regular basis as your insurance needs may have changed.
  • Leases and Contracts may not all be written to the advantage of the ministry. Ensure that indemnification clauses or other language does not transfer liability onto the ministry. A good risk manager can help you rewrite the contract to transfer liability.

Analyzing Risks

The next step is to analyze those risks. We want to know the likelihood of an accident as well as the potential impact of such a loss, should it occur. Analysis can show you how much a loss will cost when it occurs as well as future costs such as increased premiums, damaged reputation, etc. Losses do not just affect us today. They can potentially have long-term consequences.

Controlling Risks

Risk control can be defined as all the actions we take to reduce the likelihood and/or impact of a loss. There are five different techniques for controlling risk:

  • Avoidance. Avoid certain unnecessary risks that may pose a threat to the church or ministry.
  • Prevention. Stop or interrupt the chain of events that lead to an accident or a loss.
  • Reduction. There are pre-loss and post-loss reduction techniques. Pre-loss reduction techniques are steps we take before a loss has occurred to minimize the damage. Post-loss reduction practices are those actions taken after a loss has occurred to reduce the impact of the loss.
  • Separation and Duplication. Ensure that important information, especially your electronic data, is duplicated and stored off site. Make regular backups of your financial information, giving reports, tax documents, or other sensitive information.
  • Transfers. Make someone else assume your liability. It is possible to “physically” transfer risk by allowing another individual or entity to perform the necessary duties. “Contractual” transfers shift the liability onto another by way of a contract. Common examples are hold harmless agreements and indemnity agreements, whereby another entity agrees not to sue and to indemnify (or protect) you in case of an accident or suit. Do not sign a contract that transfers risk and liability to your organization as they can often be negotiated or rewritten to more favorable terms.

Financing Risks

The financing of risk explores different means to pay for the risks that we assume. Insurance helps you pay for losses you incur; it is a form of risk financing. Other parts of risk financing are deductible levels, self-insured options, retentions, etc. Build into your risk management plan (and budget) the means to pay for a risk should an event occur.

Administration

Administration is the fifth and final step in the risk management process. This is simply the overall management of the process and includes implementation and monitoring of all the risk management steps. Administration requires a commitment to the process as well as a willingness to evaluate and, if necessary, change the way we operate.

Closing Thoughts

Effective risk management compels us to examine the various aspects of our ministries to identify and analyze the various risks we ask our staff, volunteers, and adherents to take. Does our ministry expose others to harm or potential dangers? If so, what are the specific risks? While addressing those issues we can start taking steps to control, as much as is reasonably and financially possible, the risks associated with our ministries. Remember that risk avoidance is the most effective control technique; however, it is often the most difficult to implement. It is tough to ask and to answer “is this particular event/ministry worth the risk it poses”? If we feel it is worth the risk, then it benefits us to take the necessary steps to make that part of our ministry as safe as possible.

We want to help you in any way that we can. If you would like more information about anything mentioned above including the practical steps (checklists, policy reviews, contract or lease reviews, waivers, hold harmless agreements, etc.), contact one of our certified risk managers at 866.662.8210 or email info@agfinancialinsurance.org.

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