managing risk in a healthcare enterprise

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MANAGING RISK

MANAGING RISKIN A HEALTHCARE BUSINESS ENTERPRISEEVERY BUSINESS FACES RISKWHAT IS BUSINESS RISK?

EVERY BUSINESS FACES RISKUNEXPECTED CIRCUMSTANCESOF SUFFICIENT SEVERITYTO MATERIALLY IMPACT A BUSINESSOPERATIONAL CAPABILITYORFINANCIAL INTEGRITY

EVERY BUSINESS FACES RISKUNEXPECTED CIRCUMSTANCESOF SUFFICIENT SEVERITYTO MATERIALLY IMPACT A BUSINESSOPERATIONAL CAPABILITYORFINANCIAL INTEGRITY

EVERY BUSINESS FACES RISKUNEXPECTED CIRCUMSTANCESOF SUFFICIENT SEVERITYTO MATERIALLY IMPACT A BUSINESSOPERATIONAL CAPABILITYORFINANCIAL INTEGRITY

EVERY BUSINESS FACES RISKUNEXPECTED CIRCUMSTANCESOF SUFFICIENT SEVERITYTO MATERIALLY IMPACT A BUSINESSOPERATIONAL CAPABILITYORFINANCIAL INTEGRITY

EVERY BUSINESS FACES RISKUNEXPECTED CIRCUMSTANCESOF SUFFICIENT SEVERITYTO MATERIALLY IMPACT A BUSINESSOPERATIONAL CAPABILITYORFINANCIAL INTEGRITY

EVERY BUSINESS FACES RISKUNEXPECTED CIRCUMSTANCESOF SUFFICIENT SEVERITYTO MATERIALLY IMPACT A BUSINESSOPERATIONAL CAPABILITYORFINANCIAL INTEGRITY

UNEXPECTEDDOES NOT MEANUNFORESEEN

EVERY BUSINESS FACES RISKMAINTAINING A SYSTEMIC PROCESSTO IDENTIFYANDCONTAIN BUSINESS RISKIS A CORE FUNCTIONOF MANAGEMENT

EVERY BUSINESS FACES RISKMAINTAINING A SYSTEMIC PROCESSTO IDENTIFYANDCONTAIN BUSINESS RISKIS A CORE FUNCTIONOF MANAGEMENT

EVERY BUSINESS FACES RISKMAINTAINING A SYSTEMIC PROCESSTO IDENTIFYANDCONTAIN BUSINESS RISKIS A CORE FUNCTIONOF MANAGEMENT

EVERY BUSINESS FACES RISKMAINTAINING A SYSTEMIC PROCESSTO IDENTIFYANDCONTAIN BUSINESS RISKIS A CORE FUNCTIONOF MANAGEMENT

A logical and continuous process13EVERY BUSINESS FACES RISKMAINTAINING A SYSTEMIC PROCESSTO IDENTIFYANDCONTAIN BUSINESS RISKIS A CORE FUNCTIONOF MANAGEMENT

Contrast with entrepreneurial function of identifying business opportunity and weighing potential benefit against potential cost.14THE RISK MANAGEMENT PROCESSA FIVE STEP ROUTINEDiscovery of Potential Loss ExposureEvaluation of Likelihood and SeveritySelection of Control StrategyImplementation of Control StrategyMonitoring / Feedback / Correction

DISCOVERY OF POTENTIAL LOSS EXPOSUREUNDISCOVERED LOSS EXPOSURES MUST NOT BE DISMISSED AS A COST OF DOING BUSINESSDISCOVERY OF POTENTIAL LOSS EXPOSUREUNDISCOVERED RISKYIELDSUNCONTROLLED RISK RETENTIONDISCOVERY OF POTENTIAL LOSS EXPOSUREBE REALISTIC

NOT EVERYTHING THATCAN GO WRONGWILL GO WRONGDISCOVERY OF POTENTIAL LOSS EXPOSUREFOCUS MANAGEMENT ATTENTIONON THOSE UNEXPECTED EVENTS WHICH CAN CAUSE MATERIAL DAMAGE DISCOVERY OF POTENTIAL LOSS EXPOSURETYPES OF LOSS EXPOSURE

PropertyLiabilityKey PersonnelNet IncomeThink outside the box. A risk to property can be a risk of obsolescence. A risk to key personnel can be failure to maintain needed skills or even things like drug dependency and depression.20DISCOVERY OF POTENTIAL LOSS EXPOSUREUSE ALL AVAILABLE RESOURCES TO IDENTIFY RISKSInternal ResourcesIndustry and Regulatory ResourcesInsurersConsultantsDISCOVERY OF POTENTIAL LOSS EXPOSUREINTERNAL RESOURCES

Survey your own peopleConsult your own historyDiagram your processesAnalyze your cash to cash cycleAsk yourself What if ?DISCOVERY OF POTENTIAL LOSS EXPOSUREINDUSTRY AND REGULATORY RESOURCES

Professional Societies like the American Academy of DermatologyGuidelines Promulgated by your Licensure BoardsASHRM The American Society for Healthcare Risk Management (www.ashrm.org)

ASHRM publishes a Journal23DISCOVERY OF POTENTIAL LOSS EXPOSUREINSURERS

Professional responsibility carriers provide training courses and guidance

Property and casualty carriers also provide training and guidance

ASHRM publishes a Journal24DISCOVERY OF POTENTIAL LOSS EXPOSURECONSULTANTS

Industry-specific consultants can bring experience and fresh eyes

Learn from the mistakes of others

Knowledge of control techniques

ASHRM publishes a Journal25EVALUATE EACHPOTENTIAL LOSS EXPOSUREDIMENSIONS OF RISK

Frequency

Potential Severity

Realistic Range of Loss

ASHRM publishes a Journal26DISCOVERY OF POTENTIAL LOSS EXPOSUREBE REALISTIC

NOT EVERYTHING THATCAN GO WRONGWILL GO WRONGEVALUATE EACHPOTENTIAL LOSS EXPOSUREGOAL OF THE ANALYSIS?

IDENTIFY A PRACTICAL RISK CONTROL STRATEGYASHRM publishes a Journal28RISK CONTROL STRATEGIESTWO CATEGORIESOPERATIONALFINANCING29RISK CONTROL STRATEGIESOPERATIONALRisk AvoidanceLoss ControlCombinationTransfers of Operational Risk30RISK CONTROL STRATEGIESOPERATIONALRisk AvoidanceLoss ControlCombinationTransfers of Operational Risk31RISK CONTROL STRATEGIESOPERATIONALRisk AvoidanceLoss ControlCombinationTransfers of Operational Risk32RISK CONTROL STRATEGIESLOSS CONTROLPreventionMitigationSeparationExample: Fire33RISK CONTROL STRATEGIESOPERATIONALRisk AvoidanceLoss ControlCombinationTransfers of Operational Risk34RISK CONTROL STRATEGIESOPERATIONALRisk AvoidanceLoss ControlCombinationTransfers of Operational Risk35RISK CONTROL STRATEGIESTWO CATEGORIESOPERATIONALFINANCING36RISK CONTROL STRATEGIESFINANCING TECHNIQUESNon-insurance financing transfersInsuranceRetention/Reserves37RISK CONTROL STRATEGIESNON-INSURANCE FINANCING TRANSFERSContractual IndemnificationGuaranties WarrantiesCommon Law IndemnificationContribution38RISK CONTROL STRATEGIESNON-INSURANCE TRANSFERS

RISK FINANCING OBLIGATIONS CAN BE TRANSFERRED FROM YOU OR TO YOU39RISK CONTROL STRATEGIESNON-INSURANCE TRANSFERSTHE TRANSFER IS ONLY AS EFFECTIVEAS THE FINANCIAL CAPABILITY OFTHE TRANSFERREE TO PAY THE BILL40RISK CONTROL STRATEGIESFINANCING TECHNIQUESNoninsurance financing transfersInsuranceRetention/Reserves41RISK CONTROL STRATEGIESINSURANCEA risk financing techniquewith a financially responsible partner,but with strings attached.42RISK CONTROL STRATEGIESINSURANCEScope of CoverageAdequacy of AmountConditions on ClaimConditions on Payment43RISK CONTROL STRATEGIESFINANCING TECHNIQUESNoninsurance financing transfersInsuranceRetention/Reserves44RISK CONTROL STRATEGIESRETENTION/RESERVESA decision to retain the financing burden of a risk should be made only after carefully evaluation.No risk should be retained without providing a specific and committed reserve.

45THE RISK MANAGEMENT PROCESSA FIVE STEP ROUTINEDiscovery of Potential Loss ExposureEvaluation of Likelihood and SeveritySelection of Control StrategyImplementation of Control StrategyMonitoring / Feedback / Correction

IMPLEMENTATION OF THE CONTROL STRATEGYMAKE A PLANDocument the risk you have identified and the evaluation you have made.Document the reasons for your selection of a control techniqueAssign responsibility and set deadlinesFollow through47THE RISK MANAGEMENT PROCESSA FIVE STEP ROUTINEDiscovery of Potential Loss ExposureEvaluation of Likelihood and SeveritySelection of Control StrategyImplementation of Control StrategyMonitoring / Feedback / Correction

THE RISK MANAGEMENT PROCESSRISK MANAGEMENT IS ACORE MANAGEMENT FUNCTION

THE RISK MANAGEMENT PROCESSMAINTAINING THE ENTERPRISE RISK MANAGEMENT PROCESSIS THE RESPONSIBILITYOF THE CHIEF EXECUTIVE OFFICER

Douglas O. GuffeyJaburg Wilk, PC3200 N Central Avenue, 20th FloorPhoenix, AZ 85012

602-248-1039dog@jaburgwilk.comwww.jaburgwilk.com

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