7 Critical Risks Facing the Public Sector

Mass shootings, cyber liability and medical costs are all public sector risks. Add to that budget shortfalls and the picture is grim.
By: | October 24, 2018 • 6 min read

The public sector faces every risk the private sector does and then some.


Adding to the complexity of public sector risk management is the transparency required in public sector deliberations, including contract negotiations and the burden for public sector risk managers to proactively mitigate risk at a price their cash-strapped employers can afford.

What follows is a list of critical public sector risks, any one of which could reduce a public entities’ budget to a shambles if not properly managed.

1) Mass Violence

Vehicles driven into crowded sidewalks in Toronto and London. Juveniles in Florida, Colorado and Connecticut picking up automatic weapons and mowing down their classmates.

The threat of mass murder that could break out at any second is giving public sector risk managers nightmares. In some cases, this public sector violence and madness is leading to innovative insurance coverages.

One public sector risk manager, Dianne Howard of the Palm Beach County School District, sought out the insurance markets to help her solve a property concern related to active shooter incidents. What would happen, she wondered, as was the case at Sandy Hook, if her district needed to demolish a school building because of the horrible memories it evokes for parents who lost their children or for classmates and teachers who survived a mass shooting? The carriers were able to offer her an arrangement that transferred some of this risk.

In the case of a vehicle crashing into a crowd, public sector risk managers need to take a hard look at their policies. Is a vehicle defined as a possible weapon in your policies? Might be, might not be. Better check.

2) Cyber Liability

As cyber risk became understood and cyber coverage evolved, the first areas insurers felt they could be of use was in covering the forensics to run down the source of a breach and the costs of notifying customers that their data was possibly in the hands of bad actors.

In the public sector though, in the event of a breach or even a concern that a breach may have happened, the process of arranging forensic assistance becomes very complicated. What if you think you had a breach but you’re not sure?  You contact your carrier, who then instructs you to hire a high-priced legal firm that conducts forensics. The firm wants a big retainer up front.

In the public sector, you need to go the board for approval at a — you guessed it — public meeting.

Sitting in the audience are newspaper reporters eager to write down and publish every word you say. You don’t even know if you had a breach, and news of one, real or imagined, can be almost as bad as the real thing from a reputational standpoint. See the dilemma?

Smart risk managers are arranging this forensics cover up front and eating the deductible so they can move forward with forensics and inform the public when it is appropriate to do so.

3) Health Risks for First Responders 

Two recent pieces of legislation signal a growing delta of exposure for state and local governments in the area of public responsibility for the health risks of first responders.

A Florida bill extended workers’ compensation benefits for emergency workers who suffer from post-traumatic stress disorder. The psychological fallout from the 2016 mass shooting at the Pulse Nightclub in Orlando and the massacre at the Marjory Stoneman Douglas High School in Parkland this year were key factors in the law’s creation.


“You hope that these things don’t happen a lot, but as they do, it is incumbent on us to take care of those who take care of us,” said Kristy Sands, a vice president of marketing and communications with Gallagher Bassett.

Of course it is, but there will be a substantial cost to the public purse to cover treatments for not only the police and firefighters who responded to the Pulse and MSD shootings but also to other events.

In September, New York lawmakers extended workers’ comp benefits for responders to the World Trade Center bombings until 2022. Cancer from asbestos exposure is just one of the health risks that New York emergency personnel are experiencing as a result of the event.

“There is no doubt that these incredibly brave people who ran into buildings to save others are now facing a crisis of their own,” Sands said.

Related medical costs, though, (including pharmacy costs for these claims), could be massive.

“The medications required for first responder heart and lung claims are extremely expensive,” Sands said. “I had a client who had a concentrated exposure, and in looking at their drug costs, opioids weren’t even in the top 10,” she said.

4) Budget Restrictions

Workers’ comp is just one area where restricted public sector budgets are on a collision course with economic trends. As we all know, health care costs continue to rise, just as many risk managers in the public sector are seeing their budgets capped or cut.

“One of my clients saw a 9 percent reduction in their budget,” Sands said. “They were doing extraordinarily well with their costs, but now they are going to have to figure out how they are going to continue with health costs going up and their budgets going down.”

“Risk managers are going to have to get creative in looking at loss prevention,” Sands continued. “That means getting out there more and seeing where their challenges are and addressing them head on.”

But health care and workers’ comp are just one piece of it.

As this summer’s heatwave in the Northeast demonstrated, the ability of many school districts to provide a comfortable — not to mention healthy — learning environment for children is in doubt.  In the Philadelphia School District and elsewhere, inner city students who can ill afford to miss classes found themselves locked out of school. The schools lack air conditioning, and it will take millions to install it — millions the district doesn’t have.

5) Crisis Management and Reputational Risk

In the age of connectivity, when reputational risk is at everyone’s doorstep, how governments and school districts respond and communicate during a crisis is of paramount importance. An increasingly diverse U.S. population requires an increasing number of communication channels for the public sector to get its message across.

Take the example of a district with Asian students, many of them from different countries, and Latin American students, also from a variety of birthplaces. What happens when a vital piece of information goes out to a school population in general, but 20 percent of the students or their parents can’t understand the message?

Liability and accusations of prejudicial treatment is what happens; not to mention the potential loss of life if crucial evacuation orders or some other emergency communications are not received.

6) Fleet Management

Distracted driving, impaired driving and a critical shortage of driving labor are all factors that are making fleet risk management in the public sector a critical risk. Some think that autonomous vehicles may provide some measure of risk relief, but they carry their own set of shortcomings.

7) Disaster Recovery

Another area where the public sector is facing a real dilemma is in its ability of cities, counties and towns to recover from natural disasters.


As Risk & Insurance® reported in 2016, the state of our nation’s infrastructure has reached a critical stage of disrepair. Trillions will be needed to bring bridges, roads and levees up to acceptable standards, and it is not at all a given that there is the political will in this country needed to get those improvements made. Climate change and the resultant sea rise and increased storm intensity are adding to this problem.

Just look at the flooding and wind storm damage from Hurricanes Michael, Florence and others of their ilk. With public sector budgets already strained, it’s not only the cost to infrastructure, but also the tens of thousands of people who will end up on public assistance.

With no savings and limited incomes to begin with, many of those in Florida and North Carolina who were displaced by hurricanes this season will struggle to get back on their feet again, adding more of a burden to the public purse. &

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.


That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.


Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]