Managing the Risks of Special Events
May 12, 2011
Joe Risser CPCU, ARM-P
Risk Management Design
San Luis Obispo
Special events can present a wide variety of additional risks to a public entity. Often the risks are linked to: uncommon or first time activities, complex activities and mixed crowds, temporary sites and services, involvement of partner and supporting organizations, and reliance on inexperienced staff and volunteers. Skillful management of the event and supporting activities, including the risks, requires through knowledge of the event, adequate controls and financing for losses that may occur despite all of the attention to risk. Assignment of adequate resources for the planning, and execution of the event, whether it be an entity event or the event of another organization at the entity’s facilities, is critical.
Events can become “special” based upon the content, participants, sponsors, venue, funding or other factors. The special “guest” may have armed bodyguards or an entourage of “followers” with whom local authorities will need to interact. Special events are generally beyond the scope of the public entity’s “day to day” activities, requiring exceptional efforts and resources. They may be an event of a city, Annual Holiday Parade, or the event of an outside entity held in a city or county facility, such as a Renaissance Faire. Impacts on the normal operations of the public entity, community, and immediate “neighbors” may be significant or benign, such as special lighting overflow, amplified sound and a surprise fireworks finale. Critical to the management of the event and the risks involved is ownership of the event and/or the venue.
The public entity hosting its own special event or allowing the use of their facilities, services, and perhaps community for the event of another party must do the most basic benefit analysis and ask the questions: “What is the purpose of the event?” and “Why are we doing this?” Is this a signature event of our community? Are the costs and exposures beneficial to support community facilities and services? Will the costs (and risk of loss) outweigh the benefits of this Special Event? Event supporters and planners often reassure concerned public entity leaders that insurance will be required in case of any loss; not considering the possibility of uninsured loses, such as reputation damage to the public entity, stress on city services, or disruption of the regular operations in the aftermath. It is always wise to keep in mind that a “one-day” event could cause damage or loss whose cleanup will requires months or years of protracted litigation.
Managing the risks of special events is a three-step process:
- Identify and Analyze the Risks
- Develop Risk Management Controls
- Select Risk Financing Strategies
Identify and Analyze the Risks
The first step requires the development of a comprehensive proposal process. Any public entity planning or permitting special events should develop an application form that enables the entity to gather thorough details on the proposed event, including: Activities, Environment, and Participants.
Figure I Activities, Environment and Participants Identification
With this information, the second stage of “Identify and Analyze the Risks” can begin with the use of a Risk Worksheet Tool:
Figure II Risk Worksheet
Risks are identified and entered on the worksheet and assigned an initial rating. Suggested control measures will be identified in the next phase and entered on the worksheet. Finally, a residual rating of the mitigated risk determined.
Figure III Loss Analysis
The third phase of the “Identify and Analyze the Risks” step is to establish a review process for event proposals which consider: application, comprehensive schedule, map, initial and residual risks; facility, material, and service providers; stakeholders (community, neighbors); requirements, responsibilities of those involved and their ability to perform.
Develop Risk Management Controls
Establishing risk management controls begins with ensuring compliance with applicable laws, regulations, contractual obligations and “industry” or governing body standards. The public entity sponsoring or permitting the special event should always strive to make certain that minimum requirements are met. State, county and municipalities may all regulate the preparation of food, service of alcoholic beverages and provision of sanitation facilities and services. In many cases, regulatory and legal requirements inspire additional risk management measures. The importance of inspection, monitoring, reporting and correction procedures cannot not be over stated to prevent statutory liability exposures. Written plans should be developed in critical areas of:
- Health and Safety
- Participant Behavior and Control
- Parking, Transportation and Traffic
Consideration should also be given to public communication about the event. In the lead-up to the historic 2009 presidential inauguration, news outlets in Washington, DC repeatedly warned viewers to carefully consider their health before planning to attend the inaugural festivities. Government officials explained that anyone planning to attend the inauguration should be able to walk at least two miles without difficulty, due to the planned street closures and anticipated overcrowding of public transportation facilities. These warnings, crafted by government organizers but delivered through the local media, were part of an overall effort to minimize health-related risks during the event.
Loss reduction efforts should include development of clear lines of authority and communication for the overall event and all employees and volunteers. Timely communication between staff, to a central command post and with resources is essential. Emergency response plans should be developed, documented, and practiced, interfacing with local emergency resources when appropriate.
When possible and appropriate to the event and supporting activities, multiple smaller activities and service locations may reduce the opportunities for disruption of the overall event. Back up equipment, materials and services; on call staff; and “rain plans” may enable the event to succeed even with minor failures or interruptions.
Specialized support services such as: food, security, lighting, sound, stage, sanitation, and many others might best be provided through contracts by qualified and equipped companies. Transferring the risks of providing these services can reduce the complexity of the event to a level manageable by “in house” staff. Clear communication, assignment of responsibilities and written contracts to back-up the expectations of public entity staff and the commitments from contractors is essential.
General support services and assistance to regular staff can utilize temporary assignments, temporary employees and volunteers who are adequately trained and supervised. Clear job descriptions, hands-on training and practice, roles and responsibilities in an emergency, and communication methods and requirements are in investment in safety for the staff and participants of the special event.
Details regarding the prevention and reductions actions for each risk identified on the Risk Worksheet should be entered along with the implementation plan and the person(s) who will specifically supervise the mitigation efforts. Given these controls, the initial risk should be re-evaluated and given a residual risk rating, which will be considered in the final review and approval/rejection of the proposed event.
Select Risk Financing Strategies
An essential component of effective risk management is developing alternatives. As author Randy Pausch wrote in The Last Lecture, “There are a lot of things I don’t worry about because I have a plan in place if they happen.” Risks and losses can be controlled and reduced, however, claims against the entity hosting or providing the venue and services may be forthcoming and financing must be in place.
Transferring the responsibility to pay for losses related to the event to the external hosting entity (lessee or licensee) is a critical risk financing strategy. Similarly, public entity contracted service providers should execute a written contract wherein responsibilities for specific activities and potential loss are detailed. A contract with clear requirements, responsibilities and appropriate indemnification of the public entity is essential to legally effecting this transfer. Service providers who contracted with the external entity may also be required to indemnify the public entity for their actions and products at the venue.
Leases or licenses for use of facilities and contracts for services should include insurance requirements for the lessee/licensee or service provider:
Figure IV Sample Insurance Requirements
As a general rule, general and automobile liability policies should be endorsed to include the public entity as an additional insured and to establish that the policy is primary to any coverage by the public entity and the public entity’s coverage will not contribute. Workers’ Compensation and Employer’s Liability policies, if appropriate, should be endorsed with a waiver of subrogation by the insurer in favor of the public entity [the lessee/contractor must also waive subrogation in the body of the contract]. The lessee/contractor should also be held responsible in the contract to notify the public entity 30 days in advance of any policy cancellation.
Traditionally, Certificates of Insurance cannot effect the change of insurance policies to provide additional insured status to or waive subrogation against another entity. Require endorsements including policy number, public entity’s legal name and reference to the contract and/or event.
Tenant User or other Special Event general liability policies may be available for the organization wanting to use public entity facilities. These policies are often very specific regarding the coverage for the specific activities of the event and not necessarily any claim related to the event — such as a claim related to the public entity’s facilities or services. Public entity risk managers are advised to request and review a complete copy of the policy to understand if it supports the contractual indemnification required of the lessee/licensee. These policies should also be either endorsed or part of a program that provides direct coverage for the public entity as well as the organization hosting the event.
In the final analysis, the approval or rejection of a special event proposal should include consideration of:
*Value of the special event compared to the cost to manage the risks associated with the event
*Value of the special event compared to the cost of transferring the risk of loss to others through contracts and insurance
*Value of the special event compared to the exposures to loss that cannot be transferred to other — such as interruption of ongoing operations and reputation
*What is the risk of not having the special event?
Ultimately, you will be called upon to demonstrate how your public entity managed the risks associated with the special event sponsored or permitted by your public entity.
The wise course is to establish a special event process, which includes:
*A thorough Identification of the event and supporting activities and analysis of initial risks and mitigated risks,
*Development of risk management controls to mitigate the risks by preventing, reducing or transferring losses,
*The selection of appropriate risk financing strategies to pay for claims and/or losses that occur through contracts and insurance requirements,
*A comprehensive evaluation of the proposed event and support of resources necessary to manage the event, facility, support services, participants and community.
Taking each of these steps will minimize the unmanaged risk exposures associated with the event and increase the opportunity for the event to achieve its goals and purpose and reflect well on the leadership of the public entity.
Managing Special Event Risks: Ten Steps to Safety, Second Edition, Nonprofit Risk Management Center, www.nonprofitrisk.org