Public entity risk managers both here and in the United Kingdomare being subjected to drastic budget cuts that can compromisetheir effectiveness, requiring sharpened loss control techniques aswell as better communication about the value of their work withpeers and the public alike, experts in the field warn.

Coming forward with real-world examples and hard data todocument the importance and savings achieved by loss control mighthelp protect risk managers from across-the-board budget cutsimpacting safety efforts, suggested Patricia H. Roberts, presidentand chief executive officer of Genesis Underwriting ManagementCompany, during a panel session at the Public Risk ManagementAssociation's recent annual conference in Orlando, Fla.

Ms. Roberts said risk managersshould also be clear with their underwriters and speak specificallyabout where cuts have been made and what the impact might be.

Ms. Roberts also warned that due to the economic downturn, thereis much higher potential for loss. She said risk managers oftenmust delay purchases, which can increase risks to certaindepartments. She added that expectation for services can be higherfor citizens who are paying more in taxes to close budget gaps.

She also warned risk managers to guard against cuts that impactkey drivers of loss.

Patrick M. Gallagher, managing director of worldwide propertyand casualty with Gallagher London, warned that with jobs goingaway and a resulting upswing in claims, “don't cut your [employmentpractices liability].”

Tight budgets and dwindling resources are impacting public riskmanagers in the United Kingdom similarly to their U.S.counterparts, the director of a U.K. public risk managementorganization, who did not participate on the panel, toldNational Underwriter during the PRIMA conference.

Paul Dudley, director of PRIMA's U.K. counterpart, theAssociation of Local Authority Risk Managers (ALARM), said therecession has meant heavy budget cutbacks for his membership aswell.

U.K. public risk managers, as a result, are taking measures suchas cutting staff and finding new, lower-cost ways to provideservices, he said. “So yes, we have a lot of similarities [to theU.S.] in terms of the savings required,” he told NU.

Mr. Dudley said that his public entity–the Hartfordshire CountyCouncil, located north of London–will have its budget cut by about20 percent over the next three years. He said this would be donethrough “smarter procurement” and staff cuts. Similar situationsexist all over the United Kingdom, he noted.

Local authorities and public entities, he said, would have tofind “new and different ways of delivering local services, but witha lot less money and trying to maintain the quality of thoseservices.”

The intention, he added, is to “take the community with us,” byexplaining to citizens the alteration of services and why the cutsneed to be made.

For example, he said libraries may see shortened hours, but thatcould be offset by finding different ways of providing libraryservices. Because of more widespread use of computers, heexplained, “there is also much more online processing, whichrequires less staff.”

New technology plays a key role, he added, because it meansstaff can be more flexible and work in different locations,requiring less space.

“Many local authorities now don't have sufficient accommodationfor their office staff,” he said. “So there is a lot ofteam-desking, working at different locations across the county oreven at home.”

Renting less office space means savings for public entities, hesaid, reporting that some authorities are concentrating staff infewer locations while getting rid of leases and selling offproperty.

The disadvantage of this trend, he said, is that public workerscan become more detached from the people they serve and also musttravel further to provide services.

A top issue for all U.K. and U.S. risk managers, according toMr. Dudley, is how risk management is “sold” within theorganization. “So even though there are some external drivers [inthe United Kingdom],” he said, “it is about making the businesscase that effective risk management will help you achieve yourobjectives.”

He added that stressing the “opportunity” or “upside” of risksis a positive direction for risk management.

“More development is needed,” according to Mr. Dudley. “But oncewe get our arguments together about how to identify opportunities,I think that will be more engaging than the negative, which is [tofocus on] the risks.”

As for the PRIMA panel, Ms. Roberts, Mr. Gallagher and MichaelF. Klein, senior vice president of business insurance and presidentof Travelers Middle Market Business, observed that public entityrisks are improving due to better management.

But at the same time they warned that public agencies arebecoming more of a litigation target. Crises and disasters, such assome of those being seen at schools and universities, are highlypublicized, which can lead to more lawsuits, Mr. Klein noted.

To stem the tide, he said, caps and immunities are needed intort laws.

Panel moderator Ron Hays–the outgoing president of PRIMA andrisk manager of the Calcasieu Parish, La., school board–asked aboutfraud, because it has been speculated that the recession wouldprompt a spike in fake and padded claims. All three panelists saidthey have not seen significant growth in fraud claims so far.

Asked whether the creation of a Federal Insurance Office wouldhelp or hurt the industry, Mr. Gallagher and Mr. Klein agreed thefunction of such an office might be a positive force, although thatdepends on how much authority it is given. Mr. Gallagher observedthat the London market is “comfortable with the concept of someform of government oversight.”

He added that the lack of knowledge of the insurance industry bysome state insurance commissioners and at the federal level is“astonishing in some cases.”

However, Ms. Roberts, describing herself as the “blinking yellowlight” on this issue, said the current state oversight system iscreaky in some ways.

“I'm nervous to think about what we might get [with federalintervention],” she said. “It could be just another layer ofregulation,” which she fears might merely drive up costs.