In managing risk, five fundamental techniques are commonly applied: avoidance, retention, spreading, loss prevention and reduction, and transfer (including insurance and contracts). Each method plays a specific role in helping organizations, like universities, effectively mitigate and address various risks.

1. Avoidance

 Avoiding risk entirely isn’t always possible, but reducing exposure to risk is essential. For instance, during a severe thunderstorm, Cal State Fullerton may restrict vehicle travel to minimize the risk of accidents. Similarly, in buildings with frequent water issues, prohibiting the storage of sensitive records or supplies in affected areas helps prevent water damage.

2. Retention

Sometimes, it’s cost-effective to retain a portion of the risk rather than transfer it entirely. For example, the university absorbs the cost of minor losses to fences, signs, or light poles rather than insuring them due to the administrative burden of covering all such items. When incidents occur, these costs are managed within the campus maintenance budget unless a third party is responsible.

3. Spreading

 Risk spreading involves distributing assets and people to reduce potential loss. Storing duplicate records in separate locations helps mitigate loss from localized disasters, such as fires. Similarly, housing individuals across various buildings decreases the likelihood of widespread injury or loss of life in the event of a major incident.

4. Loss Prevention and Reduction

 Not all risks can be avoided, but preventive measures can reduce the frequency or severity of losses. For example, the university encourages using security devices on valuable equipment to reduce theft risk. When students study abroad, they’re required to obtain health insurance, thus safeguarding against high medical expenses abroad.

5. Transfer (Insurance and Contracts) 

 In many cases, risk can be shifted to another party, often through contracts or insurance. When external organizations use university facilities, they must provide proof of insurance, naming the university as an additional insured. This shifts potential liability from the university to the facility user. Insurance itself is a common risk transfer tool, transferring financial risks from the insured to the insurance provider.

In contracts, third-party vendors may include “hold harmless” clauses to limit their liability. Cal State Fullerton’s Contracts & Procurement team, along with the University Risk Management Office, reviews such contracts to ensure these provisions meet the university’s standards. These often include obtaining Certificates of Insurance and additional documentation like Endorsements to confirm coverage.

Essential Tools for Effective Risk Management

Effective risk management begins with identifying and assessing risks in every department and program. The following steps are typically involved:

• Risk Identification: List all tasks associated with an activity or program. For example, a lab experiment involves travel, setup, execution, and cleanup. Each phase has potential hazards, from travel safety to equipment handling.
• Hazard Identification: Identify specific hazards for each task, as unmanaged risks can’t be controlled. In the lab example, hazards during setup could include improper equipment or lack of supervision.
• Risk Control Selection: Decide on risk management techniques to lower the likelihood or severity of issues. Hazards in a lab might be addressed through thorough training and the use of separate stations.
• Risk Assessment: Evaluate the risks with the chosen controls in place to determine if the activity is safe enough to proceed or if adjustments are necessary.
• Implementation and Monitoring: Assign responsibility for implementing risk controls and set a timeline for completing them. It’s also crucial to monitor outcomes to assess effectiveness.

After implementing controls, residual risk—measured in terms of “frequency” (how often an incident might occur) and “severity” (potential loss magnitude)—is evaluated. For high-severity risks with frequent occurrences, avoiding the activity may be best. If frequency is low but severity is high, supervision and liability waivers are recommended. Moderate-severity activities with moderate or low frequency need thorough planning and supervision, while negligible-severity activities with minimal likelihood of loss require little risk management.

These strategies ensure Cal State Fullerton can manage risks effectively, safeguarding its operations, property, and community while enabling successful program delivery.