Risk Management

By: Rachel Corbett, Hilary A. Findlay, David W. Lech

Introduction

Risk is an integral element of sport. Sport without risk would cease to be sport. Although in some businesses a manager’s objective is to eliminate all risk to the extent possible, in sport the objective may be more properly characterized as minimizing unacceptable risks but maintaining a balance among those risks that are considered reasonable, acceptable, and in many cases, integral to the sport activity. This unique aspect of sport must be factored into any discussion of risk management within sport organizations, facilities, programs, and events.

A second unique aspect of risk management in sport is that the overwhelming majority of opportunities to participate in sport in Canada arise out of the efforts of private, voluntary organizations. Governments may fund sport and may provide facilities, and private business may own professional teams and operate professional sport facilities, but participation in sport in this country is almost entirely the domain of the non-profit sector. Within the total non-profit community in Canada, sport and recreation account for the second largest segment, just behind the social development sector but well ahead of the religion, arts/culture, health, environment, and international communities. There are presently over 33,000 sport and recreation organizations in Canada, over half of which report annual revenues under $30,000 and over three-quarters of which have no paid staff whatsoever, relying solely on volunteers to oversee and manage their programs (see Corbett, 2007). This enormous unpaid volunteer component creates challenges for any sport manager.

This chapter describes a practical and sensible risk-management approach that can be implemented in any type of sport organization. The chapter also concludes this book and hopefully ties together the many ideas and concepts presented previously. Risk management is about taking this knowledge and applying it in the day-to-day management of sport organizations. At its core, risk management is about minimizing loss, harm, and liabilities-but it can also serve as a more positive tool to help sport leaders manage resources wisely, lead and govern effectively, make decisions soundly, and project positive images toward sponsors, government funders, and the public.

One word of caution for the sport manager-there is no magic formula for risk management. There is no cookie-cutter or checklist that can be used to manage risks in a league, team, organization, or facility. Although there are universal concepts and common approaches, there are no black and white rules to risk management. One organization's risk-management program will be very different from another's, depending on the sport discipline, the nature of participants, the organization’s tolerance for risk, whether or not the organization operates a facility, its structure and mandate, and its relationship with its members. The key to managing risk well is to understand a practical methodology and to know the underlying law, and then to integrate this knowledge systematically and in a common sense manner within the organization's daily business operations.

 

The Sport Organization's Risks and Responsibilities

From the perspective of risk management, there are three important areas of responsibility for every sport organization:

• The sport organization's first responsibility is to provide a safe and secure environment for participants. This means having policies and standards that promote safe programs in safe facilities, overseen by qualified personnel and trained volunteers. This responsibility was addressed in chapter 2, where concepts of negligence, liability, and standard of care were discussed. Chapter 3 on violence and chapter 7 on work relationships also elaborated on the sport organization's responsibilities to promote a secure environment for its members and participants.
• The sport organization's second responsibility is to make decisions fairly, especially decisions that affect members. This means having and following proper policies and procedures when making important decisions and handling disputes among members. This responsibility was addressed in chapter 4, where principles of administrative law and the responsibilities of private tribunals were discussed, as well as in chapter 5 on doping in sport and chapter 6 on discrimination. Chapter 10 elaborated further on conflict and provided some tools for improving decision making and dispute management.
• The sport organization's third responsibility is to properly care for and protect its assets and resources, including money, equipment, facilities, and intangible property such as data, corporate image, and marketing rights. Chapter 8 on intellectual property touched on some legal issues relating to identification and protection of intangible assets.

Failing to meet any one of these responsibilities can lead to unwanted consequences, some of which have a legal aspect. For example, injury or harm to a participant can lead to a lawsuit that will cost the organization money, time, and very possibly higher future insurance costs. Poor conflict management and decision making can lead to appeals, arbitrations, and lawsuits that will take an emotional toll on individuals as well as cost money and take time. Even if legal action is not the result of bad decisions, these disputes will harm important relationships, burn out volunteers, and tarnish an organization's goodwill and public image. Finally, failure to take care of assets (whether tangible assets such as physical property or intangible assets such as intellectual property) is simply bad business management, and this in turn can have harmful financial and legal consequences for the sport manager.

Approaches to Risk Management

Much of this book has addressed the essential question "How does the law expect me to behave?" The sport manager today requires a core of legal knowledge to do his or her job-knowledge that might not have been so important in the past. He or she needs to understand negligence, liability, standard of care, administrative law, contract law, criminal law, dispute resolution techniques, and human rights law. Having described these responsibilities in this book, the next question for the reader is "How do I behave responsibly?" The answer lies in risk management.

There are three general steps in risk management that are applicable to any context: risk identification (asking the question, what are the risks?), risk assessment (determining how significant the identified risks might be), and risk treatment (identifying what measures should be taken to address significant risks). These steps can be summarized as "identify-measure-control," and they apply equally to all organizations ranging from a local soccer club to a for-profit, multinational corporation. The definitions used by all risk managers are also consistent.

So, what does risk mean for the sport manager? Traditionally, risk has been defined as the chance of injury, damage, or loss. For the sport organization, this can be extended to mean "the chance of injury to your members or participants, damage to your property or property of others that you may be responsible for, or other loss to your organization, directors, volunteers, members, or to someone else." Ultimately, the effect of risk is financial: the injury, damage, or loss is going to cost money. And often, this cost is incurred because the risk has resulted in some form of legal action or dispute.

Risk management has been defined traditionally as reducing the chances of injury, damage, or loss by taking steps to identify, measure, and control risks. Risk management is sound business practice, and undertaking risk management is not necessarily complicated. It does mean that the sport manager and others within the organization must make a concerted effort to think about and identify potential risky situations, decide which situations or circumstances might pose serious risks, and then determine what practical steps they can take to minimize or mitigate those risks. The common ingredient in all these tasks is common sense. This task is also made easier when there is a culture within the organization that promotes safe and prudent conduct by all staff and volunteers.

Some examples of traditional risk-management measures used in sport organizations are

• Designing a system whereby sports equipment and facilities that are used on a regular basis are inspected thoroughly according to a fixed schedule;
• Establishing and following a policy with regard to minimum qualifications for instructors, coaches, or other staff-for example, determining as a matter of policy that all coaches in programs will have level 11 certification and will be members of Coaches of Canada;
• Carrying adequate property and liability insurance for an office, facility, or programs,
• Insuring that proper and progressive coaching techniques are used in elite development programs;
• Implementing a system of screening when hiring summer program staff who will be working closely with children in unsupervised settings; and
• Ensuring that policies and criteria to evaluate and select a provincial team are clearly written, properly implemented, and transparently communicated to coaches and athletes.

The terms "tradition" and "traditionally" have been used in the above text because in recent years there has been an evolution in how the issue of risk management is approached within the non-profit sector generally, and within sport organizations specifically. Historically, risk management in sport involved taking steps to ensure that activities were safe, that appropriate insurance coverage was acquired, and that the necessary paperwork in the form of signed waivers and releases was in place. This describes the efforts of most sport managers in the 1980s. Through the 1990s it became apparent that sport organizations routinely face risks related to a wider array of legal issues: the main concern was no longer injury prevention, but liabilities arising from decision making, member complaints, breaches of contract, human rights, team eligibility and selection, harassment and conduct matters, and incidences of violence. Risk management thus broadened in the 1990s to incorporate measures to address all forms of loss exposure faced by the organization. The evolution did not stop there-today, risk management is emerging as a comprehensive management technique to improve organizational performance through effective leadership and governance, efficient planning, and relevant programming.

Much of this recent evolution stems from the development of an Australia/New Zealand risk-management standard (AS/NZS 4360) that has been promoted through the Australian Sports Commission (see Standards Australia International). A similar standard (CSA Q850) is beginning to take root in Canada, primarily in federal government circles. The Australia/New Zealand standard has been adapted for testing through a pilot project in Canada with eight national sport bodies. (1) This project differs from traditional applications of risk management in Canadian sport in a number of ways: risk management is seen as a tool to promote social change and values-driven sport, risk is defined very broadly (risk is the chance of something happening that can have an impact on the achievement of objectives), risks are identified in relation to the strategic objectives of the organization, and the resulting risk-management measures are incorporated into the organization's strategic and business plans. As well, this new approach recognizes that risk management must be comprehensive and integrated into all levels of management of the organization. As a result, responsibility for risk management is evolving from a committee function overseen by volunteers within the sport organization to a day-to-day responsibility of management and staff.

A Practical Methodology for Risk Management

As noted above, there are three steps in risk management-identify risks, measure risks, and control risks. Most sport managers do some risk management some of the time, usually intuitively. The challenge is to make that implicit and ad hoc process more explicit. Put more succinctly, risk management is an organized and systematic process of asking the following three questions about a sport program, facility or event (refer to Appendix 10.1 for a useful worksheet to guide this process):

• What are the possible things that can go wrong? (this is the task of identifying risks);
• How likely is it that these things will go wrong, and what are the consequences if they do go wrong? (this is the task of measuring risks); and
• What can we do to keep things from going wrong? (this is the task of controlling risks).

The first step in any risk-management exercise is thus to identify the major areas of risk facing the sport organization. These "risk areas" can be defined as potential events or occurrences that could lead ultimately to loss or harm for the organization:

• Liability losses (resulting from the sport organization being sued);
• Failure to comply with existing standards or funding requirements;
• Damage to property (either the sport organization's own property or the property of others for which the sport organization has responsibility);
• Loss of revenue or earnings;
• Loss of members or participants;
• Loss of key personnel (staff as well as volunteers);
• Loss of brand value and public image; or
• Failure to be able to deliver on critical strategic objectives.

It is possible to bring some order and method to the task of identifying risks by keeping in mind that there are four main sources of risk and three main types of risk facing any sport organization. The four main sources of risk are:

• Facilities-the buildings, fields, offices, and other venues where the sport and its related activity occur;
• Equipment-this includes equipment used by athletes, coaches, and officials within the sport activity itself, and equipment used by the organization in the provision of sport services and programs;
• Program-there are physical risks that are an inherent part of the sport itself, some of which are desirable and thus reasonable while others are not; and
• People -this is the human element and includes participants, staff, volunteers, directors, and spectators, all of whom can be unpredictable in their behaviour and can make mistakes in carrying out their duties.

The three main types of risk for a sport organization are

• Physical injury-this is the risk that a participant will be seriously hurt;
• Wrongful actions-this is the risk that an individual will experience a loss of rights or opportunities for which there is a legal remedy and for which the sport organization may be responsible; and
• Property loss or damage -this is the risk that property owned or controlled by the sport organization, or for which the organization is responsible, will be lost, stolen, or damaged. Intangible property losses include such things as traditional sources of intellectual property (copyrights and trade-marks) as well as public image and goodwill.

The second step of the risk-management process is to measure the risks that have been identified in terms of their potential seriousness. The seriousness of any particular risk depends on both its frequency (a measure of how often it might occur) and its severity (a measure of its consequences if it does occur). The terms possibility and consequences can also be substituted to reflect these two categories. While this evaluation can become a complex exercise in probability and mathematics, it doesn't need to be. Although detailed injury statistics are available for certain popular and high-risk sports, and these in turn permit detailed calculations of frequency and severity, most sport situations require only an informed judgment as to whether a particular risk is low, moderate, high, or very high. On this basis, the sport manager can then determine which risks are more important and thus warrant taking measures to contre them.

Once significant risks are identified, the third step of the risk-management process involves finding practical, affordable, and reasonable ways to manage them. Typically, the organization will already be taking a number of steps to deal with the identified risk, so this step often involves identifying further measures that can be taken and deciding which, among those, the organization might commit to over the longer term.

As noted in the introduction to this chapter, there is no magic formula for controlling risk-the measures that a sport manager will select and implement will depend on the factors and unique circumstances of the sport club, organization, facility or event. However, there are four generic strategies that are used to control risks:

• Retain the risk (the risk is minor and inherent in the sport activity, and the sport manager is thus willing to accept the consequences-so does nothing about it);
• Reduce the risk (the risk is significant enough for the manager to do something about it-he or she does things to reduce the likelihood of events occurring, or the consequences if they do occur, by careful planning and organizing, preparing and educating staff and volunteers, and by inspecting and monitoring facilities and equipment, etc.);
• Transfer the risks (the risk is significant enough that the sport organization doesn't want to take it on itself, so it transfers the consequences of the risk to others through contracts, insurance, or waivers); or
• Avoid the risk (the risk is potentially so severe that the sport manager doesn't want anything to do with it, so he or she decides to avoid doing whatever creates the risk in the first place).

 

As a general rule, there is a relationship between the seriousness of the risk and the preferred strategy, where retain and reduce strategies are used for low and moderate risks, and transfer and avoid strategies are used for higher risks. As a general rule, it is also a good idea to mix and match a variety of strategies, rather than to rely on just one or a few. It should also be noted that strategies to transfer risks do nothing to reduce the possibility or consequence of a risk, but merely transfer to another entity the ultimate liability associated with the risk. As such, transfer measures do not make a sport program, facility, or event any safer. Strategies to reduce or avoid risk, on the other hand, can go a long way toward promoting the safety of sport participants and the effective governance of a sport organization.

Under each strategy, there are numerous tools and techniques to choose from, as illustrated in the next section. The choice of measures, and how they will be combined and implemented, will depend on a host of factors that are specific to the sport organization and its circumstances. It is also important to note that risk management activities will occur at different levels depending on the mandate of the sport organization, as expressed in its constitution, objects, and bylaws. A local sport club or sport facility that offers direct programs to individual members or participants can adopt a narrow approach to risk management, which means the organization manages risks only for those program activities it engages in directly. On the other hand, a sport organization that is the governing body for sport activities within Canada or within a geographic area such as a region, zone, province, or territory of Canada must manage risk for its own activities as well as for those activities carried out by others who are under its purview by virtue of its mandate as a governing body.

For a sport governing body, risk management occurs for three types of activities:

• Direct activities-These are the activities that the organization undertakes directly for itself (governing the organization through the board of directors and committees, running a provincial office, employing staff, certifying coaches and officials, disciplining members, and possibly operating a high performance program involving a provincial team, coaches, staff, and officials who will train, compete, and travel to events outside the province). The fact that very few sport-governing bodies possess or control facilities means that responsibility for this significant area of risk and responsibility falls to others.
• Indirect activities-These are the activities that fall within the indirect jurisdiction of the sport governing body through its "oversight" function of a sport discipline. Most sport governing bodies issue a "sanction," or other form of recognition, to competitions organized and hosted by others but nonetheless within the sport discipline. Typically, only competitive results from sanctioned events are recognized by the sport body. Sport governing bodies are not in a position to control these activities, but they can exercise indirect control through establishing and enforcing standards. All sport governing bodies should identify the appropriate risk-management standards that will govern sanctioned events, and in turn monitor these events to ensure that these standards are maintained. (2)
• Supported activities-These are the activities carried out by local sport clubs that are typically member associations of the sport governing body. A sport governing body has an important leadership role to play in terms of influencing the activities of its member sport clubs, which means providing suitable risk-management assistance, resources, and tools to help local associations and clubs in their own risk-management efforts. The use of these tools can be encouraged by linking them to participation in a club quality-assurance program, or to eligibility for insurance coverage or other benefits of membership. (3)
  

Examples of Risk-Management Strategies

The following are simple illustrations of techniques commonly used to manage risk. This information is not presented with the intention of serving as a checklist. Although some sport managers may believe that following a checklist is sufficient, the authors of this book are of the view that risk management is a process of analysis and judgment to be applied in a systematic fashion in each situation. The risk-management measures and commitments that are the outcome of that analysis will vary from one organization to another.

Most measures to reduce risk involve planning, organizing, and influencing human behaviour. This is an area where sport organizations have the potential to exercise the greatest control and where there are the greatest number of options to manage risk. At the same time, this is probably the area to which sport organizations devote the least amount of time and the fewest resources when undertaking risk management.

The illustrative examples of measures to reduce risk listed below are grouped according to the source of risk.

Where the source of risk is facilities and equipment, sport managers should

• Design and follow a regular maintenance, repair, and replacement program for their facilities and equipment;
• Design security measures to protect office equipment and data, such as careful control of keys and regular schedules for data backup;
  Strictly enforce the use of prescribed safety and protective equipment at all times-no equipment, no game!

Where the source of risk is people, sport managers should

• Provide all new board and committee members with detailed orientation materials and consider a mentor or "buddy" system for new volunteers;
• Comply with any existing policies or legislation with regard to the screening of staff and volunteers;
• Carefully recruit, select, and train volunteers, particularly those who will be working directly with children, youth, or other vulnerable persons;
• Prepare written job descriptions for all staff and volunteer positions and approve a personnel policy that provides clear procedures for handling personnel matters;
• Help staff pursue professional development so that they can remain current with trends in the sport and the industry;
• Support ongoing certification of coaches and officials, and training of volunteers so that they remain up to date on new safety practices and other innovative techniques;
• Develop and implement codes of conduct, discipline, and dispute resolution policies that will enable the sport organization to better handle controversial decisions and disputes;

For major events, develop emergency response plans that identify key roles and responsibilities in the event of an injury or other incident.

Where the source of risk is program, sport managers should

• Follow approved food preparation and alcohol management practices in facilities and at events;
• Educate participants and parents about inherent risks of the sport through verbal messages, signage, and printed materials such as informed consent agreements
• Well in advance of selection events, develop sound criteria and a process for applying the criteria to make selections;
• Post appropriately worded rules and warning signs in prominent places throughout the facility;
• Incorporate relevant standards and guidelines from higher-level sport governing bodies (national and international) into the sport organization's operating procedures, and encourage member clubs and associations to do the same.

These are illustrative examples of measures sport managers should take to transfer risks:

• Insist that adult participants sign a waiver of liability agreement (if the organization has decided philosophically that it wishes to use waivers in its programs-the complex topic of waivers is discussed in chapter 9);
• Review all insurance needs and purchase insurance coverage that is appropriate in scope and amount for all activities as well as all paid and volunteer personnel;
• Contract out discrete work tasks such as instructional clinics, event management, catering, bartending, and transportation to outside parties;
• Ensure that there are proper indemnification provisions in all contracts signed by the organization, including those relating to rental of facilities, contracts for services, and licensing and sponsorship;
• If putting on a major event jointly with other organizations, create a partnership agreement that defines and shares the risks among the partners.

These are illustrative examples of measures sport managers should take to avoid risks:

• Decide to simply not do something, because the risk is too great;
• Suspend or postpone events in dangerous conditions;
• Not travel to competitions in bad weather;
• Restrict novice participants and lower age groups to lower-risk activities;
• Purchase high-quality equipment that meets all safety standards;
• Do not serve alcohol at functions where there will be families or minors;
• Adhere strictly to all the organization's bylaw provisions, policies, and rules.

All of the above examples can also apply to risk management for those activities undertaken by other entities over which the sport governing body has some influence. For example, risk-management guidelines for a sport body's sanctioned events may include:

• Requiring that the host organization provide a certificate of insurance with suitable levels of coverage and naming the sanctioning organization as an insured;
• Ensuring the site or venue provides access to emergency vehicles;
• Designating in advance a call person (the person who contacts 911 in an emergency) and a control person (the person who takes charge of the situation and directs others) to handle serious incidents;
• Ensuring volunteers are adequate in number, are identifiable by a badge, cap, or t-shirt, have assigned duties, and have undergone an orientation session;
• Ensuring there are proper first-aid supplies and persons trained in delivery of first aid on-site at all times;
• If crowd control is an issue, ensuring that the host organization has made proper security arrangements, using either professional security personnel or trained volunteers;
• If there is a banquet or other social event, ensuring that all health code requirements are met, and that alcohol is being served in accordance with approved alcohol management guidelines;
• Ensuring that the venue or site has been properly inspected for safety hazards before the competition; and
• Having the sanctioning organization designate a representative to meet with the host organization in advance to explain the risk-management guidelines, and be on-site during the event to monitor compliance with the guidelines.

Sanctioning guidelines may also include measures that are specific to the sport discipline, such as those that might be required by the international governing body for the sport.

In terms of providing risk-management support to member associations, the various resources and tools to assist member clubs in their own risk-management efforts can include:

• Providing member clubs with up-to-date copies of all relevant written policies, manuals, and minimum standards that they are expected to follow when delivering their sport programs;
• Referring member clubs to outside resource persons and experts when needed;
• Compiling and distributing a discipline-specific risk-management awareness kit for directors, volunteers, and staff of clubs;
• Compiling and distributing insurance information so that clubs are aware of the scope of coverage, and providing them access to the insurance broker if they have questions;
• Helping clubs design proper agreements, registration forms, and waivers or, where appropriate, providing standard-form documents for their use;
• Putting on a risk-management seminar in conjunction with the annual meeting and encouraging club members to attend; and
• Providing nominal staff assistance to those clubs who want to develop and implement their own risk-management programs.

 

Conclusion

The information in this chapter has provided a general approach for undertaking risk management, and has given some examples of risk areas that face sport organizations and facilities, along with suggestions for measures to control these risks. Keep in mind that there is no uniform template or generic checklist that can be used to do risk management within a club, league, program, or facility. Risk-management decisions require some basic legal understanding, background experience in the sport, and good judgment. The right risk-management decisions will depend on each sport organization's circumstances.

It is also important to remember that managing risk is an ongoing process. The fundamental steps in risk management don't change, but the sport organization's circumstances do, and the legal responsibilities of the organization may also change, although usually more gradually. For example, as little as 10 years ago there were few expectations that volunteer sport organizations would screen all their volunteers; today, the sport organization that does not undertake some form of personnel screening is likely no longer achieving a reasonable standard of care in the eyes of the law.

In closing, risk management is not rocket science-it is organized common sense, where common sense is the sum of knowledge and experience. The chapters of this book have provided most of the information that is needed for the sport manager to make a smooth transition from doing risk management in an ad hoc manner to doing it in an organized manner. Organized and systematic risk management means that the sport manager undertakes a comprehensive risk assessment to ensure that all sources and types of risk are considered and all legal responsibilities are fulfilled. Risk management, like the law, does not expect perfection. As a result, a sound risk-management plan is an appropriate, reasonable, and affordable mix of strategies, suited to the sport organization's needs, circumstances, and resources. And while risk management is largely about preventing the negative, it can also serve to promote the positive. Risk management done well will help the sport manager to improve membership development, performance success, financial viability, organizational capacity, and community image.

1. The risk-management pilot project is a multiyear project of the True Sport Secretariat, which is carried out under the auspices of the government of Canada's Canadian Strategy on Ethical Conduct in Sport, approved by all federal, provincial, and territorial sport ministers in 2001.  The organizations participating in this pilot project include Diving Plongeon Canada, Athletics Canada, Swimming Nation Canada, Gymnastics Canada, Speed Skating Canada, Skate Canada, Canoe Kayak Canada, and Field Hockey Canada.

2. It is strongly recommended that all sport governing bodies put into force and monitor riskmanagement guidelines for all sanctioned events (surprisingly, only a minority of sport governing bodies presently do this). These guidelines should address issues such as: insurance requirements including naming the sanctioning organization as an insured; preparation of an emergency response plan; orientation and training for all volunteers including security personnel; implementation of alcohol management guidelines for social events associated with the sporting event; provision of appropriate first aid and sport medicine services; and pre-event inspection of all facilities, grounds, and equipment. It is also suggested that the sanctioning organization designate an official representative to work with the host organization in advance of the event, and to be on-site during the event to monitor compliance with risk-management guidelines.

3. Many sport organizations have used insurance programs quite effectively as a risk-management incentive. For example, in some sports strict compliance with rules about eye guards, mouth guards, and other protective equipment is a prerequisite for the participant to be covered by the organization's insurance programs. Other organizations use their insurance program as a lever to ensure that member clubs, leagues, and associations maintain their status as "member in good standing."

Appendix 11.1: Risk-Assessment Worksheet

References

Corbett, Rachel, "Encourage Good Sports for Better Sports" (May/June 2007), Law Now 27-30.

Standards Australia International, AS/NZS 4360 (Sydney, Australia: SAI Global, 1999).

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