Managing Risk, Loss And Finances In The Fire Service

"Penny wise, pound foolish." - Burton

Despite the fact that money, buildings, equipment, materials and personnel all are needed to protect life and property in any community, emergency service organizations constantly deal with limited resources. The degree to which we control the adverse impact upon resources directly affects the services we can provide. It is an impact that loss control can affect positively.

We can estimate the organizational drains, such as equipment replacement and personnel turnover, but accidental and equipment breakdowns cannot be estimated. Yet, they have a great impact on the financial management of a fire department. In today's inflationary climate, the money you waste on accidental losses not only can keep you from upgrading facilities and equipment, it can also keep you from getting the most out of what you have. Everyone should work towards preventing losses; administrators and line officers must provide leadership and the knowledge to control losses.

Here are some examples of such losses:

  • A suspicious fire guts the entire record-keeping area of your municipal building, resulting in a total loss of all municipal records. Subsequent investigation reveals forcible entry through an unprotected first floor window, probably by juveniles.

    Resultant Loss: All records and vital documents of the community, including personnel files, historical documents, and official records of the municipality (charters, minutes, ordinances) are destroyed. With few or no duplicates, a tremendous interruption of municipal business occurs.

  • A firefighter injures his back while improperly attempting to lift an 80 pound piece of fire equipment.

    Resultant Loss: A key municipal employee is out of work for twenty-two weeks. In a volunteer department, it's complete loss of a person; in a paid department, an additional overtime expense occurs. Even upon returning to work, the type of work the employee can perform is usually limited.

  • A fire destroys much of the equipment used by the fire department. The suspected fire cause is the improper storage of flammable liquids near a portable heating unit.

    Resultant Loss: The entire work force of the fire department is handicapped by the destruction of equipment. Replacing the destroyed equipment will take several years, at a substantial cost to the budget.

  • Two firefighters are severely injured and an innocent citizen is killed when a fire vehicle fails to negotiate a turn during a high speed response to a fire and plows into an oncoming vehicle.

    Resultant Loss: A fire vehicle is out of service, two firefighters are injured and out of work (unavailable), and the municipality is liable to a suit by the affected parties while negative press hits the fire department.

  • A municipality is sued for negligence because of improper firefighting tactics.

    Resultant Loss: The suits filed against the municipality total $250,000, excluding legal fees.


Dealing with limited resources can be done effectively though risk management. This relates directly to funds expended. The risk management decision-making process involves first the establishment of how you wish to control your risks and expend your funds. It then becomes essential to identify and to analyze your loss exposures, including both their types and their significance.

Once this is complete, it is necessary to develop some risk management alternatives, including such risk control techniques as avoidance, loss prevention, loss reduction, separation or diversification and non-insurance transfer - as well as risk financing techniques.


Whether this is termed risk management, financial planning and control, loss prevention or something else, the bottom line is that a management standpoint forces you to try and control expenses, improve production, and eliminate adverse situations.

One primary impact on expense through risk management is the insurance premium you pay. This insurance premium is based upon a groups' shared exposures to loss. Mining, firefighting, and automobile manufacturing are each a separate group. The rate is the price a policyholder pays for transferring a unit of his risk to an insurer. This unit varies by the type of insurance - liability, fire or worker's compensation. The total premium is then determined by applying the rate to the exposure units.


Unfortunately, it is not that simple. Loss frequency and loss severity affect the rate. For example:

  • If an employer furnishes a safer place to work, the rate may be lower than for a risk where hazardous activity exists, no loss control is provided and injuries are plentiful.

  • Similarly, a fire insurance rate is affected by such factors as fire protection, building construction and type of occupancy.

  • Severity is also measured by the number of exposure units.

Therefore, better protection, active loss control, and effective risk management can help control your resources.


Typically, municipalities are subject to fire department losses through:

  • motor vehicles
  • crime and fire (property losses),
  • personnel (worker's compensation),
  • fire scene (worker's compensation and liability)
  • professional liability

Consequently, you need to know your loss history, your loss potential and the impact these have on your resources. Then you can begin to develop an effective loss control program by weighing accident prevention versus loss control and applying cost effective loss control management. The success of loss control efforts requires the full and earnest cooperation of each employee and administrator.

Without question, when accidental damage or a personal injury occurs, you should conduct a thorough investigation. Find out if the cause of the accident could have been controlled. Experience shows that conditions that cause accidents also cause waste and inefficiency. Speeding, jackrabbit starts and hard stops are unsafe and cause excessive wear on vehicle parts. This not only increases maintenance costs and accelerates depreciation on equipment, but also can cause personal injuries.


Good loss control and risk management techniques can have a positive impact on all such losses. Managing risks provides a way of controlling losses and expenses. It can make your limited resources of men, materials, and equipment more effective. And if your resources are more effective, the community you serve is safer.