Essential Elements Of A Loss Control Program

"Carelessness does more harm than a want of knowledge."
- Franklin

Let's start this article by being honest with ourselves and ask the question "When do you take action with loss control issues?" When I have asked this question, the typical answer was "when an accident occurs or a problem develops."

Now let's be realistic -- to take action after an accident or problem surfaces does not support the principles of either good management or common sense. This is reactionary management or crisis management. The accident has occurred, the problem has developed, the loss has occurred, and the resource is lost! To best manage resources, you must be proactive in your approach.

There have also been a number of significant changes in recent years which have increased the financial exposure and impact upon fire departments. These changes within the legal and social systems have forced us to change the way we operate our fire departments. Legislative trends first in the Occupational Safety & Health Act of 1970 and related subsequent legislation on the state and national level are most significant. These have transcended into labor agreements, employee liability lawsuits, and expansion of insurance agreements and premiums. The risk of accident and loss therefore is one of the most significant issues facing the fire department today. This is both a moral and financial exposure. As a result, it is no longer important, but now mandatory that fire departments take the necessary steps to prevent accident and loss, which result in loss of budget funds or other drains on municipal resources. To the fire department, this instills you to develop, implement, and maintain a comprehensive loss control program.

Loss Control has long been recognized as a functional part of the Risk Management Program of business (and let's face it, the Fire Department is a type of business). We saw in the last article that there are seven elements which are necessary for a loss control program. Each of these elements must be integrated into the comprehensive risk management system of the fire department. The risk management process has five steps. At each step, the various elements of the loss control program play a role in managing risk and loss.


Risk management is essentially a process to manage uncertainty. To understand this approach it is necessary to realize that this process is a decision making model with five key steps. The goal of this activity is therefore to control the impact of uncertainty of losing wealth, profit, or value. This is achieved through two common techniques -- risk control to minimize losses and risk financing to restore losses.

Step 1

Before any loss control efforts can truly be undertaken, you must first identify and analyze your loss exposures. The identification is achieved in two ways -- by type of loss and by method of identification. There are four essential types of losses:

  • Property Loss - for example, physical loss of the property or the loss of its use
  • Net Income or Budgetary Loss - for example, a loss requiring rental of equipment impacts on the budget
  • Liability Loss - personal injury, negligence, and visitor injury, among others, present a real loss exposure
  • Personnel Loss - through the loss of service, overtime, and similar issues

Each of these can and should be identified. Typically, the identification process uses one of four methods: the generic or specific questionnaire; and analysis using flow charting; personal inspection of the facility, process, or operation; and analyzing financial statements. In addition, other methods may be used to identify the loss exposure.

Once the identification process has taken place, it is time to analyze the exposure. The loss analysis is typically done using a loss history to summarize the data found into a system which can easily be interpreted into an action-taking activity. This is done in two distinct ways; by determining the loss frequency (measuring the number of losses that have occurred or will occur) and determining loss severity (measuring the potential dollar impact of the loss).

Throughout the entire first step, we need to keep a perspective on two key items. First, when identifying any exposures we must look at both actual and potential exposures. Let your mind wonder through many "what if?" scenarios. As you conduct this identification and analysis, you will immediately identify whether you are reactive or proactive in you dealing with losses. Those of us who are reactive wait until the incident or loss in order to correct it and prevent recurrence. The other approach (and the preferred one) is to be proactive or anticipatory where we determine what we are doing or not doing which might lead to a loss or incident and correct the situation before the incident or loss occurs.

While we typically look at frequency and severity of losses to analyze our problems, there are a number of other methods which can be used to analyze exposure. The identification of patterns and trends has long been used to identify areas to attach first. Probability, based upon mathematical computation is another method to analyze and identify problem areas.

Others have looked at the consequence of a loss occurrence, worked in reverse and analyzed the whole loss identifying those areas which need to be dealt with. This is similar in thought process to the result-versus-cause process where we take a loss (result), proceed in reverse to analyze the accident, determine the hazards that existed, and look at what factors played a role in hazard development. In this particular system, within each stage we find an identification and analysis process.

Step 2

Once the incidents and losses have been identified an analyzed they must be dealt with. This step involves the development of alternatives to deal with the problem and choosing the method of corrective action.

There are two fundamental ways to achieve this, both of which are dependent upon first evaluating at least six considerations:

  • the type of problem
  • the cause of the problem
  • the frequency and severity of the problem
  • the cost benefit of implementing the corrective action, and
  • the urgency of implementing the corrective action

Upon dealing with each consideration, you can evaluate the various risk financing and risk control options available to you. We can control risk by stopping or limiting losses. This is done through one of or a combination of five techniques.

(Risk Avoidance)

2. We could reduce the potential of loss, but not totally eliminate it (Loss Control)>;

3. We could reduce the severity of losses that do occur (Loss Reduction)

4. We could reduce the concentration of assets subject to a single incident and therefore be able to better predict aggregate losses (Separation or Diversification of Losses) or

5. We could eliminate any responsibility for losses by assigning the loss to someone else by contract (Risk Transfers).

We can further control losses by applying risk financing techniques to pay for losses. The easiest way to deal with risk financing issues it's to transfer them. This can be done in two ways; first by paying an insurance company to handle your losses through an insurance policy or secondly, by non-insurance transfer to others by contract. The second method requires legal staff input and researching of your state laws to determine what can and can't be done. The other method of risk financing is to retain the associated costs of an incident or loss by providing finances in one of five ways; absorbing the expense in a current expensing situation, borrowing funds necessary, obtaining monies from either a funded or unfunded reserve, or creating a captive insurance operation. If these methods are chosen, financial information must be closely scrutinized and we must assure that compliance with state and federal law is maintained. Be sure appropriate legal and financial personnel are consulted.

With no less than twelve options to develop alternatives, it is now possible to move on to the next step.

Step 3

The next step, selecting the best technique to deal with loss exposure is a simple method but often a difficult task. To select the best techniques, it is critical to evaluate the time frame involved in implementation and control. Given the combination of techniques you have chose, risk control elements will be implemented to stop losses and reduce the cost of financing while risk financing techniques will be used to pay any remaining losses. This is further evaluated by the short and long term impact of the techniques applied. In the short term a cost benefit analysis must be conducted, while for the long term application you will need to evaluate capital budgeting requirements and techniques.

Step 4

This leads us to implementing the technique(s) we have decided upon. To do this, two activities are necessary. Technical decisions are necessary to determine what should be done while managerial decisions are necessary to assure people will work with one another to achieve technique implementation. The implementation efforts can then be achieved by proper planning, preparation, education, and training.

Step 5

The final step is to monitor and evaluate results of the technique implementation. Formalized, periodic follow-up is necessary to assure the implementation process is complete and to identify and adapt to changes or problems. This step documents results, measures the results to pre-determined standards or expectations and begins the modification process to correct or improve performance, and if necessary, determine areas where we need to initiate the process again by returning to Step 1 to identify or analyze exposures.


We can put our role and activity into focus as we, "The Fire Officer," direct our attention to the loss control efforts. This is achieved by addressing the issues reviewed in Step 2 discussed as Risk Control.


As we are well aware, changes within the United States legal system and social system have increased the financial exposures to the fire service. The risk of incidents and losses is one of the most significant exposures fire service officers face. As we have already discussed in concept and will continue to do so in detail, one of the best methods to avoid drains on municipal resources is the implementation of a comprehensive loss control program.

In Article 2 you were introduced to the seven components of a loss control program. Let's now take a look at each and the factors which compose each element. While these components may be discussed and factors added, the objective is to maintain as comprehensive a program as possible within the resources available. If we lose track of this, we will be unable to manage the program or have an effective program.


Loss Prevention must be an integral part of the fire department operations; "In the mainstream!" This means it must be a part of the management process and people must work with and through each other to affect it. Therefore we must effectively plan, lead, organize, and control our work.

In planning we need to determine what our department's goals are, establish the necessary action plans to attain the goals, determine how to accomplish the plans, and communicate the implementation plan.

Organizing the tasks is the next function to determine what resources are necessary to accomplish the plans, determine how the various resources will be structured to attain these goals, establish the standards of performance desired and communicate the standards to personnel.

In controlling the tasks of the department, monitor what persons and groups are doing, provide feedback to personnel as appropriate and discipline or reward individuals on the basis of performance.

Finally, the leading of personnel involves not only the motivation but coordination skills to build commitment, identify, pride, spirit, and interest in the organization; develop staff, and encourage them on negotiating and resolving conflicts . . Giving the group direction and someone to follow.

The professional manager is one who can provide this guidance depending on the conditions encountered. Depending upon the situation, the individual manager must be impulsive, thinking, self-centered, and involving others as conditions dictate.

Management leadership controls the program. A well written program demands management leadership to be truly effective. If a basic loss control program is developed, implemented, and effectively managed, the risk of accidents and losses can be minimized. The control emphasized by management must be centered upon a conscious effort which is base don proper fundamental concepts. Much like driving a fire truck, the officer must shift gears appropriately from being impulsive to thinking and involving others. The effective manager is the one who can shift styles in managing depending upon what is being encountered. This means the effective fire service manager must be versatile in dealing with each of the Loss Control Program Elements.


As we saw in Article 2, there are seven elements of loss control program, each having a sub-set of components. Let's start with a well-written directed policy on loss control, affirmed to and signed by the senior fire department manager and distributed to all personnel. There are two critical support factors which must be affected at the same time. By assigning a responsible persons o manage loss control activities and providing appropriate hardware and software, management illustrates its willingness to support this effort and not have it as a "paper-tiger" the "hardware" concept is designed to provide for the necessary personal protective equipment to maintain as safe a working environment as possible. The "software" concept ranges into policies, rules, and procedures prepared and distributed; mandatory reports of various types of record sufficient data to make decisions; and secure appropriate insurance coverages or financial programs as deemed necessary. The support issues of claim management and rehabilitation must also be dealt with.


The loss control officer or manager must be assigned both responsibility and authority to maintain established department rules and enforcement of said rules. The responsibility assignment mandates appropriate time and funding be provided with the intent being returned on investment to achieve as incident fee a working environment as possible.


Once the responsibilities are assigned, it's time to look at the necessary training. Training is critical. Basic training for all fire department personnel must be mandatory, specific job instruction to new or re-assigned staff for each new task or function they are to perform must also be achieved. Awareness programs then become important to assure fire department personnel keep loss prevention on their mind. Refresher training on a periodic basis should be conducted for all individuals; training to a higher level for supervisors and fundamental safety training for all personnel round out the training efforts. You also will see the need to record the training conducted and how it interfaces with job duties.


The ability to have all firefighters accept responsibility for loss control requires the individual firefighter to make a personal commitment.

The creation and maintenance of interest goes a long way toward achieving personal acceptance. Employee acceptance comes many times with direct involvement. This direct involvement can begin with participation on committees and in meetings dealing with loss control as it affects the individuals themselves. Subsequently it can be enhanced by contests, incentives, awards, and so on to recognize those who have performed outstandingly. Bulletin board poster usage and off the job safety emphasis also provides a medium to keep information on one's mind and to get personnel involved. Involvement and communication are the critical components to successful personal acceptance of loss control.


In any labor intensive system, it is crucial to have an effective medical system. This begins with placement physicals for all jobs and periodic exams for a variety of reasons all of which are not centered on employee health. Equally important though, is the ability to treat injuries and handle the emergency when one of your men is injured. Personnel training, procedures, and facilities are necessary to handle the first-aid cases. In addition, it is important to plan for handling serious injuries. Finally, recordkeeping for these areas to insure proper documentation of data for future use is mandatory.


Recordkeeping has been commented on many times thus far. Let's take the time now to look at what, how, and why. It is mandatory to record and investigate all incidents and accidents. Supervisors or their designated personnel must be investigating the incidents providing written descriptions and remedial action; not to place blame, but to prevent future incidents. The data can be tabulated, analyzed, and evaluated; identifying the impact on fire department operations, the apparent management deficiencies and what remedial action can be taken.


Our seventh element is the maintenance of safe working conditions. This begins with engineering out potential problem, buying equipment and materials based upon adequate specifications and state-of-the-art engineering controls. Equipment and material specifications must be determined with the ultimate purchase and implementation adhering to these specifications. Consistent with this we need to implement and maintain both an inspection and maintenance program. Our inspection program should involve the entire facility and all equipment, begin conducted on a pre-defined basis and reporting appropriately. A preventive maintenance program should be established which includes the item to be maintained, the key components to be inspected, the maintenance schedule, the responsible individuals, and the function to be performed. Again regarding records, their maintenance is critical.

Protective devices are an additional factor in maintaining safe working conditions. The devices must be provided to everyone involved and be appropriate for the problem and hazards with enforcement applied as necessary. Last but not least, we need to deal with the issue of job design and job observation. The job shall be appropriately designed with function and safety in mind and individuals trained as such and observed periodically to assure the job is being properly performed.


Using these components in a comprehensive fashion provides the fundamentals of a loss control program. A loss control program helps you identify possible sources of loss in your fire department. Through a continuing-tailored loss control program, you can eliminate exposures that could result in injury to employees, damage to equipment, and drains on municipal resources. Develop a loss control program and use it!