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Username: Ltorivia485

Post Number: 2241
Registered: 08-2004
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Posted on Thursday, December 15, 2005 - 12:40 am:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

Risky business
http://www.metrotimes.com/edit orial/story.asp?id=8627

You’d think that by now we’d have plumbed the depths of fiscal inefficiency in Detroit. Sadly, you’d be wrong. Former Auditor General Joe Harris — he left his post earlier this month — says Detroit currently pays between $30 million and $70 million a year in lawsuits and claims. The city could substantially reduce that payout if it spent more time and money looking for ways to stop accidents before they happen. That’s what risk management is all about. And it’s an area in which the administration of Mayor Kwame Kilpatrick has slipped up big time, Harris says.

Harris expects his former office to issue a report with all the gory details by year’s end.
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Username: Huggybear

Post Number: 100
Registered: 08-2005
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Posted on Thursday, December 15, 2005 - 1:42 am:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

This is a red herring point by Mr. Harris and pretty typical of people who are not in risk management (or fields where cost/benefit analysis plays any role). The payout metric is one of many. And when Harris complains about this, it's not like lawsuits were something that started with KK. Or DA. Or even CY.

What you hear about in the media is the big score, the one huge payout a year where the cops kill someone by accident. I used to think that the situation was outrageous until I started a job where one of my tasks was to set reserves for lawsuits.

I don't know what the precise breakdown is for what the city faces in suits and claims, but you can look at some generalities. For a multibillion dollar budget, 143 square miles, 900K people, numerous hazardous properties and conditions, and general municipal risk, $30-70mm is not outrageous. That's maybe $45-75 a person per year. Or half a million a square mile. Or $3,500 a block.

Can you correct every dangerous thing a person encounters on a daily basis for that $45-75 a year? Could you fix every pothole and cracked sidewalk for $3,500 a block? Could you even hire an inspection crew for that kind of money? Could you be 100% effective in inspecting for and correcting risks?

One of the key principles of risk management is finding the cost/benefit balance between preventing claims and living with them. And as you get to zero claims, the costs rise astronomically. If by spending $70 million a year you can avoid spending $500 million annually for upgrades and repairs, you are ahead of the game.

(Or think of it another way - we could cure poverty and totally reform society for a trillion bazillion dollars, but it is simpler and cheaper to have a police department and a court system).

But another factor in this is the overloaded Law Department. It's my understanding that the case loads are Protean and that a lot of cases have to be settled for simple lack of capacity to defend them. Cutting corners in defense is a great way to lose high-profile cases.

I think in the end you might be able to drive down the suits and settlements metric, but not without a huge corresponding increase in other parts of the budget.
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Username: Ray1936

Post Number: 134
Registered: 01-2005
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Posted on Thursday, December 15, 2005 - 2:04 am:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

Better yet, as Shakespeare suggested, let's first kill all the lawyers......... :-)

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