Risk management with a human heart – Longmont Times-Call

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Ralph Josephson

A neurologically triggered autonomic reflex reaction is triggered by imminent peril. A deer jumps in front of a speeding car on a highway. In a split second, the foot hits the break reactively. Equally intuitive is the Confucian concept of “Ren” (altruistic human heart), a human reaction to help others who are suffering or in imminent danger. A passerby reactively grabs a toddler running towards a highway. Hesitation or procrastination can have tragic, even deadly consequences.

The human brain is complex. It is designed to assess a myriad of risks not involving imminent peril of injury or survival. Reflexive risk avoidance is reinforced by risk management which involves an analytical assessment of risks and benefits. Making financial investments, committing to lifelong loyalty to an intimate partner, mingling with others during a pandemic, giving up a secure job to pursue a new lifestyle or new opportunities, getting a COVID-19 vaccine , balances risks and benefits. Risk management can be counterproductive. Isolation during a pandemic could lead to worse depression and financial hardship than assuming the manageable risk of contracting the disease. Living in a risk-free bubble is risky.

Orchestrated risk management to mitigate financial liability is necessitated by a legal system imposing civil liability on an increasing range of negligence/responsibility criteria recognized by the courts. The risk of liability has been expanded to include not only the wrongful conduct of a negligent party, but also others, if arguably foreseeable and reasonably avoidable, whether deliberate or even criminal. James Holmes (the “Joker”) sneaked into the Century 16 Theater multiplex in Aurora, Colorado, killing 12 people and injuring 70 others. Two dozen surviving victims and relatives of those killed sued Cinemark USA Inc., accusing the company of lax security measures that made the movie chain partially responsible for the bloodshed. A jury found that Cinemark was not responsible for the rampage, agreeing with Cinemark that the mass shooting was an unpredictable tragedy carried out by “a madman”. A risk management joker survived. Cinemark spent nearly $700,000 in legal costs to defend itself at trial. The theater agreed to eat this expensive popcorn, salted with a considerable shortfall. A scarier Joker is that the case survived legal challenges. He went to a jury. Another jury might well have awarded several million dollars to the plaintiffs.

An added tidbit in the risk management stew is that settlements are often made based on financial factors. If a case can be solved for less money than the cost of litigation, it is often settled, regardless of legitimate legal defenses. This encourages marginal claims. The cost of cost accounting risk management is ultimately borne by the company, which impacts the availability and price of goods, services and liability insurance.

Another wildcard of risk management involves an assessment of risks and benefits subordinating the human heart to self-interest. A customer suffered injuries and briefly lost consciousness at a Longmont supermarket after falling while pushing a shopping cart. Another buyer responded by removing the cart and offering to help. Store staff remained unassisted, likely due to established risk management protocols. Loss of consciousness remains a haunting specter of not knowing what happened. The supermarket entrusted the file to a claims adjuster. He refused requests to provide a copy of the video showing the events surrounding the accident, while saying the store was not at fault (the telltale carts were marked with a warning). A trial would be required to gain access to the video. The buyer’s intention was not and is not to seek financial recovery, only the video depicting the otherwise unavailable circumstances and events surrounding the fall. This point has been clarified, but to no avail.

The supermarket should not be singled out for its stubborn risk management practices. Other companies and institutions no doubt follow a similar protocol based on the colossal financial risks and inherent liability vulnerabilities. The non-quarterback is facilitated by our judicial system. It is as intransigent and harsh as the divisions that generally plague America, especially in the realm of ideological beliefs and political politics. Tort reform could be the alchemy to convert the 24-carat risk management pot of gold into a 100-carat bucket of human hearts.

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