The Cost of SAM Risk

How much sexual abuse risk do you have?

We can estimate how much sexual abuse risk your organization has based on the data we have collected over the 15 years we have been helping organizations manage sexual abuse risk.

Our calculation of your sexual abuse risk cost uses a factor-based approach derived from estimating the likelihood you will discover a sexual abuse-related incident in the next 12 months (ignoring when any underlying sexual abuse might have occurred) multiplied by the potential $ cost of the incident or incidents.  The result is an estimate of the total possible $ cost of all sexual abuse-related incidents discovered by you in the next year, ignoring the cost or benefit of insurance. 

Use the button below to use our sexual abuse risk calculator.  We will send you an estimate of your sexual abuse risk and how much we would charge you for an annual BRM subscription based on how much sexual abuse risk you have. 

The Total Cost of SAM Risk

Our estimate is for the tangible civil legal liability costs of potential sexual abuse-related incidents.  To understand the total cost of your sexual abuse risk, there are other elements you also need to consider:

  • Your sexual abuse risk management budget – the cost of your regular sexual abuse risk management activities, like background checks or insurance;
  • Potential immediate revenue loss as soon as your organization is associated with sexual abuse, increased costs of dealing with an allegation of sexual abuse (for example, legal, crisis management, business interruption, and PR), and the potential long-term revenue impact of a damaged reputation;
  • Legal risks – criminal to the people who are alleged not to have done what they should to protect children or vulnerable adults, and the civil liability potentially arising from allegations of negligence in child protection; and 
  • The intangible costs of your SAM risk.  These include the potential – and potentially significant – disruption and reputation damage organizations increasingly suffer following a sexual abuse-related incident.  Anecdotally, these intangible costs can be the most significant sexual abuse risk costs.

Anecdotally, the shame individuals feel if, with the benefit of hindsight, they realize they could have done more to prevent sexual abuse shouldn’t be underestimated.

How Reliable is the Estimate?

A BOKRIM estimate is based on the same form of calculation insurers use to develop premiums.  Mathematically, therefore, the calculation format is well understood and reliable.

The data used in the calculation comes from the data BOKRIM has collected over the last 15 years, including a data set of some 3,000 sexual abuse insurance claims.  However, because no current sexual abuse data set is even close to complete, it will be a skewed calculation.

And though it is based on the same calculation insurers use and on insured loss data, a BOKRIM estimate is not a premium calculation.  A BOKRIM estimate includes items not covered by insurance and excludes an insurer’s costs and profit margin.  Considering these differences, a BOKRIM estimate should always be higher than a premium because insurance cannot transfer all an organization’s costs.

Will anyone ever actually spend their average annual value of sexual abuse risk on sexual abuse risk?  Almost certainly not. That’s the nature of statistics.  However, all organizations looking after minors and vulnerable adults spend some money on sexual abuse every year.  The main uncertainty is how much, which depends on whether and what kind of incidents they have.

For most organizations in most years, most costs will be the expected costs of trying to:

  • understand your sexual abuse risks
  • prevent sexual abuse
  • identify it as early as possible
  • prepare to respond and mitigate the consequences if it happens, and
  • adapt activities and controls in the face of change.

Depending on the organization, some years will include more or less costs to respond to suspected or alleged sexual abuse.  Hopefully, unexpected costs will rarely arise because of the need to respond to and mitigate the impact of actual sexual abuse.

What is Included in the Estimate?

The elements that go into a BOKRIM estimate of the value of an organization’s sexual abuse risk are based on how likely a sexual abuse incident might be and how much a sexual abuse incident can cost.  

What is a sexual abuse incident?

In a BOKRIM estimate, a sexual abuse-related incident is any one of the three forms of incident addressed in a BRM sexual abuse Incident Response Plan. Though sexual abuse is fortunately quite rare, the longer an organization has been in operation, the more likely it is to deal with a suspicion of sexual abuse (the most expensive form of sexual abuse-related incident) and the higher the value of its sexual abuse risk.

The Calculation

BOKRIM’s two-part calculation is similar to the way an insurer calculates a sexual abuse liability insurance premium.  But where an insurer’s calculation is focused on the risk the insurer accepts, the BOKRIM calculation deals with the full legal liability risks an organization faces when managing sexual abuse risk.  Depending on the insurance, the differences can be material. 

For example, insurance doesn’t cover any prevention or most mitigation costs, rarely covers incident response costs, and typically only mitigates the financial costs of defending and settling sexual abuse claims. 

Further, insurance is a conditional contract, so most sexual abuse-related incidents do not trigger insurance policies. Unless or until the coverage is triggered, which might be by an occurrence but in the future is more likely to be because of a claim for damages, insurers bear no costs. Some types of sexual abuse incidents, for example, ones in the distant past, may not be covered, and even ones that are covered are likely to be subject to a deductible, excess, or another form of retention. 

Calculation Drivers

The potential for a sexual abuse-related incident to occur is driven by two main elements:

  1. The size and scale of an organization and its activities indicate the number of potential targets for sexual abuse.  Greater scale also suggests greater sexual abuse risk management complexity.  Size is, therefore, one driver of the likelihood that sexual abuse might occur.
  2. Years in operation is another because the longer an organization has been active, the higher the probability that sexual abuse may have occurred in the past.  This likelihood increases dramatically if the organization was active at the height of the sexual abuse crisis in the mid to late 70s.

The potential cost of a sexual abuse-related incident is also mainly driven by two elements:

  1. The organization’s core activity matters because, though the damage caused to a victim by sexual abuse is the same whatever the organization does, different organizations are punished more severely than others – though this distinction is less marked than it once was.
  2. The State in which an organization is domiciled or active can also make a big difference because:
    • Courts in different States deal with sexual abuse differently;
    • The profile and attitude towards sexual abuse differs State by State; and
    • Different States have different statutes of limitation, with different rules about how the statutes apply – which also naturally impacts likely costs.

What is Excluded from the Calculation?

The two main assumptions in the estimate are that the organization:

  1. Is applying an ‘average’ level of sexual abuse risk management.  Better or worse than ‘average’ sexual abuse risk management will make a difference to both the likelihood of a sexual abuse event and its potential cost.
  2. Has no unusual history of sexual abuse costs, suggestive of the possibility that it has either become a target for litigation, has yet undisclosed sexual abuse, or has less than adequate sexual abuse risk management.

The relationship between sexual abuse risk management quality and the likelihood of sexual abuse and its cost is not linear but exponential.  This explains why, for example, the range of potential sexual abuse costs is so wide.

  • A single incident of inappropriate behavior caught quickly and managed well will hopefully cause little damage to the victim and can cost an organization little, if anything.
  • The same initial inappropriate behavior, not identified and allowed to develop into something quite different, which is not identified for many years, can end up causing significant damage to multiple victims and, if also poorly managed once identified, can cost the organization its existence.

What is the value of an estimate?

Measurement is valuable because, without it, improvement is impossible.

Sexual abuse risk is constantly changing and increasing.  This means that to stand still in sexual abuse risk management terms, organizations need to improve their sexual abuse risk management continually.  The amount of sexual abuse risk an organization has is one of the foundational measurements of any sexual abuse risk management system.  Organizations can choose the relationship between their budgeted annual sexual abuse risk management costs and their un-budgeted and intangible costs, and can use this target relationship to set cornerstone metrics for their entire sexual abuse risk management system.

Use the button below, and we will send you an estimate of how much sexual abuse risk we estimate your organization has.