The Cost of SAM Risk

How much SAM risk do you have?

We can provide you with an estimate of how much SAM risk your organization has, based on the data we have collected over the 15 years we have been helping organizations manage SAM risk.

Our calculation of the cost of your SAM risk uses a factor-based approach derived from an estimate of the likelihood you will discover a SAM-related incident in the next 12 months (ignoring when any underlying SAM 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 SAM-related incidents discovered by you in the next year, ignoring the cost or benefit of insurance. 

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

The Total Cost of SAM Risk

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

  • Your SAM risk management budget – the cost of your regular SAM risk management activities, like background checks or insurance;
  • The intangible costs of your SAM risk.  These include the potential – and potentially significant – disruption and reputation damage organizations increasingly suffer following a SAM-related incident.  Anecdotally, these intangible costs can be the most significant SAM risk costs.

How Reliable is the Estimate?

A BOKRIM estimate is based are 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 SAM insurance claims. However, because no current SAM data set is even close to complete, it will be a skewed calculation.

And though it is based on the same form of 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 SAM risk on SAM risk? Almost certainly not. But all organizations looking after minors and vulnerable adults spend some money on SAM every year.  The main uncertainty is how much, which depends on whether they have incidents and what kind of incidents they have.

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

  • prevent SAM
  • 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 SAM. Hopefully, unexpected costs will rarely arise because of the need to respond to and mitigate the impact of actual SAM.

What is Included in the Estimate?

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

What is a SAM incident?

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

The Calculation

BOKRIM’s two-part calculation is similar to the way an insurer calculates a SAM liability insurance premium.  But where an insurer’s calculation is focused on the risk the insurer accepts, the BOKRIM calculation deals with all the risks an organization faces when managing SAM 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 SAM claims. 

Further, insurance is a conditional contract, so most SAM-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 SAM 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 SAM-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 SAM.  Greater scale also suggests greater SAM risk management complexity.  Size is therefore one driver of the likelihood SAM might occur.
  2. Years in operation is another because the longer an organization has been active, the higher the probability that SAM may have occurred in the past.  This likelihood increases dramatically if the organization was active at the height of the SAM crisis in the mid to late 70s.

The potential cost of a SAM-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 SAM 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 SAM differently;
    • The profile and attitude towards SAM 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 SAM risk management.  Better or worse than ‘average’ SAM risk management will make a difference to both the likelihood of a SAM event and its potential cost.
  2. has no unusual history of SAM costs, suggestive of the possibility that it has either become a target for litigation, has yet undisclosed SAM, or has less than adequate SAM risk management.

In fact, the relationship between SAM risk management quality and the likelihood of SAM and its cost is not linear but exponential.  This explains why, for example, the range of potential SAM 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, might cost the organization $40,000,000 – the biggest individual SAM settlement BOKRIM is aware of.

What is the value of an estimate?

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

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

Use the button below and we will send you a BOKSURE estimate – an estimate of how much SAM risk we estimate your organization has and how much an annual BOKSURE subscription would be for you, based on the cost of your SAM risk.