SAM risk value calculation

What does our ballpark estimate tell you?

Our ballpark estimate tells you that, based on the sexual abuse and misconduct (SAM) claims and other data we have collected over the last 13 years, we think the annual average cost of your SAM risk is the $ amount shown in the calculator.

What is an average annual $ amount of risk? It is our estimate of the likelihood that you will have a SAM incident in the next 12 months, multiplied by our estimate of the possible $ cost of an incident.

How accurate is our estimate?

Mathematically, the calculation format and the data used in the calculation are reliable. They are the same insurers use to calculate premiums every day. Our estimate isn’t a premium calculation however, because we have included items not covered by insurance, and excluded some of an insurer’s costs.

Will anyone ever have an average annual loss? Probably not. Will you ever have a loss? Statistically, again, probably not but that depends on how you define the kind of SAM event being measured.

If you define SAM events as the knowledge of SAM taking place now, that is one thing; on this basis, SAM is fortunately quite rare now. But if you define a SAM event as the discovery of SAM regardless of when it occurred in the past, that is quite different and would tend to give the impression that SAM is quite a bit more common now than in practice, it is.

Because organizations need to deal with SAM when they discover it regardless of when it happened, we use the second definition so our estimate reflects what organizations have to deal with in practice.

So, what is the value in an estimate?

Measurement is valuable because, without it, improvement is not possible.

For example, SAM risk is constantly changing and increasing. This means that just to stand still in SAM risk management terms, organizations must be constantly improving their SAM risk management. The amount of SAM risk an organization has is the foundational measurement of any SAM risk management program.

Other measurements, such as the ways in which SAM risk changes, the different effectiveness of different SAM risk controls, and changes to the overall SAM risk environment are developed in other parts of our SAM risk management service. Our core assessment is how well you are managing SAM risk, which we deliver in the form of a risk management rating.

What goes into our SAM risk value estimate?

The elements that go into our estimate of the value of an organization’s SAM risk are based on how likely we think a ‘SAM event’ might be and how much a SAM event might cost.  

What is a SAM event?

A SAM event is the first discovery that SAM may have occurred, regardless of when it occurred or even that SAM itself actually occurred.  It may be that SAM is witnessed, someone is accused of SAM, or someone suspects SAM may have happened.  It can also mean a suit demanding damages for SAM is received. 

The key issue is that a SAM event is the first awareness by someone in the organization who has some responsibility for managing SAM risk that SAM may have occurred.

Clearly, the range of value of such events can be extremely wide. And most events will be for ‘small’ – a relative term – values because SAM is suspected more often than it actually happens. It is because an annual average $ value takes account of the relatively higher probability of many small events and the relatively low probability of a few quite substantial events that the average will likely never occur.

Types of SAM event

SAM events can also take different forms. 

For example, SAM might involve a ‘relationship’ between a teenager and a young adult; ‘relationship’ in inverted commas because, while the two individuals may think there is a consensual relationship between them, a minor legally cannot give consent to a sexual relationship. 

At the other end of a continuum, SAM might involve the discovery that a now-deceased individual abused multiple children 30 or 40 years ago.  SAM might also involve an employee or a visitor abusing a minor or vulnerable adult or involve, for example, one minor sexually abusing another. 

Form of calculation

Our 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 when they insure SAM risk, our calculation is formatted to focus on the risk an organization is dealing with when they manage SAM risk.  The differences are material. 

For example, insurance doesn’t cover all the costs of SAM events and insurance is a conditional contract; unless or until insurance is triggered, it provides no coverage for SAM events and many SAM events and costs are neither insured, nor insurable.

Calculation elements

The potential for a SAM event is driven by two main elements:

  1. The size and scale of an organization and its activities likely mean more potential targets for SAM.  Size and scale also suggest greater SAM risk management complexity.  Size is therefore one driver of the likelihood SAM might occur.
  2. Years in operation is another indicator because, the longer an organization has been active, the more chance there is 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 event also has two main elements:

  1. The core activity of the organization matters because, though the damage caused to a victim by SAM is the same whatever the organization does, different organizations are punished more severely by juries 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:
    1. Courts in different States deal with SAM differently;
    2. The profile and attitude towards SAM differs State by State; and
    3. Different States have different statutes of limitation, with different rules about how the statutes apply.

What is not included in the calculation. 

The main assumption we make in the estimate is that the organization is applying an ‘average’ level of SAM risk management – based on the SAM risk management assessments we regularly perform.  Better or worse than ‘average’ SAM risk management can make a difference to both the likelihood of a SAM event and its potential cost.  

In fact, we would go further; we have detected a leveraging effect.  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; we have seen single SAM events cost $100,000 and others cost $40,000,000.

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