Risk Is His Job
October 23, 2017
When the Office of Risk Management does its job well, it is invisible to the people it keeps safe.
By Daniel Oppenheimer
When Phillip Dendy and his colleagues in the UT System Office of Risk Management do their jobs well, it is invisible to the vast majority of the people they have helped keep safe. It’s the work of years and decades, in collaboration with thousands of colleagues throughout the System, planning and coordinating how UT institutions deal with emergencies.
It’s new floodgates and submarine doors in buildings that have flooded in the past, so that they don’t flood the next time around. It’s drills, drills, and more drills, so that staff have the muscle memory of what to do in times of crisis. It’s buying the right insurance, and working quickly and efficiently with insurers and adjusters after a disaster, to minimize cash flow issues and allow the recovery work to begin as quickly as possible. It’s setting up relationships with disaster response companies, well in advance of any problem, so that when problems arise the contractors know what to do, and are ready to go, the minute they’re needed. It’s anticipating everything that's possible to anticipate, adapting to what’s not, and then incorporating the lessons of every new emergency into the next set of plans and practices.
“Our job is to support the missions of the institutions,” says Dendy, Chief Compliance and Risk Officer for The University of Texas System. “We do that by working with them to minimize the impact of catastrophic loss, and by expediting and financing any recovery that’s necessary.”
Texas Health Journal spoke to Dendy at his office at the UT System Administration Building in Austin. He talked about how well the System and its institutions handled Harvey, what the aftermath will look like, and what lessons he and his colleagues have learned for the next natural disaster. Dendy has been with UT System since 1995, and in charge of risk management since 1999.
Texas Health Journal: From a risk management perspective, how did we do with Harvey?
Phillip Dendy: The physical damage at the UT Marine Science Institute in Port Aransas was extensive. Compared to some past disasters, like Tropical Storm Allison in 2001 and Hurricane Ike in 2008, the health institutions in Houston and Galveston weathered Harvey exceptionally well. The damage at UTMB in Galveston, which was really devastated by Ike, was minimal this time around. The institutions in the Texas Medical Center in Houston—UTHealth Houston and UT MD Anderson— had significant damage from Allison. They did vastly better this time.
In both cases the better outcomes are in large part because of the work their teams did after those storms, understanding how the damage occurred and taking measures to prevent it this time around. At the Medical Center, after Allison, they put in submarine doors, flood walls, a berm, and submarine glass on the lower levels, and elevated equipment. Where it couldn’t be elevated, equipment was hardened in place. There was an investment of over $50 million in mitigation projects in the Medical Center precisely to prepare for something like this. There was over $1 billion invested at UTMB after Ike. That is why the damage was so minimal.
Even at the Marine Science Institute, the staff did an extraordinary job preparing for what they could. There is only so much you can do when you’re hit in the nose by a Category 4 hurricane.
When did you start watching Harvey?
Dendy: During hurricane season we are always watching what’s buzzing out there. So we were on it when it first appeared as a tropical storm, on August 17th, way out in the Atlantic. But Harvey was an unusual storm. It fizzled out to almost nothing by Saturday the 19th, and didn’t do much of anything for another few days. On Wednesday the 23rd, when we activated our Emergency Operation Center, it was still just a tropical depression, and the forecasters were thinking it would be at most a Category 1 hurricane at landfall. On Thursday morning it was upgraded to a tropical storm with predictions to become a major hurricane, and by Friday at 10 pm it made landfall as a Category 4 hurricane. It escalated quickly, but fortunately we were ready. Everyone in its path had begun preparing even when it looked as though it wasn’t going to be as serious as it ended up being.
So what goes into motion when the alarm bells sound?
A lot of things. Number one is the physical and organizational preparation. The vulnerable institutions start implementing their emergency processes and procedures days before the storm hits. At the Medical Center, for instance, UT has about 90 flood gates and doors—about 60 at MD Anderson and another 32 at UTHealth Houston. They systematically started closing those gates. The ride-out teams began prepping to stay on site if needed.
On the communication side, we held regular calls with our counterparts in emergency management and environmental health and safety at the institutions, making sure they were getting whatever support they needed, and getting information from them so that we were able to keep our leadership informed. We were also in regular communication with state and regional agencies.
Then there’s the preparation for what comes after. We have executed system-wide contracts with emergency response contractors so that all the individual institutions need to do, when something’s coming, is make a call to engage them. So in this case, for example, we had contractors staging in various locations before the storm made landfall. They were ready to roll the minute the sites were accessible. In the case of the Marine Science Institute, we were able to arrange special access for contractors to get in there before the area was generally accessible. These are the people who deal with things like debris removal, emergency generators, dehumidification, hazardous waste, emergency repair, clean-up, stripping out water-damaged floors and roofs. It’s specialized and sometimes dangerous work that needs to be done as soon as possible by people who know what they’re doing.
It is also important that we get on site as soon as possible. We had staff from the Office of Risk Management, The Office of Director of Police (ODOP), and UT Austin Environmental Health and Safety on the road to Port Aransas on Monday morning after the Friday night landfall. It was flooded and still raining in Houston then, but we and ODOP got in there later that week.
And then there’s the money part of it.
Let’s talk about the money. Do we have insurance?
We have a very complex insurance program that includes a number of complementary policies. We have a comprehensive property protection plan that has a high coverage limit but also a high deductible. So we have underlying flood and wind policies with lower deductibles but also lower limits. Those are there, effectively, to “buy down” as much of the large deductible on the other plan as possible.
Then there’s FEMA, which provides grants to states to cover certain kind of damages. But they are always looking to see what insurance will cover first. So a lot of the financial work for us is strategizing how we can maximize insurance coverage and FEMA participation. That work begins even before a storm makes landfall.
You’re lining up the insurance teams to get in there as quickly as they can, so they can assess the damage. The sooner they can get in there, the sooner we will have accurate assessments, and the sooner they will begin paying claims.
Assessing claims on complex properties like ours is not a simple job. You need building consultants, salvage people, experts on high tech equipment, research experts, and so on. It’s not just physical damage. It’s also what we call business interruption, or BI. That’s the money you lose, or extra expenses, from not being able to conduct normal business operations. For that you need forensic accountants and other financial experts.
At the Marine Science Institute, they have a lot of physical damage, and the majority of the dollar losses there will involve things like repairing and replacing roofs, replacing equipment, etc. The insurance team will be conferring with the institution’s project management teams to agree on scope and pricing.
On the other side of the coin, you’ve got UT MD Anderson, UTHealth Houston, and UTMB where the physical losses are relatively minimal considering the magnitude of the storm. In their case, it’s the BI losses that are going to be far greater because of the inability to access the Texas Medical Center and many mainland clinics for about a week. It will take a while to accurately assess those losses, because some of the losses that occurred during and right after the storm will be recovered later on. Some of the people who had to cancel appointments or procedures, for instance, may go somewhere else for them, but many of them will simply reschedule for later, so some of that revenue will show up in the next quarter.
As I said, it’s complex. We engage our own claims preparation team, to assist in maximizing the insurance recovery.
How hard is it to get the insurers to pay?
These are companies with which we’ve had longstanding relationships, and we are an important client. They have no incentive to drag it out, and they want to retain our business. It can take time to accurately assess the damages, and of course there are negotiations, but we have a good record of having our claims paid in a fair and timely fashion.
Any new lessons learned from this disaster that you will incorporate into preparations for the next?
We are always looking for ways to mitigate damage from these catastrophic hurricanes. At the Marine Science Institute, for instance, engineers will look into whether different roofing and window systems may have withstood the wind better. They lost a pump house that kept sea water flowing to some of the tanks, and lost a lot of research as a result. Anything that can reasonably harden the facilities will be considered in repairs and new construction.
We had facilities impacted from Port Aransas to Beaumont, with the Texas Medical Center and Galveston Island and many mainland clinics in between. The magnitude of the storm and the impacted geography was massive. Simply scoping it out and making sure we don’t miss something is a challenge.
I think we did well, but we did well because we weren’t complacent. So we will review all of the activities, and continue to prepare and plan and do our best to enhance all of these programs.
The hardest work is done by the people on the ground at the institutions. The stories of the actions of those staff are inspiring, to say the least, and there are a lot of them. Before, during, and after the storm, these people, many of whom suffered personal losses, went to heroic lengths to protect the lives of patients and visitors and make sure the facilities were protected and repaired as expeditiously as possible. It was an honor to accompany Chancellor McRaven, Dr. Greenberg, and Dr. Leslie to the impacted institutions, as they thanked and congratulated the professionals in those institutions for their efforts.