February 18, 2020

Managing Fleet Risk Part 1

Managing Fleet Risk | Strategic Aspects

Think of fleet risk and what’s likely to come to mind are vehicle accident rates, driver training interventions and health and safety legislation. But the risks associated with running any car and van fleet are far broader than this.

In this series of five posts on fleet risk management we take a holistic look at the risks inherent in owning or running business vehicles, as well as those directly related to having employees on the road for business purposes.

The series will cover the fleet risk topics below and the links will become live as each one is published:

  1. Strategic Aspects of Risk
  2. Financial Risk
  3. Reputational Risk
  4. Human Resource Risk
  5. Legal Risk

In this first post we look at the strategic aspects of fleet risk, which set the context for the organisation’s approach to managing and reducing risk over time. In the rest of the series we’ll look in detail at the operational considerations required to mitigate risk on a day-to-day basis.

We also have a comprehensive PDF report which includes all of the topics covered in this series –you’ll find the link at the end of the article.

Strategic Aspects of Fleet Risk

At the strategic level, fleet risk is the responsibility of the organisation’s senior management team. They need to set the tone to emphasise the importance of managing the risks associated with running the fleet and take ultimate accountability for risk performance.

They will also need to make decisions balancing the reduction of risk against other business objectives and carefully consider the diminishing returns to be gained in attempting to remove, or mitigate against, every aspect of risk.

It’s important at this stage to clarify that ‘fleet’ in this context not only relates to vehicles owned or leased by the organisation but all those used for business purposes, including cars and vans owned by employees and contractors and those hired for short or medium term use. This is often referred to as the ‘grey fleet’. The risk also extends beyond drivers to all passengers, including fare-paying passengers.

The organisation’s fleet risk objectives and strategies need to be formally recorded in its fleet policy, which becomes the reference point for all decisions on the topic. The fleet policy will need to include strategic guidance on each of the four key elements of fleet risk.

Financial Risk

Here, the policy should outline the overall financial objectives related to the fleet, as well as the key decisions on how these will be achieved. The financial objectives are likely to include managing the amount of financial risk the organisation is willing to accept through its decisions on vehicle acquisition, funding methods and maintenance provision.

It should also cover how the organisation will seek to mitigate against the financial losses associated with vehicle accidents, including driver and vehicle downtime, repair costs, increased insurance premiums and expenditure on any resulting legal action.

money saving with competitive tendering

Reputational Risk

At the most fundamental level, the senior management team will need to make decisions regarding all potential risks to the organisation’s brand that are associated with the fleet. This will mean determining how the vehicle fleet reflects the environmental objectives (and claims) of the business, its health and safety record and its reputation as a socially responsible entity.

With customers’ and other stakeholders’ expectations of organisations increasing all the time, determining the best approach to all fleet operations within the policy is becoming ever more important.

Human Resource Risk

Protecting the safety of individuals while at work must be of paramount importance to all organisations. The fleet policy needs to reflect all aspects of risk associated with travelling by car or van on company business. This will include rules relating to driver behaviour and training, licencing, insurance, health, driver fatigue, drink and drugs and the use of mobile devices.

It will also provide direction on the selection of vehicles suitable for the tasks required and on their ongoing maintenance and safety checks. The policy should also reflect how the organisation collects and uses accident data, with the aim of reducing the frequency and severity of these incidents.

As well as safety related issues, the fleet policy should also determine how the organisation uses employer provided vehicles as part of its overall benefit strategy. In today’s highly competitive labour market failure to provide the right type and level of benefits places the organisation at risk of not being able to attract or retain the best talent. The policy will include guidance on eligibility, options (including cash alternatives), breadth of choice and ensuring vehicle suitability. It should also put measures in place to encourage the choice of vehicles that are preferred by the organisation in meeting its cost, environmental or other objectives.

Chess - Strategy image

Legal Risk

There are two main pieces of legislation that define an organisation’s duty of care responsibilities for on-road business activities.

The Health and Safety at Work etc Act 1974 (HSW Act)2 determines that businesses must, ‘so far as is reasonably practicable’, ensure the health and safety of all of their employees while at work – this includes all situations where employees drive for work. It also dictates that employees must take reasonable steps to ensure their own health and safety, and that of others, while at work. Businesses must also ensure that other road-users are not put at risk through the work-related driving activities of their employees.

The Management of Health and Safety at Work Regulations 1999 relates to how organisations manage the health and safety of their employees. It determines that risk assessments must be carried out to measure the risks to employee’s health and safety while at work, as well as the risks to other people who may be impacted by the organisation’s activities.

The fleet policy needs to determine how the organisation will abide by these pieces of legislation through assessing, prioritising and controlling the risks that are associated with the operation of the fleet. It should also outline everyone’s responsibilities for work-related road safety and highlight those with specific accountabilities.

Additional fleet risk also resides in the organisation’s collection, use and storage of personal information about drivers. The introduction of GDPR in 2018 made very significant changes to the requirements placed on businesses when dealing with personal information of all types and this includes that of employee drivers.

In outline terms, the key impacts of GDPR for fleet management include:

  • The definition of personal data is extended to include ‘digital identifiers’ such as IP addresses and mobile device IDs. This also means that data recorded from telematics systems can constitute personal data.
  • Driver consent for data capture and use is required. If this isn’t covered in the contract of employment, or there is no ‘legitimate interest’, then specific consent must be sought from the driver. ‘Legitimate interest’ must not interfere with the rights, freedom, and legitimate interests of the individual.
  • Those responsible for fleets are expected to adhere to strict standards of accountability, governance, and transparency by documenting all data and processes associated with drivers.
fleet policy

Fleet Policy Guidance

Developing a meaningful fleet policy that encapsulates, amongst other things, direction in each of these risk areas can seem daunting. However, help is available from fleet management professionals to ensure that there are no omissions and that fleet performance in general is optimised. For a free guide on the development of a robust fleet policy click here.

Next in the series – Financial Risk

To read more about CLM’s approach to fleet risk management and to contact us for a no-obligation discussion click here.