General liability and workers’ compensation claims have not increased since the private equity firm Carlyle Group took over HCR ManorCare, according to Bruce Helberg, risk management director of HCR ManorCare.
“We’re early in the process but I’ve not seen an increase in incident reports from a general liability or workers’ compensation standpoint at all,” said Helberg.
Carlyle took over the 60,000-employee hospital chain in July 2007 for $6.3 billion. It borrowed heavily to do so, and Carlyle ordered a review of the HCA ManorCare’s insurance programs.
The transaction serves as a cautionary tale for other private equity deals and their implications for risk management.
Now that HCR ManorCare, an operator of nursing homes and rehabilitation centers, is a private company, it is still not clear what kind of risk compliance documentation, for example, the company is responsible for releasing.
“No one had a clue as to what could be released and when, so we had to work with the underwriters and keep them at a comfort level. and we’re still not comfortable as to what we can release to underwrites,” said Helberg. “That causes issues with self-insured workers’ comp states.”
Helberg also said that HCR ManorCare, which is self-insured in nine states, has had high self-insured retentions for about eight years. The company was likely to stick with that strategy for the moment,” he said.
“Where the captive came into play on the excess layers, we did go out and buy reinsurance for those layers, and we’ll continue the captive this year but we’ll probably lay off more (risk).”
Whether the HCR ManorCare deal deserves more or less attention from risk managers remains to be seen. But one trend is clear, and it is that private equity deals are more popular than they used to be because they are very profitable for investors, said James R. Lash, executive risk practice leader for Hylant Group Inc.
In the first quarter of this year, there were a total of 221 completed buyouts in the United States and a total of 355 completed buyouts worldwide. Last year, there were a total of 1,162 completed private equity buyouts in the United States and 2,155 buyouts worldwide in 2007.
Not all private equity takeovers succeed, of course, and the landscape is littered with the remains of busted deals: Alliance Data, Harmon International, Advanced Semiconductor, Clear Channel, Sallie Mae and United Rentals.
When that happens, it’s up to the broker to help sort out the insurance programs, the experts said. “If you’re a broker, you’ve got your work cut out for you when these deals happen,” said Lash. “There are a whole bunch of things that affect the broker side.”
Lash said most of the private equity takeovers are friendly, as was the case with HCR ManorCare.
There are more than 1,700 private equity firms operating in the United States. Among the best known are Blackstone Group, Carlyle Group, KKR, Bain Capital and Cerberus, which took over Chrysler last year.
Showing posts with label Sessions. Show all posts
Showing posts with label Sessions. Show all posts
Friday, May 2, 2008
Thursday, May 1, 2008
Sessions: INS208: The dangers of the last session
Speaking in the last session on the last day of RIMS is not for the faint of heart, or the boring. At the start of INS208 (about the perils of online advertising), the RIMS rep who introduced the speakers stressed just how important, cutting edge and interesting the session would be. He cited how only one in 10 session ideas submitted to the RIMS conference organizers gets chosen to be developed into an actual session. Being one in 10, INS208 just had to be good, he was implying, so please stick around until 1 p.m. and the end of the session, he was pleading.
Then he left.
As can be expected, not all of the audience listened to him. Some of us fled. Those of us who stuck it out appeared to be listening all the way through. Maybe my fellow audience members have the unique talent of sleeping with their eyes open. I have tried to learn this skill, and have attended workshops in India with a yoga master who possesses complete control over all his bodily functions, but I am a failure at it.
The speakers, Martin Myers of HellerEhrman LLP and Chad Milton of Marsh, did their best to battle through the audience's unavoidable last-day malaise, and through an Internet connection that was so slow that it could have been dial-up. Maybe it was.
That was probably one of the biggest downfalls of the session. It was, after all, about online adverts, so Myers' efforts to show some examples of said online ads -- streaming video of user-generated Pepto commercials, for instance, or even just the homepage for American Apparel -- were frustrated by the crapitude of the convention center IT system.
It's a shame. The session focus was something I'd never really seen discussed before anywhere else -- how the legal and liability vagaries of the Web can and are affecting advertising in blogs, social networking sites, user-generated video and other content, and other video games. Cool stuff. (Too bad if you left the conference a day or two early.)
It turns out, though, advertisers have much of the same exposures and lack of protections that online content generators have. For instance, when a corporate Web site allows its employees or visitors to blog or post comments, they might be liable for those contents. The ISP might even be liable. Same holds true for companies that create ads from user-generated content.
And the insurance situation is similar too. CGL does not touch this stuff. But E&O underwriters are trying to.
Or as Milton put it, "The E&O underwriters are crawling all over themselves to show they understand this."
Now that I'm rehashing the PowerPoint details of the session, it does seem like some pretty heavy slogging for the last session on the last day of RIMS. To those of you in the audience with me until 1 p.m., and especially to Martin and Chad, I salute you.
Then he left.
As can be expected, not all of the audience listened to him. Some of us fled. Those of us who stuck it out appeared to be listening all the way through. Maybe my fellow audience members have the unique talent of sleeping with their eyes open. I have tried to learn this skill, and have attended workshops in India with a yoga master who possesses complete control over all his bodily functions, but I am a failure at it.
The speakers, Martin Myers of HellerEhrman LLP and Chad Milton of Marsh, did their best to battle through the audience's unavoidable last-day malaise, and through an Internet connection that was so slow that it could have been dial-up. Maybe it was.
That was probably one of the biggest downfalls of the session. It was, after all, about online adverts, so Myers' efforts to show some examples of said online ads -- streaming video of user-generated Pepto commercials, for instance, or even just the homepage for American Apparel -- were frustrated by the crapitude of the convention center IT system.
It's a shame. The session focus was something I'd never really seen discussed before anywhere else -- how the legal and liability vagaries of the Web can and are affecting advertising in blogs, social networking sites, user-generated video and other content, and other video games. Cool stuff. (Too bad if you left the conference a day or two early.)
It turns out, though, advertisers have much of the same exposures and lack of protections that online content generators have. For instance, when a corporate Web site allows its employees or visitors to blog or post comments, they might be liable for those contents. The ISP might even be liable. Same holds true for companies that create ads from user-generated content.
And the insurance situation is similar too. CGL does not touch this stuff. But E&O underwriters are trying to.
Or as Milton put it, "The E&O underwriters are crawling all over themselves to show they understand this."
Now that I'm rehashing the PowerPoint details of the session, it does seem like some pretty heavy slogging for the last session on the last day of RIMS. To those of you in the audience with me until 1 p.m., and especially to Martin and Chad, I salute you.
Wednesday, April 30, 2008
Session INS 201: Trends in D&O - Say it Ain't So
Litigation connected to the collapse of the subprime market, more institutional investors deciding to opt out of class action lawsuits, and more aggressive prosecutions by state and federal authorities has led to an increase in the severity and frequency of directors’ and officers’ liability lawsuits, according to ACE USA’s chief counsel.
“The end result is that executives and corporations today are faced with defending more complex litigation on more varied fronts, which is costly and compromising,” according to Zacharias, author of a recent report on the subject. “D&O litigation is back, and appears to be poised to continue unabated in the near future.”
The percentage of cases settling for more than $100 million has grown from 1.7 percent in 1998 to 5.2 percent in 2003 to 8.1 percent in 2007, according to her study, titled “The Return of D&O: Trends Driving Increasing Costs and Frequency of Litigation Against Corporate Directors and Officers.” The report was released at the annual conference of the Risk and Insurance Management Society Inc. in San Diego.
Excluding settlement of more than $1 billion, median settlements in 2007 increased by 37 percent, $9.6 million from $7.0 million in 2006, and average settlements increased 46 percent, to $33.2 million in 2007 from $22.7 million in 2006.
While the volume of cases settling for less than $10 million, there are a higher percent of cases setting in the higher damage brackets, said Zacharias.
Another trend, said Zacharias, was the increasing likelihood of institutional investors to opt out of the class action status, in an attempt to seek retribution on their own. Zacharias blamed the heavy lobbying efforts of plaintiffs lawyers.
Institutional investors opt out because they can get a larger settlement on their own, they can negotiate lower attorneys fees, and they feel a duty to investors to recover as much as they can rather than settle for cents on the dollar. In the case of public pension funds, it may even be a way to jockey for political attention, she said.
The early opt-out case used as a benchmark is Worldcom, in which eight institutional investors who decided to opt out recovered $651 million. The Worldcom case was followed by AOL-Time Warner with nine opt-out institutional investors recovering $795 million. In the Qwest case, the entire class of plaintiffs settled for $400 million, but some of the opted-out institutional investors settled for $411 million, according to the report.
Some industries are at higher risk of litigation than others: One quarter of the 2007 cases filed were brought against technology companies, 13 percent were filed against pharmaceutical companies, and 21 percent were filed against the banking/brokerage/financial services sectors, the report also found. CEOs and CFOs are sued more often than other executives in securities class actions. Committees are much less likely to be sued.
“The size of a company is not necessarily a determinant as to whether the company will be subject to a securities class action,” the report also said.
“The end result is that executives and corporations today are faced with defending more complex litigation on more varied fronts, which is costly and compromising,” according to Zacharias, author of a recent report on the subject. “D&O litigation is back, and appears to be poised to continue unabated in the near future.”
The percentage of cases settling for more than $100 million has grown from 1.7 percent in 1998 to 5.2 percent in 2003 to 8.1 percent in 2007, according to her study, titled “The Return of D&O: Trends Driving Increasing Costs and Frequency of Litigation Against Corporate Directors and Officers.” The report was released at the annual conference of the Risk and Insurance Management Society Inc. in San Diego.
Excluding settlement of more than $1 billion, median settlements in 2007 increased by 37 percent, $9.6 million from $7.0 million in 2006, and average settlements increased 46 percent, to $33.2 million in 2007 from $22.7 million in 2006.
While the volume of cases settling for less than $10 million, there are a higher percent of cases setting in the higher damage brackets, said Zacharias.
Another trend, said Zacharias, was the increasing likelihood of institutional investors to opt out of the class action status, in an attempt to seek retribution on their own. Zacharias blamed the heavy lobbying efforts of plaintiffs lawyers.
Institutional investors opt out because they can get a larger settlement on their own, they can negotiate lower attorneys fees, and they feel a duty to investors to recover as much as they can rather than settle for cents on the dollar. In the case of public pension funds, it may even be a way to jockey for political attention, she said.
The early opt-out case used as a benchmark is Worldcom, in which eight institutional investors who decided to opt out recovered $651 million. The Worldcom case was followed by AOL-Time Warner with nine opt-out institutional investors recovering $795 million. In the Qwest case, the entire class of plaintiffs settled for $400 million, but some of the opted-out institutional investors settled for $411 million, according to the report.
Some industries are at higher risk of litigation than others: One quarter of the 2007 cases filed were brought against technology companies, 13 percent were filed against pharmaceutical companies, and 21 percent were filed against the banking/brokerage/financial services sectors, the report also found. CEOs and CFOs are sued more often than other executives in securities class actions. Committees are much less likely to be sued.
“The size of a company is not necessarily a determinant as to whether the company will be subject to a securities class action,” the report also said.
Sessions: Surviving a Workplace Shooting...and a Boring Session
Things I learned in Session RMG 203 "Lightening Strikes: Surviving an Active Shooter-Hostage Event in the Workplace":
1.) False Advertising: What is contained in the RIMS Conference Guide should be taken with a grain of salt. Sessions often do not live up to their cool titles and descriptions. Sessions also tend to be a bit more basic and elementary than their experience levels would suggest.
2.) Blind Leading the 20/20: Session speakers don't always represent their field's most brilliant minds. Those attending sessions can be disappointed to discover that they possess more knowledge about the topic than those standing behind the podium. These folks need to approach RIMS about leading sessions of their own in the future--we would all benefit.
3.) PowerPoint BS: When a topic demands you step outside the PowerPoint, do it! For example....
This particular session sounded engaging and exciting. Others must have shared my opinion because the room was packed. I was disappointed to hear some of the survival strategies though. They included such earth-shattering concepts as:
"The best way to survive is to be where the shooter is not."
(Really? I always thought murders could use a nice bear hug)
"Find a room that locks, block the door, and be silent."
(Hmm...I was under the impression that standing behind a potted plant half my size, like I do when I play hide-and-go-seek with my niece, would suffice)
"Assume that his intentions are lethal."
(But maybe he's just looking for a partner at the shooting range?)
"Remain calm."
(The response to this is so obvious, I can't mention it)
All half-jokes aside, the session led (disappointingly) mostly by PowerPoint presentation, did address one issue that many risk and safety managers have a difficult time grasping. In an active shooter situation, when no other options are available, you must confront the shooter. Session leader, Randy Spivey, director of the Safe Travel Institute, said companies often clam up when he broaches the subject.
"Some people wouldn't even discuss that in a corporate environment," he said. "My response is, how can you ignore that?"
Spivey pointed to the most well known example of the strategy, United Flight 93, whose passengers decided to take matters into their own hands on Sept. 11, 2001. Of course, we all know the plane crashed, but other than those on board no lives were lost. Spivey said confronting an attacker takes a group effort and a total commitment is necessary to be successful. Taking action, instead of freezing in place, is what Spivey terms giving oneself a "mental permission slip."
It seems that many people lose that permission slip, however. Spivey said research indicates that folks trained to respond in such shooter-hostage situations vary dramatically from untrained individuals when put in an actual event. He claims 10 percent of untrained individuals will respond well in a crisis, while 10 percent of trained individuals will screw it up. I find those numbers a bit difficult to believe.
I've taken a self-defense course, but does that mean when approached by an assailant from behind, I would have the clarity of mind to recall my training and be able to jab that elbow in a calm, calculated manner and hit my mark? Much more likely, I would flail about in a desperate and hysterical manner.
For now, I think I'll be able to sleep tonight, with the peace of mind that I am well aware of the emergency exits closest to my cubicle at the Risk & Insurance office building. And when no other options exist in an active shooter scenario, I think I'll try the bear hug tactic. That, and a piece of candy from the dish on my desk. That should sweeten the deal, don't you think?
1.) False Advertising: What is contained in the RIMS Conference Guide should be taken with a grain of salt. Sessions often do not live up to their cool titles and descriptions. Sessions also tend to be a bit more basic and elementary than their experience levels would suggest.
2.) Blind Leading the 20/20: Session speakers don't always represent their field's most brilliant minds. Those attending sessions can be disappointed to discover that they possess more knowledge about the topic than those standing behind the podium. These folks need to approach RIMS about leading sessions of their own in the future--we would all benefit.
3.) PowerPoint BS: When a topic demands you step outside the PowerPoint, do it! For example....
This particular session sounded engaging and exciting. Others must have shared my opinion because the room was packed. I was disappointed to hear some of the survival strategies though. They included such earth-shattering concepts as:
"The best way to survive is to be where the shooter is not."
(Really? I always thought murders could use a nice bear hug)
"Find a room that locks, block the door, and be silent."
(Hmm...I was under the impression that standing behind a potted plant half my size, like I do when I play hide-and-go-seek with my niece, would suffice)
"Assume that his intentions are lethal."
(But maybe he's just looking for a partner at the shooting range?)
"Remain calm."
(The response to this is so obvious, I can't mention it)
All half-jokes aside, the session led (disappointingly) mostly by PowerPoint presentation, did address one issue that many risk and safety managers have a difficult time grasping. In an active shooter situation, when no other options are available, you must confront the shooter. Session leader, Randy Spivey, director of the Safe Travel Institute, said companies often clam up when he broaches the subject.
"Some people wouldn't even discuss that in a corporate environment," he said. "My response is, how can you ignore that?"
Spivey pointed to the most well known example of the strategy, United Flight 93, whose passengers decided to take matters into their own hands on Sept. 11, 2001. Of course, we all know the plane crashed, but other than those on board no lives were lost. Spivey said confronting an attacker takes a group effort and a total commitment is necessary to be successful. Taking action, instead of freezing in place, is what Spivey terms giving oneself a "mental permission slip."
It seems that many people lose that permission slip, however. Spivey said research indicates that folks trained to respond in such shooter-hostage situations vary dramatically from untrained individuals when put in an actual event. He claims 10 percent of untrained individuals will respond well in a crisis, while 10 percent of trained individuals will screw it up. I find those numbers a bit difficult to believe.
I've taken a self-defense course, but does that mean when approached by an assailant from behind, I would have the clarity of mind to recall my training and be able to jab that elbow in a calm, calculated manner and hit my mark? Much more likely, I would flail about in a desperate and hysterical manner.
For now, I think I'll be able to sleep tonight, with the peace of mind that I am well aware of the emergency exits closest to my cubicle at the Risk & Insurance office building. And when no other options exist in an active shooter scenario, I think I'll try the bear hug tactic. That, and a piece of candy from the dish on my desk. That should sweeten the deal, don't you think?
Sessions: INS209: By reading this, you agree to the indemnification provisions contained herein
The voices of the three presenters at the INS209 session fade out ... and their last point is pulling me off into my own little la-la land. (At RIMS, I really haven't had too much time to go there, so I've really been missing my la-la land.) The topic of discussion in the session (and sorry for not giving you the full title for this session, it's really long) was how contractual indemnification agreements can be designed so that a subcontractor would have to indemnify a third party for the mistakes of the contractor.
Say contractor A is doing construction and takes the wrecking ball, by accident, to the building next door to the worksite ... and then has his architect subcontractor be responsible for it (and the subcontractor's insurance company). Roughly speaking, that's what the speakers were talking about as the session faded onto the back burner here, and instead I am wondering how I can use these indemnification agreements on my own life ...
And I can't. Because I never make a mistake, so there's no need to have somebody on the hook for them.
But let's say I did make mistakes ... I could start making everyone I meet sign a contract that says they are on the hook should I screw up while dealing with them, directly or indirectly, or as long as they know me. If I had enough people sign these contracts, and then I pissed off my wife, say, I could whip out one of my contracts and say, "Look, honey, John Schmoe here agreed to indemnify you in the event I made a mistake so please ask him to do the dishes and put away the laundry." If John Schmoe balked, I'd whip out another contract signed with somebody else, then another, until I found the push-over who'd do my chores for me.
Here's another example: I've been forgetting to wear my wedding band during RIMS ... during the day, during the night ... and no, I am not false advertising, Gail, or revealing some sort of unconscious weakness in morality or fidelity, Erin. It's because I am bouncing from one meeting to another, to a session, to the computer to blog, to a lunch meeting, to another interview, to another interview ... so my brain can only focus on 30-minute intervals throughout the day until I make it to the latest nighttime party at Stingaree and shut down my brain completely. (Great place, Stingaree. I could go to an insurance party there every night the rest of this year and not wonder at all how many other excellent restaurant and bar venues in the city of San Diego I'm missing out on.)
But my point is: Let's say my wife were to find out that I haven't been wearing my wedding band, and let's say she then uncharacteristically turned terribly vengeful and decided not to speak to me for a whole week or two after I get home (I say uncharacteristically because she'd only maybe not talk to me for a day, maybe a weekend).
Were I to have all of my interviewees, all of my session speakers, all of my co-workers and especially all of my bosses sign these indemnity provisions, then I could return home comfortably sleeping on my red-eye flight knowing that my wife would then have to not speak to one of them, not me. Through my indemnity obligation (and the words of someone speaking in the session are seeping into my consciousness now), I could transfer the risk of my own forgetfulness to some other party, any other party, and my wife would be forced to put up with me and curse under her breath at them.
But I'd first have to check PA state laws ... some states would prohibit John Schmoe from indemnifying her because of something caused by my own stupidity and laziness.
Yes, laziness is involved here too. Yesterday morning, I remembered that I forgot my ring ... but only after having walked 8 flights down the stairs in my hotel, and with 4 more flights to go, I sure as hell was not walking back up those 8 flights to get my ring. It's only a ring, people! And I surely wasn't even going to think of taking the elevator to get up there.
The elevators in my hotel do not stop at any floor where someone is waiting for them. They might not stop at all. They merely rush up and down, without pausing anywhere for a lit down button or a glowing up button, whooshing past each floor loud enough so you can hear them come and go, passing you over and over and over and over.
Any takers on indemnifying the hotel should I kick in their elevator doors?
Say contractor A is doing construction and takes the wrecking ball, by accident, to the building next door to the worksite ... and then has his architect subcontractor be responsible for it (and the subcontractor's insurance company). Roughly speaking, that's what the speakers were talking about as the session faded onto the back burner here, and instead I am wondering how I can use these indemnification agreements on my own life ...
And I can't. Because I never make a mistake, so there's no need to have somebody on the hook for them.
But let's say I did make mistakes ... I could start making everyone I meet sign a contract that says they are on the hook should I screw up while dealing with them, directly or indirectly, or as long as they know me. If I had enough people sign these contracts, and then I pissed off my wife, say, I could whip out one of my contracts and say, "Look, honey, John Schmoe here agreed to indemnify you in the event I made a mistake so please ask him to do the dishes and put away the laundry." If John Schmoe balked, I'd whip out another contract signed with somebody else, then another, until I found the push-over who'd do my chores for me.
Here's another example: I've been forgetting to wear my wedding band during RIMS ... during the day, during the night ... and no, I am not false advertising, Gail, or revealing some sort of unconscious weakness in morality or fidelity, Erin. It's because I am bouncing from one meeting to another, to a session, to the computer to blog, to a lunch meeting, to another interview, to another interview ... so my brain can only focus on 30-minute intervals throughout the day until I make it to the latest nighttime party at Stingaree and shut down my brain completely. (Great place, Stingaree. I could go to an insurance party there every night the rest of this year and not wonder at all how many other excellent restaurant and bar venues in the city of San Diego I'm missing out on.)
But my point is: Let's say my wife were to find out that I haven't been wearing my wedding band, and let's say she then uncharacteristically turned terribly vengeful and decided not to speak to me for a whole week or two after I get home (I say uncharacteristically because she'd only maybe not talk to me for a day, maybe a weekend).
Were I to have all of my interviewees, all of my session speakers, all of my co-workers and especially all of my bosses sign these indemnity provisions, then I could return home comfortably sleeping on my red-eye flight knowing that my wife would then have to not speak to one of them, not me. Through my indemnity obligation (and the words of someone speaking in the session are seeping into my consciousness now), I could transfer the risk of my own forgetfulness to some other party, any other party, and my wife would be forced to put up with me and curse under her breath at them.
But I'd first have to check PA state laws ... some states would prohibit John Schmoe from indemnifying her because of something caused by my own stupidity and laziness.
Yes, laziness is involved here too. Yesterday morning, I remembered that I forgot my ring ... but only after having walked 8 flights down the stairs in my hotel, and with 4 more flights to go, I sure as hell was not walking back up those 8 flights to get my ring. It's only a ring, people! And I surely wasn't even going to think of taking the elevator to get up there.
The elevators in my hotel do not stop at any floor where someone is waiting for them. They might not stop at all. They merely rush up and down, without pausing anywhere for a lit down button or a glowing up button, whooshing past each floor loud enough so you can hear them come and go, passing you over and over and over and over.
Any takers on indemnifying the hotel should I kick in their elevator doors?
Session: Human incubators and other upcoming al-Qaeda attacks
The next big Bin Laden attack could occur on the 10-year anniversay of 9/11, according to John Cloonan, president of Clayton Consultants and a 25-year veteran of the FBI who's personally interrogated the al-Qaeda member who brainstormed the plane attacks into the World Trade Center.
On that 10-year anniversary, he said, the attack is likely to be one meant to cripple our already beaten-down economy, perhaps one involving biochem. He explained that al-Qaeda is already experimenting with using human "incubators"--suicide "bombers" infected with some painful, debilatating, deadly vector who then are sent on a tour of America -- up elevators, through malls, into subways, onto airplanes -- all in an effort to spread the bio weapon into as much American airspace as possible before they themselves succumb to it. Imagine that.
You should. According to Cloonan, it is going to happen. Not if. When. It was a horrible session that Cloonan spoke at -- Tuesday afternoon in RMG305: Terrorism 2008 Update: Domestic to Al-Qaeda.
Not horrible in the sense that Cloonan was clueless. He knew exactly what he was talking about. And it was terrifying. You had the sense that the audience was in pain, in silent anguish, hearing what they knew to be true but, as Americans, living in American la-la land, we'd rather not think about, let alone enunciate in public.
It's been the only session I've attending where no one left mid-session. We couldn't. We were trapped, stuck, listening to some Nostradomus-esque prediction of how our society will be battered, slashed, sucker-punched, pricked, slapped, bled, generation after generation. Religious, ideological terrorism is a risk that we have no answer for. This is coming from an intel expert who specializes in handling kidnap and ransom situations, interrogations and other terrorism-related situations.
"They think very very long term," he said. "They will take years to get revenge, and they will get it."
The problem for commercial interests, and the risk managers who protect them, is that this revenge is targeting upon business and public victims, as much as it was on military and governmental ones.
The other problem is -- and before I say this, let me report that Cloonan did a very delicate and excellent job of staying apolitical when discussing the war on Muslim fundamentalism -- and I repeat, the other problem is we are NOT good at stopping terrorists.
"We're not that good," he said, adding that more terroristic attacks have occurred since 9/11 than before.
We have 36 FBI agents who speak Arabic beyond a vocab of five words. Our embassy in Baghdad has 6 staff who speak Arabic. Our human intel capabilities, in other words, suck. And we're fighting an organization, a movement, an idea based entirely on killing Americans and their allies.
If it makes you feel any better, Cloonan recalled how, when eavesdropping on Bin Laden during phone conversations with his mother -- yes, Cloonan is a bad ass --he'd heard the most wanted man in the world complain to his mom about sore throats and other nonsense that grown men still call their moms to whine about.
"He's a momma's boy," reported Cloonan.
Yes, a momma's boy who helped to launch a movement of thousands dedicated to killing Americans, destroying their businesses and properties, and sinking our economy and our society.
On that 10-year anniversary, he said, the attack is likely to be one meant to cripple our already beaten-down economy, perhaps one involving biochem. He explained that al-Qaeda is already experimenting with using human "incubators"--suicide "bombers" infected with some painful, debilatating, deadly vector who then are sent on a tour of America -- up elevators, through malls, into subways, onto airplanes -- all in an effort to spread the bio weapon into as much American airspace as possible before they themselves succumb to it. Imagine that.
You should. According to Cloonan, it is going to happen. Not if. When. It was a horrible session that Cloonan spoke at -- Tuesday afternoon in RMG305: Terrorism 2008 Update: Domestic to Al-Qaeda.
Not horrible in the sense that Cloonan was clueless. He knew exactly what he was talking about. And it was terrifying. You had the sense that the audience was in pain, in silent anguish, hearing what they knew to be true but, as Americans, living in American la-la land, we'd rather not think about, let alone enunciate in public.
It's been the only session I've attending where no one left mid-session. We couldn't. We were trapped, stuck, listening to some Nostradomus-esque prediction of how our society will be battered, slashed, sucker-punched, pricked, slapped, bled, generation after generation. Religious, ideological terrorism is a risk that we have no answer for. This is coming from an intel expert who specializes in handling kidnap and ransom situations, interrogations and other terrorism-related situations.
"They think very very long term," he said. "They will take years to get revenge, and they will get it."
The problem for commercial interests, and the risk managers who protect them, is that this revenge is targeting upon business and public victims, as much as it was on military and governmental ones.
The other problem is -- and before I say this, let me report that Cloonan did a very delicate and excellent job of staying apolitical when discussing the war on Muslim fundamentalism -- and I repeat, the other problem is we are NOT good at stopping terrorists.
"We're not that good," he said, adding that more terroristic attacks have occurred since 9/11 than before.
We have 36 FBI agents who speak Arabic beyond a vocab of five words. Our embassy in Baghdad has 6 staff who speak Arabic. Our human intel capabilities, in other words, suck. And we're fighting an organization, a movement, an idea based entirely on killing Americans and their allies.
If it makes you feel any better, Cloonan recalled how, when eavesdropping on Bin Laden during phone conversations with his mother -- yes, Cloonan is a bad ass --he'd heard the most wanted man in the world complain to his mom about sore throats and other nonsense that grown men still call their moms to whine about.
"He's a momma's boy," reported Cloonan.
Yes, a momma's boy who helped to launch a movement of thousands dedicated to killing Americans, destroying their businesses and properties, and sinking our economy and our society.
Tuesday, April 29, 2008
Sessions: Are You Passionate?
The light went off in Robert Pastore’s head when he analyzed 10 years of Wal-Mart Stores Inc’s pay-outs and pay-ins on its insurance program. You know what the difference was? 1 percent.
That’s right ladies and gentlemen, 1 percent.
That’s just one more occasion when it hit Pastore, the director of global risk management for the mammoth retailer that hit $375 billion in revenue in its most recent fiscal year; why was he paying for insurance when he could use his company’s massive financial strength to self-insure in at least some cases?
Pastore was laying down this creed in a RIMS session on self-insurance on Tuesday morning, but when you think about the financing of insurance in this respect, it’s really no different than what financial consultants and sages remind you about your own money management.
For after all, what do they say about taxes? It is far better to hold onto as much of your tax payment money throughout the year as you can and realize the benefits of investing it in a money market account or some other instrument, than have the U.S. government hold your money for the year and issue you their patronizing tax rebate at some point every spring.
Warren Buffet and others have been very clear on this concept for years, haven’t they? It’s not the profits on the underwriting, they say, it’s the fact that they get to hold onto other people’s money for them and profit by investing it: profit greatly by investing it, we might add.
But how was Pastore, who has only been in risk management for a few years, to get to that holy place where he could put his theories about self-insurance into practice?
For one, he had to overcome, or at least engage, to be fair, a corporate culture at the Arkansas-based retailer that tended to look at risk management as a dyed-in-the-wool budget item, not the fluid hybrid of art and science that some practitioners believe it to be.
“We were looked at for the longest time as a budget item,” Pastore explains. The degree to which Wal-Mart’s corporate culture took that approach was a little shocking. Employees in Wal-Mart’s garden centers would leave plants outside in heat waves, with the expectation that they company had insurance for some losses, so why not use it?
Pastore has changed all of that line item thinking, and boy are the petunias happier.
“We haven’t had a plant loss in three years,” he said. And he said insurers are welcoming his new approach.
“They don’t want to be swapping dollars anymore than you want to be,” Pastore said.
In getting to the place that Pastore has arrived at, one needs to take a much more active role in assessing the financial strength and corporate culture of one’s company, according to David North, the president and CEO of Sedgwick Claims Management Services Inc., who shared some podium time with Pastore on Tuesday in San Diego.
That means, according to North, that you need to be able to assess management’s appetite for risk, understand the financial strength of the company, its administrative competence, and what North called executives' “emotional readiness” to take on risk.
It’s not something you do in your sleep. It means being active about what you are doing, and in fact being passionate about what you are doing.
“The concept of self-insurance and retaining risk is not easy,” is the way North puts it.
But just look at those numbers that Pastore unearthed: 1 percent, over 10 years, at the biggest company anyone can think of.
So now we just have one question for you gentle readers. To quote from the album title by Neil Young, “Are You Passionate?”
That’s right ladies and gentlemen, 1 percent.
That’s just one more occasion when it hit Pastore, the director of global risk management for the mammoth retailer that hit $375 billion in revenue in its most recent fiscal year; why was he paying for insurance when he could use his company’s massive financial strength to self-insure in at least some cases?
Pastore was laying down this creed in a RIMS session on self-insurance on Tuesday morning, but when you think about the financing of insurance in this respect, it’s really no different than what financial consultants and sages remind you about your own money management.
For after all, what do they say about taxes? It is far better to hold onto as much of your tax payment money throughout the year as you can and realize the benefits of investing it in a money market account or some other instrument, than have the U.S. government hold your money for the year and issue you their patronizing tax rebate at some point every spring.
Warren Buffet and others have been very clear on this concept for years, haven’t they? It’s not the profits on the underwriting, they say, it’s the fact that they get to hold onto other people’s money for them and profit by investing it: profit greatly by investing it, we might add.
But how was Pastore, who has only been in risk management for a few years, to get to that holy place where he could put his theories about self-insurance into practice?
For one, he had to overcome, or at least engage, to be fair, a corporate culture at the Arkansas-based retailer that tended to look at risk management as a dyed-in-the-wool budget item, not the fluid hybrid of art and science that some practitioners believe it to be.
“We were looked at for the longest time as a budget item,” Pastore explains. The degree to which Wal-Mart’s corporate culture took that approach was a little shocking. Employees in Wal-Mart’s garden centers would leave plants outside in heat waves, with the expectation that they company had insurance for some losses, so why not use it?
Pastore has changed all of that line item thinking, and boy are the petunias happier.
“We haven’t had a plant loss in three years,” he said. And he said insurers are welcoming his new approach.
“They don’t want to be swapping dollars anymore than you want to be,” Pastore said.
In getting to the place that Pastore has arrived at, one needs to take a much more active role in assessing the financial strength and corporate culture of one’s company, according to David North, the president and CEO of Sedgwick Claims Management Services Inc., who shared some podium time with Pastore on Tuesday in San Diego.
That means, according to North, that you need to be able to assess management’s appetite for risk, understand the financial strength of the company, its administrative competence, and what North called executives' “emotional readiness” to take on risk.
It’s not something you do in your sleep. It means being active about what you are doing, and in fact being passionate about what you are doing.
“The concept of self-insurance and retaining risk is not easy,” is the way North puts it.
But just look at those numbers that Pastore unearthed: 1 percent, over 10 years, at the biggest company anyone can think of.
So now we just have one question for you gentle readers. To quote from the album title by Neil Young, “Are You Passionate?”
Sessions: The Future Is Now, Risk Managers
Peter Breitstone, managing principal and CEO of Aon Environmental Services Group, broke the tension in the room after his presentation with a, "I'm a fun guy, right?"
He'd spent the last 20 minutes or so in the Tuesday morning session titled "The Future is Now: Upgrading from ERM to Sustainability" talking about how the "intangibles" now make up 71 percent of the balance sheet for corporations. Risk managers better "embrace" the intangibles, he said. Otherwise, their company's sustainabiliy officer will decide that tacking on "insurance buying" onto their to-do lists would be better than paying a whole other person's salary (hint, hint ... your salary).
"Once we turn into insurance buyers, we're marginalized. We know that," he said.
Intangibles? They're green consumerism, governments, activist shareholders, vendors/suppliers, the dreaded media.
Embrace intangibles, and the sustainability that comes from doing so. Breitstone said that
"embracing sustainability offers risk managers to broaden their role."
"Be a sponge, not Sponge Bob," he said, adding that sustainability is fun and it's good business.
Dan Anderson, professor of risk management and insurance, University of Wisconsin-Madison, gave the audience some techniques of strong sustainability:
-- it has to become a top management priority
-- it has to be CEO driven
-- ERM should be expanded to include sustainability risk
-- consider producing a sustainability report, first thing by figuring out where you're at. About 67 percent of the largest 200 global companies have made sustainability reporting part of their risk manageemnt
-- waste reduction. DuPont made a 74 percent reduction in toxic releases and cut annual waste tratement bill by $200 million
-- prevention and reduction of pollution and emissions
-- increase water efficiency
-- voluntary reductiuon of greenhouse gases
"There's a very high probability in 2009 that we'll have rules, regulations, requirements," he said about the three presidential candidates.
Companies should also figure out their "triple bottom line" -- their financials minus their environmental risks and social responsibility performance risks.
All this sound expensive? Anderson cited the Stern Report from the British government, which calculated the cost of mitigation of global warming at 1 percent of gloal GDP ... but without mitigation, global warming will lead to loss of 5 percent to 20 percent of GDP.
If that's not enough, the panel also included John Vargo, who manages risk for Johnson Controls. Sustainability has become one of his company's five vore values, as well as integrity, customer satisfaction, its employees, and innovation and improvement.
Track down Vargo if you want proof that sustainability -- including making global warming a priority -- works.
"If you align yourself with what society wants and what your customers want, your're going to do better," he said.
He'd spent the last 20 minutes or so in the Tuesday morning session titled "The Future is Now: Upgrading from ERM to Sustainability" talking about how the "intangibles" now make up 71 percent of the balance sheet for corporations. Risk managers better "embrace" the intangibles, he said. Otherwise, their company's sustainabiliy officer will decide that tacking on "insurance buying" onto their to-do lists would be better than paying a whole other person's salary (hint, hint ... your salary).
"Once we turn into insurance buyers, we're marginalized. We know that," he said.
Intangibles? They're green consumerism, governments, activist shareholders, vendors/suppliers, the dreaded media.
Embrace intangibles, and the sustainability that comes from doing so. Breitstone said that
"embracing sustainability offers risk managers to broaden their role."
"Be a sponge, not Sponge Bob," he said, adding that sustainability is fun and it's good business.
Dan Anderson, professor of risk management and insurance, University of Wisconsin-Madison, gave the audience some techniques of strong sustainability:
-- it has to become a top management priority
-- it has to be CEO driven
-- ERM should be expanded to include sustainability risk
-- consider producing a sustainability report, first thing by figuring out where you're at. About 67 percent of the largest 200 global companies have made sustainability reporting part of their risk manageemnt
-- waste reduction. DuPont made a 74 percent reduction in toxic releases and cut annual waste tratement bill by $200 million
-- prevention and reduction of pollution and emissions
-- increase water efficiency
-- voluntary reductiuon of greenhouse gases
"There's a very high probability in 2009 that we'll have rules, regulations, requirements," he said about the three presidential candidates.
Companies should also figure out their "triple bottom line" -- their financials minus their environmental risks and social responsibility performance risks.
All this sound expensive? Anderson cited the Stern Report from the British government, which calculated the cost of mitigation of global warming at 1 percent of gloal GDP ... but without mitigation, global warming will lead to loss of 5 percent to 20 percent of GDP.
If that's not enough, the panel also included John Vargo, who manages risk for Johnson Controls. Sustainability has become one of his company's five vore values, as well as integrity, customer satisfaction, its employees, and innovation and improvement.
Track down Vargo if you want proof that sustainability -- including making global warming a priority -- works.
"If you align yourself with what society wants and what your customers want, your're going to do better," he said.
Sessions: EMP 202: Workplace Bullying
This isn't an issue just for high school locker rooms. Bullying is an issue in the workplace and it concerned enough RIMS attendees that they packed the room for Session EMP 202 "Workplace Bullying: The 'New' Type of Harassment" on Tuesday morning.
Adeola Adele, a senior vice president and EPL practice leader at Marsh, set the record straight at the outset, confirming that "bullying" is not illegal in the United States. However, when she surveyed the audience to see who knew about the risk associated with the issue, well over half the room raised their hands.
She shared some interesting statistics from the National Workplace Bullying Institute, stating that 37 percent of Americans--54 million people--have been bullied in the workplace. In addition, workplace bullying is four times more prevalent than other types of harassment, including sexual and racial harassment. Women are the targets of the behavior, more often than men. By the same token, women were the perpetrators of workplace bullying in 71 percent of cases.
Johan Lubbe, partner at Jackson Lewis, said during his presentation that when he defends workplace bullying claims in the U.S.--and yes, there are claims being made despite the behavior not being expressly prohibited by law--he asks the employers if the bullier singled out the individual or group that he or she bullied.
"I am usually pleased to find out that the perpetrator bear hugs everyone, is touchy-feely with everyone," said Lubbe. This defense is known as the "equal opportunity harassment" defense, or as Lubbe prefers to call it: the "equal jerk" defense.
Lubbe was quick to point out that this defense is falling by the wayside. "Whether the person does it to everyone is irrelevant," he said. "It's really whether or not this behavior has occurred, period."
While legislation is being looked at in several states, Lubbe said much of his research has covered European countries where workplace bullying is increasingly being looked at as a type of harassment. The crux of what constitutes workplace bullying is that the behavior causes chronic stress and anxiety that causes a person to lose their dignity. The challenge in identifying when workplace bullying has occurred is that the line between a tough management style and abuse can be a fuzzy one.
Although no legislation has passed yet in the U.S., Lubbe said there have been attempts to look at workplace bullying from an OSHA standpoint, or to apply it to existing statutes. A case this year in Indiana involving a bypass surgery support staff member who sued a bullying doctor went in favor of the victim. The jury awarded the person $325,000, and it was the first time that workplace bullying was rolled into the concept of intentional infliction of emotional distress, Lubbe said.
The "Healthy Workplace" bills that have been making their way through various stages of legislature intend to make unlawful employment practices that subject an employee to an abusive work environment. A cap of $25,000 on emotional distress damages could be seen as attractive to legislators, Lubbe said. However, bullying could be seen as just one of several causes of action.
"In my perspective, it only adds $25,000 to your financial risk," he said. "I think it will take one state to be bold and to pass this legislation. Other states will follow."
Catherine Padalino, a vice president and national EPLI product leader at Chubb Specialty Insurance, said that even though workplace bullying is not illegal in the U.S., underwriters are continuing the monitor the issue as an emerging exposure.
"The frequency of claims will increase," she said. "We don't view this as a severity issue, but simply because of the media attention and the legislation activity this will be another cause of action that will be brought."
Padalino said that as an underwriter, one of the surprising statistics to her was that in 62 percent of cases, when made aware of bullying employers worsen the problem or do nothing. "One of the reasons I think that number is alarmingly high is because it is tough to determine the difference between a tough management style and bullying," she said.
From the underwriter's perspective, Padalino said that the term "bullying" does not have to be mentioned expressly in an employment practices policy, but that companies should certainly have broad language that covers any non-sexual harassment. Adele said that as a broker, she would prefer that bullying be mentioned explicitly so that the client is covered whether the behavior has been deemed illegal or not.
"Just because workplace bullying is not illegal doesn't mean the behavior won't be alleged," she said. "Claims will come and you need to at least be able to cover your defense costs."
These bits of advice came at the end of the session, during which Lubbe expressed his prediction that bullying will take on a life of its own, even before laws pass to make the behavior illegal.
"I think you will see a standalone 'bullying' case before legislation is passed because of all the attention being brought to the issue," he said.
OK risk managers. Start reviewing your employee handbooks and EPLI policies.
Adeola Adele, a senior vice president and EPL practice leader at Marsh, set the record straight at the outset, confirming that "bullying" is not illegal in the United States. However, when she surveyed the audience to see who knew about the risk associated with the issue, well over half the room raised their hands.
She shared some interesting statistics from the National Workplace Bullying Institute, stating that 37 percent of Americans--54 million people--have been bullied in the workplace. In addition, workplace bullying is four times more prevalent than other types of harassment, including sexual and racial harassment. Women are the targets of the behavior, more often than men. By the same token, women were the perpetrators of workplace bullying in 71 percent of cases.
Johan Lubbe, partner at Jackson Lewis, said during his presentation that when he defends workplace bullying claims in the U.S.--and yes, there are claims being made despite the behavior not being expressly prohibited by law--he asks the employers if the bullier singled out the individual or group that he or she bullied.
"I am usually pleased to find out that the perpetrator bear hugs everyone, is touchy-feely with everyone," said Lubbe. This defense is known as the "equal opportunity harassment" defense, or as Lubbe prefers to call it: the "equal jerk" defense.
Lubbe was quick to point out that this defense is falling by the wayside. "Whether the person does it to everyone is irrelevant," he said. "It's really whether or not this behavior has occurred, period."
While legislation is being looked at in several states, Lubbe said much of his research has covered European countries where workplace bullying is increasingly being looked at as a type of harassment. The crux of what constitutes workplace bullying is that the behavior causes chronic stress and anxiety that causes a person to lose their dignity. The challenge in identifying when workplace bullying has occurred is that the line between a tough management style and abuse can be a fuzzy one.
Although no legislation has passed yet in the U.S., Lubbe said there have been attempts to look at workplace bullying from an OSHA standpoint, or to apply it to existing statutes. A case this year in Indiana involving a bypass surgery support staff member who sued a bullying doctor went in favor of the victim. The jury awarded the person $325,000, and it was the first time that workplace bullying was rolled into the concept of intentional infliction of emotional distress, Lubbe said.
The "Healthy Workplace" bills that have been making their way through various stages of legislature intend to make unlawful employment practices that subject an employee to an abusive work environment. A cap of $25,000 on emotional distress damages could be seen as attractive to legislators, Lubbe said. However, bullying could be seen as just one of several causes of action.
"In my perspective, it only adds $25,000 to your financial risk," he said. "I think it will take one state to be bold and to pass this legislation. Other states will follow."
Catherine Padalino, a vice president and national EPLI product leader at Chubb Specialty Insurance, said that even though workplace bullying is not illegal in the U.S., underwriters are continuing the monitor the issue as an emerging exposure.
"The frequency of claims will increase," she said. "We don't view this as a severity issue, but simply because of the media attention and the legislation activity this will be another cause of action that will be brought."
Padalino said that as an underwriter, one of the surprising statistics to her was that in 62 percent of cases, when made aware of bullying employers worsen the problem or do nothing. "One of the reasons I think that number is alarmingly high is because it is tough to determine the difference between a tough management style and bullying," she said.
From the underwriter's perspective, Padalino said that the term "bullying" does not have to be mentioned expressly in an employment practices policy, but that companies should certainly have broad language that covers any non-sexual harassment. Adele said that as a broker, she would prefer that bullying be mentioned explicitly so that the client is covered whether the behavior has been deemed illegal or not.
"Just because workplace bullying is not illegal doesn't mean the behavior won't be alleged," she said. "Claims will come and you need to at least be able to cover your defense costs."
These bits of advice came at the end of the session, during which Lubbe expressed his prediction that bullying will take on a life of its own, even before laws pass to make the behavior illegal.
"I think you will see a standalone 'bullying' case before legislation is passed because of all the attention being brought to the issue," he said.
OK risk managers. Start reviewing your employee handbooks and EPLI policies.
Sessions: RMG 211: Global warming's gonna getcha
Don't read this if you don't believe in global warming. Keep your head in the sand ... until your beach gets eaten by the sea and you have no choice to face your climate change crisis. Or perhaps where you live, climate change will lead to desertification, and then you'll have even more sand to shove your head into.
On the other hand, if you want to know about how your whole company, your top product line, or your hometown could become obsolete because of the effects of climate change, if you are concerned about the thousands of billions of dollars in conceivable exposure that could result from climate change, read on about session RMG 211.
David Dybdahl of American Risk Management Resouces LLC spoke at this Monday afternoon session titled "Global Warming Litigation's Impact on Insurance Coverage and Risk Management" with a calm that did not match the profundity of the facts, figures and notions coming out of his mouth. It was a dry wit and matter-of-fact presentation with the message: "we're screwed."
Dybdahl brought up the village of Kivalina in Alaska, which is bringing suit against 23 U.S. companies for the damage done to their community because of global warming. Why those 23 companies? Because they are putting out 22 percent of the world's CO2.
The village is demanding $50,000,000 to $100,000,000 to pay for relocation costs. The community is becoming obsolete … and not in 2100. Today. They want out of the coast.
Dybdahl talked about Topsail, North Carolina. It's already eroding into the sea, he said, and is a top 10 hurricane spot on top of it. Yet the 850 people who live there own property with $1.3 billion in appraised value. Is that the American can-do spirit at work? Gotta love it.
The effects of global warming are visible today, not decades from now as the U.N. Intergovernmental Panel on Global Warming contemplated in its report, said Dan Anderson, professor of risk management at the University of Wisconsin-Madison.
Anderson said climate change is happening and human activity is helping it along. The science is not nearly as vague as some "experts" would like you to believe. Instead, the scientific consensus points to scary stuff. The U.N. report is actual conservative in its take on global warming, Anderson said. Do you disagree with all these Ph.D.s? Why? Because your town had its coldest winter last season in years? Those arguments only show your ignorance and perhaps inability to grasp the argument. You probably also argue that evolution is only a "theory."
So risk managers, you best have listened up to Dybdahl when he listed the major risks of global warming. There are property risks (increased risks of catastrophes), but the truly scary risk is that of obsolescence -- places, towns, cities, states, all that can become impossible to sustain.
Take Atlanta and its long-lasting drought. There is no way to get water there if they run out, and they are running out. Anderson said that Atlanta has only months of water in its Lake Lanier reservoir. What happens at your company in Hotlanta when there's no water for your toilets, your fountains, your business operations? Or how is Nevada going to get its water if they don't eventually run a pipeline to Lake Michigan. Lake Mead is not bottomless.
For companies, the problem could be product line obsolescence … or legislated obsolescence.
And the question with all these risks, and the risk of global warming litigation, said Dybdahl, is: When did you know or when should you have known that you activities were causing harm? In other words, when did you start to try to reduce your CO2 emisions (the best and perhaps only way at the moment to mitigate your global warming exposure, according to Anderson).
As it stands now, we know what is happening. Some people tend to argue against global warming. They can't get their head around the idea. They don't believe the scientists. They cling to doubts about climate change that are as obsolete as their businesses and communities may soon be.
On the other hand, if you want to know about how your whole company, your top product line, or your hometown could become obsolete because of the effects of climate change, if you are concerned about the thousands of billions of dollars in conceivable exposure that could result from climate change, read on about session RMG 211.
David Dybdahl of American Risk Management Resouces LLC spoke at this Monday afternoon session titled "Global Warming Litigation's Impact on Insurance Coverage and Risk Management" with a calm that did not match the profundity of the facts, figures and notions coming out of his mouth. It was a dry wit and matter-of-fact presentation with the message: "we're screwed."
Dybdahl brought up the village of Kivalina in Alaska, which is bringing suit against 23 U.S. companies for the damage done to their community because of global warming. Why those 23 companies? Because they are putting out 22 percent of the world's CO2.
The village is demanding $50,000,000 to $100,000,000 to pay for relocation costs. The community is becoming obsolete … and not in 2100. Today. They want out of the coast.
Dybdahl talked about Topsail, North Carolina. It's already eroding into the sea, he said, and is a top 10 hurricane spot on top of it. Yet the 850 people who live there own property with $1.3 billion in appraised value. Is that the American can-do spirit at work? Gotta love it.
The effects of global warming are visible today, not decades from now as the U.N. Intergovernmental Panel on Global Warming contemplated in its report, said Dan Anderson, professor of risk management at the University of Wisconsin-Madison.
Anderson said climate change is happening and human activity is helping it along. The science is not nearly as vague as some "experts" would like you to believe. Instead, the scientific consensus points to scary stuff. The U.N. report is actual conservative in its take on global warming, Anderson said. Do you disagree with all these Ph.D.s? Why? Because your town had its coldest winter last season in years? Those arguments only show your ignorance and perhaps inability to grasp the argument. You probably also argue that evolution is only a "theory."
So risk managers, you best have listened up to Dybdahl when he listed the major risks of global warming. There are property risks (increased risks of catastrophes), but the truly scary risk is that of obsolescence -- places, towns, cities, states, all that can become impossible to sustain.
Take Atlanta and its long-lasting drought. There is no way to get water there if they run out, and they are running out. Anderson said that Atlanta has only months of water in its Lake Lanier reservoir. What happens at your company in Hotlanta when there's no water for your toilets, your fountains, your business operations? Or how is Nevada going to get its water if they don't eventually run a pipeline to Lake Michigan. Lake Mead is not bottomless.
For companies, the problem could be product line obsolescence … or legislated obsolescence.
And the question with all these risks, and the risk of global warming litigation, said Dybdahl, is: When did you know or when should you have known that you activities were causing harm? In other words, when did you start to try to reduce your CO2 emisions (the best and perhaps only way at the moment to mitigate your global warming exposure, according to Anderson).
As it stands now, we know what is happening. Some people tend to argue against global warming. They can't get their head around the idea. They don't believe the scientists. They cling to doubts about climate change that are as obsolete as their businesses and communities may soon be.
Monday, April 28, 2008
Sessions: INT 201: Product Liability and Product Recall – Intel Corp.’s China Experience
Locked deep in the electronic vaults of Intel Corp. is a master map of every factory, every research plant and every design center owned by the world’s leading manufacturer of microchips.
What stands out about this map isn’t the familiar position of the seven continents – or five continents depending on how you count them. What makes these particular maps unique are the numbers found on them.
In China, for example, it’s the number 68, or in the lingo of Intel executives, Fab 68, the company’s fabrication plant under construction in Dalian. Intel doesn’t have 68 factories, far fewer. But the reason for No. 68 is that when pronounced in mandarin, the sound means good luck, according to Diane R. Labrador, Intel’s assistant treasurer and director of risk management.
Intel’s plants in Israel, Fab 18 and 28, are so designated because tradition there considers the numbers 18 and 28 special.
“We don’t look at China any differently than any other manufacturing organization,” she said. But there are habits and customs specific to foreign countries that deserve special attention if you’re going to do business there.
Fab 68 is a recognition of that, which Intel has learned after 23 years of doing business in China.
“Embedding a corporate culture is the No. 1 issue,” said Labrador. “If you’re going to embed quality in your products, then you need robust corporate culture so our Pudong facility has the highest quality ratings of any of our test facilities.”
Intel employs more than 6,000 employees in China, and for the past two decades has stuck to assembly and testing there only. But beginning in 2010, Fab 68 in Dalian will be Intel’s first manufacturing facility in China, adding capacity outside of the United States, Israel and Ireland.
The manufacturing specs for the new factors will have to be exact … and Labrador means exact.
Over the past 30 years, Intel has managed shrink the transistor to such an extent that it can now pack 400 million transistors on a chip the size of a fingernail.
Intel measures its products in units of measures called nanometers, which is the size of bacteria, so product recall issues when dealing with technology so advanced is top-of-mind among Intel’s risk managers.
Exacting are the demands of retaining consistent processes from one factory to another that plants are reproduced exactly – down to the position of toilet paper stored in the bathroom.
That’s because the potential changes in chemical properties in factories built to different designs and specs could affect the performance of the chips coming off the production line. “To manufacture at these levels and produce at these levels requires a lot, a lot of discipline,” said Labrador. Just in case, the company carries global product liability coverage.
The Chinese are more than capable of adopting Intel’s corporate culture. Intel’s Pudong facility, for example, has the highest quality ratings of any of Intel’s test facilities around the world, Labrador said.
As the Dalian factory prepares to stamp out more chips two years from now, they still won’t be Intel’s leading-edge chips no matter how rigorous the manufacturing process. That’s because of the U.S. government’s export controls, which prohibit the production of Intel’s latest technologies. “In China we process N-2, which means two generations behind what we make elsewhere,” said Labrador.
N-2 is still valuable technology and Intel does all it can to protect its intellectual property, she said.
“At some facilities we have armed guards, in other places we don’t depend on them,” she said. Choosing how much firepower to give guards depends on the community in which Intel operates, she said, as Intel needs to protect its relationship with host governments as well as its need to protect its economic interests in the marketplace.
What stands out about this map isn’t the familiar position of the seven continents – or five continents depending on how you count them. What makes these particular maps unique are the numbers found on them.
In China, for example, it’s the number 68, or in the lingo of Intel executives, Fab 68, the company’s fabrication plant under construction in Dalian. Intel doesn’t have 68 factories, far fewer. But the reason for No. 68 is that when pronounced in mandarin, the sound means good luck, according to Diane R. Labrador, Intel’s assistant treasurer and director of risk management.
Intel’s plants in Israel, Fab 18 and 28, are so designated because tradition there considers the numbers 18 and 28 special.
“We don’t look at China any differently than any other manufacturing organization,” she said. But there are habits and customs specific to foreign countries that deserve special attention if you’re going to do business there.
Fab 68 is a recognition of that, which Intel has learned after 23 years of doing business in China.
“Embedding a corporate culture is the No. 1 issue,” said Labrador. “If you’re going to embed quality in your products, then you need robust corporate culture so our Pudong facility has the highest quality ratings of any of our test facilities.”
Intel employs more than 6,000 employees in China, and for the past two decades has stuck to assembly and testing there only. But beginning in 2010, Fab 68 in Dalian will be Intel’s first manufacturing facility in China, adding capacity outside of the United States, Israel and Ireland.
The manufacturing specs for the new factors will have to be exact … and Labrador means exact.
Over the past 30 years, Intel has managed shrink the transistor to such an extent that it can now pack 400 million transistors on a chip the size of a fingernail.
Intel measures its products in units of measures called nanometers, which is the size of bacteria, so product recall issues when dealing with technology so advanced is top-of-mind among Intel’s risk managers.
Exacting are the demands of retaining consistent processes from one factory to another that plants are reproduced exactly – down to the position of toilet paper stored in the bathroom.
That’s because the potential changes in chemical properties in factories built to different designs and specs could affect the performance of the chips coming off the production line. “To manufacture at these levels and produce at these levels requires a lot, a lot of discipline,” said Labrador. Just in case, the company carries global product liability coverage.
The Chinese are more than capable of adopting Intel’s corporate culture. Intel’s Pudong facility, for example, has the highest quality ratings of any of Intel’s test facilities around the world, Labrador said.
As the Dalian factory prepares to stamp out more chips two years from now, they still won’t be Intel’s leading-edge chips no matter how rigorous the manufacturing process. That’s because of the U.S. government’s export controls, which prohibit the production of Intel’s latest technologies. “In China we process N-2, which means two generations behind what we make elsewhere,” said Labrador.
N-2 is still valuable technology and Intel does all it can to protect its intellectual property, she said.
“At some facilities we have armed guards, in other places we don’t depend on them,” she said. Choosing how much firepower to give guards depends on the community in which Intel operates, she said, as Intel needs to protect its relationship with host governments as well as its need to protect its economic interests in the marketplace.
Sessions: INT 201: Product Liability and Product Recall – The China Syndrome
The vast promise of China isn’t without risk. Readers will recall the following misfortunes to have befallen several manufacturers:
Item: Pottery Barn: 185,000 units, candles, exterior coating can ignite.
Item: Cranium Inc.; 38,000 unites; Game Die, paint on die contains excessive lead.
Item: Dollar Tree Stores; 253,000 units; glue guns, possible short circuit causing smoke and possible fire.
Item: Mattel; 18 million units; toys, possible lead contamination
Item: Wenzel Corp.; 3,900 units, airbed inflators; can overheat when engine is running.
Item: Husky; 233,000 units, air compressor, cover not made of flame retardant material.
Item: The Gift Wrap; 600 units; picture frames, surface paint excessive lead.
The incidents, compiled by Kevin J. Murphy, senior vice president of Hilb Rogal & Hobbs, have cost companies millions. Worse yet, the physical recall of products is the least of a risk manager’s problems.
“The manufacturer in China rarely has product liability coverage that responds in the United States,” said Murphy.
What to do?
“In many cases, I would advise clients to buy foreign manufacturers coverage,” he said. “There are programs in today’s market from big-name insurers that you can put together for makers of products. It’s a master policy and you can charge back the cost of the policy back to the manufacturer.”
China’s role in supplying the United States with consumer products is growing. China’s exports to the United States grew 12.6 percent in 2007 over the previous year, said Murphy.
By comparison, exports from Canada, long the U.S.’s most important trading partner, grew just 3.1 percent over the same period.
Murphy also said that incidents of tainted food products have also received attention from the press, and he noted that there are about 450,000 food processing companies in China with fewer than 10 employees sending food to the United States.
The Chinese government’s recent execution of the nation’s top food regulator, said Murphy, was meant to send a signal to the rest of the world that China was serious about cracking down on corrupt and incompetent bureaucrats. But other nations have managed to export tainted food products.
“If you’re not protecting the raw ingredients, you have to take control,” said Murphy. “You really need to employ as many risk management techniques as you can.” Even when a company’s done its due diligence, “you still have to go down a few layers,” he said.
He advised risk managers to have top flight controls in place and a good claims handling operation because when a product recall strikes, “it’s your face, your reputation and your assets that are at risk.”
The risk management piece of it is completely within your control, at least in how your program is set up.
Item: Pottery Barn: 185,000 units, candles, exterior coating can ignite.
Item: Cranium Inc.; 38,000 unites; Game Die, paint on die contains excessive lead.
Item: Dollar Tree Stores; 253,000 units; glue guns, possible short circuit causing smoke and possible fire.
Item: Mattel; 18 million units; toys, possible lead contamination
Item: Wenzel Corp.; 3,900 units, airbed inflators; can overheat when engine is running.
Item: Husky; 233,000 units, air compressor, cover not made of flame retardant material.
Item: The Gift Wrap; 600 units; picture frames, surface paint excessive lead.
The incidents, compiled by Kevin J. Murphy, senior vice president of Hilb Rogal & Hobbs, have cost companies millions. Worse yet, the physical recall of products is the least of a risk manager’s problems.
“The manufacturer in China rarely has product liability coverage that responds in the United States,” said Murphy.
What to do?
“In many cases, I would advise clients to buy foreign manufacturers coverage,” he said. “There are programs in today’s market from big-name insurers that you can put together for makers of products. It’s a master policy and you can charge back the cost of the policy back to the manufacturer.”
China’s role in supplying the United States with consumer products is growing. China’s exports to the United States grew 12.6 percent in 2007 over the previous year, said Murphy.
By comparison, exports from Canada, long the U.S.’s most important trading partner, grew just 3.1 percent over the same period.
Murphy also said that incidents of tainted food products have also received attention from the press, and he noted that there are about 450,000 food processing companies in China with fewer than 10 employees sending food to the United States.
The Chinese government’s recent execution of the nation’s top food regulator, said Murphy, was meant to send a signal to the rest of the world that China was serious about cracking down on corrupt and incompetent bureaucrats. But other nations have managed to export tainted food products.
“If you’re not protecting the raw ingredients, you have to take control,” said Murphy. “You really need to employ as many risk management techniques as you can.” Even when a company’s done its due diligence, “you still have to go down a few layers,” he said.
He advised risk managers to have top flight controls in place and a good claims handling operation because when a product recall strikes, “it’s your face, your reputation and your assets that are at risk.”
The risk management piece of it is completely within your control, at least in how your program is set up.
Sessions: FIN302: MBAs are ruining the world
Let me start off by saying I have friends who are MBAs. Plenty. I know guys in Wharton at this very moment. I have beers with them when I can.
That being said, after sitting (or actually standing in the back corner) through the Monday afternoon session titled "A Buyer's Guide to the Risk Finance Bizaar," I am convinced that MBAs and their ilk of uber financial consultants, upper level management types and academics are ruining the world. Perhaps they already have.
Kevin Kelley of Lexington fame spoke about the $250 billion to $950 billion (perhaps trillion) loss that is expected to come from the financial meltdown in which we now find ourselves. He said that when you can't even calculate a CAT loss -- hence, the wide range of estimates to the loss -- how can you expect to know how well you're counterparties are faring in the mess ... and thus how can you know how exposed you are?
Whereas look at how the insurance industry handles its CATs -- there is certainty there. It might take the modelered and ISO a few weeks (or months) to come up with the final loss estimate, but right off the bat people can look at their insurance contracts and at least have a certain idea what they can expect. In that way, Kelley said, insurance is like the first responders, arriving on the scene of disaster with liquidity.
Can't say the same for other financial service institutions.
Their idea is to not lift up the rock to inspect the scum underneath it should everything be honky-dorey, should profits be rolling in and bonuses being doled out on Wall St, said Bill Panning of Willis, a former academic.
Panning talked about MBA text books that say there are two types of risk, the kind you don't want to do something about (the systematic) because it's a shareholder's job to diversify and protect himself from it, and the nonsystematic--the kind of risk you can't do anything about. Hence, academics teach MBAs that risk doesn't matter. Panning went on to say that these text books are being re-written to suggest that risk matters after all, as a matter of preference.
But has the damage been done? Can today's risk managers--armed with ERM--prove that risk matters, and that it can actually add value to an organization (rather than just consume resources)?
After all, risks are not like roaches, he said. Some risks are worth taking. Not all need to be stamped out.
Perhaps it's the MBAs, or the way they are taught to think, who are more like roaches. But like I said, I have plenty of friends who are MBAs. I'd hate to see them stomped on. I'm counting on them all to get very rich later on in their career and treat me to dinners and drinks.
That being said, after sitting (or actually standing in the back corner) through the Monday afternoon session titled "A Buyer's Guide to the Risk Finance Bizaar," I am convinced that MBAs and their ilk of uber financial consultants, upper level management types and academics are ruining the world. Perhaps they already have.
Kevin Kelley of Lexington fame spoke about the $250 billion to $950 billion (perhaps trillion) loss that is expected to come from the financial meltdown in which we now find ourselves. He said that when you can't even calculate a CAT loss -- hence, the wide range of estimates to the loss -- how can you expect to know how well you're counterparties are faring in the mess ... and thus how can you know how exposed you are?
Whereas look at how the insurance industry handles its CATs -- there is certainty there. It might take the modelered and ISO a few weeks (or months) to come up with the final loss estimate, but right off the bat people can look at their insurance contracts and at least have a certain idea what they can expect. In that way, Kelley said, insurance is like the first responders, arriving on the scene of disaster with liquidity.
Can't say the same for other financial service institutions.
Their idea is to not lift up the rock to inspect the scum underneath it should everything be honky-dorey, should profits be rolling in and bonuses being doled out on Wall St, said Bill Panning of Willis, a former academic.
Panning talked about MBA text books that say there are two types of risk, the kind you don't want to do something about (the systematic) because it's a shareholder's job to diversify and protect himself from it, and the nonsystematic--the kind of risk you can't do anything about. Hence, academics teach MBAs that risk doesn't matter. Panning went on to say that these text books are being re-written to suggest that risk matters after all, as a matter of preference.
But has the damage been done? Can today's risk managers--armed with ERM--prove that risk matters, and that it can actually add value to an organization (rather than just consume resources)?
After all, risks are not like roaches, he said. Some risks are worth taking. Not all need to be stamped out.
Perhaps it's the MBAs, or the way they are taught to think, who are more like roaches. But like I said, I have plenty of friends who are MBAs. I'd hate to see them stomped on. I'm counting on them all to get very rich later on in their career and treat me to dinners and drinks.
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