FIve YeaRS aFteR KatRIna | BeneFIt CoRpoRatIonS | IRan SanCtIonS

FRoM tactical to stRategic
Risk ManageMent’s next Move

3Rd annual RISK ManageMent eduCatIon RevIew
September 2010 www.RIMS.org

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Contents
Volume 57 | Issue 7

ForeFront
8 12 14 16 18 20
Five Years After Katrina
Five years after Katrina, New Orleans is finally recovering despite the recession and the oil spill.

Rise of the B Corp
Along with more socially conscious shoppers come more socially conscious companies.

D&O in the Land Down Under
Security class action lawsuits are on the rise in Australia. And that means D&O fallout.

Q&A: Iran Sanctions
Tougher sanctions against doing business that assists Iran were passed, but enforcement questions remain.

Time Line: Infamous Intelligence Leaks
The publication of 90,000 Afghanistan war documents ranks alongside other historic leaks.

22

Cover Story

Risk Atlas: I Wouldn’t Eat That
Next trip to the baseball park, stick to the peanuts and Cracker Jack—or you may never come back.

From Tactical to Strategic: Risk Management’s Next Move
Strategic risk management may not be the discipline’s endgame, but it is the next evolution. Time to start thinking strategic and long term.
by Jared Wade and Craig Snyder

Details
6 42 44 46 48
Preface
Once upon a time, I thought risk management was just a part of business as usual. Maybe someday.

28 Head of the Class
by Emily Holbrook

Shelf Life
Reviewing Marketing Lessons from the Grateful Dead, Power and Bury My Heart at Conference Room B.

Risk Management university programs are branching out.

34 The 10 Largest Risk and Insurance Schools
by Emily Holbrook

Findings
Energy company ERM (or the lack thereof), VoIP security, faltering confidence in brokers, cat bonds.

A rundown of the biggest risk management academies.

36 Safeguarding the Ivory Tower
by Jared Wade

Hindsight
The latest facts and figures in risk.

Compared to managing a university’s risks, teaching looks easy.

Last Word
The end of the internet.

38 A Matter of Trust
by Marcus Wagner

If an insurance buyer can’t trust her broker, who can she trust?

cover image tongro/corbis

Risk Management

1

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ERM | BUSINESS INTELLIGENCE | RMIS CLAIMS & POLICY ADMINISTRATION OSHA & SAFETY MANAGEMENT

Morgan O’Rourke
Senior Editor

Editor in Chief

Contact Us
All submissions and letters should be sent to: Morgan O’Rourke Editor in Chief, Risk Management 1065 Avenue of the Americas, 13th Floor New York, NY 10018

Jared Wade
Editor

Emily Holbrook
Art & Production Manager

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EDITORIAL ADVISORY COUNCIL
Shawn Adams, VA Hospital; Richard Carris, QBE the Americas; Ron Cooley, W.W. Grainger, Inc.; Mary Daniels, retired; James J. Duggan, Coty Inc.; Lance Ewing, Chartis; Delany Haj, Accenture Global Risk Management & Insurance; Michael Liebowitz, New York University; Richard Sarnie, The ALS Group; Arnold Schanfield, Schanfield Risk Management Advisors

www.rmmagazine.com

The Risk and Insurance Management Society, Inc. (RIMS) is a not-for-profit organization dedicated to advancing the theory and practice of risk management.

Risk Management Magazine (ISSN 0035-5593) is published 10 times per year, with combined issues in January/February and July/August, by the Risk and Insurance Management Society, Inc. Offices at 1065 Avenue of the Americas, New York, NY 10018; 212.286.9364; Fax 212.922.0716. Volume 57, Issue 7. Copyright 2010 by the Risk and Insurance Management Society, Inc. All rights reserved. Reproduction in whole or in part without permission is prohibited. The opinions expressed in articles are those of their authors and not the Risk and Insurance Management Society, Inc. Subscription rates for RIMS members: $75. Non-members: $115. Microfilm editions obtained from University Microfilms International, 300 N. Zeeb Road, Ann Arbor, MI 48106. CD-ROM editions may be obtained from Information Access Co., 362 Lakeside Drive, Foster City, CA 94404. The full text of Risk Management is also available in the electronic versions of the Business Periodicals Index. Periodicals postage paid in New York and additional mailing locations. POSTMASTER send change of address notices to Risk Management Magazine, P.O. Box 3, Congers, NY 10920.
Risk Management

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visit fmglobal. All Rights Reserved. To learn more.Understanding how FM global is diFFerent is akin to © 2010 FM Global.com/insuranceevolved/light .

Plus. That’s why we link our underwriting to loss prevention engineering. Perhaps that’s why our client base is composed of one-third of the Fortune 1000 across industries—companies that can’t afford to shut down. It’s an approach that helps us identify. Insurance Evolved . for 175 years we’ve been building a reservoir of rich data framed by engineering and research to anticipate future risk and protect our clients. It means that risk is reduced before a disaster can strike. our claims service is unsurpassed in the industry. helping to ensure business continuity. In fact. So if you remember just one thing about FM Global. So even if clients do suffer losses. That’s insurance evolved. minimize and assume risk—and only FM Global does it. Underwriting through loss prevention engineering.SEEING THE An unexpected disaster can jeopardize your business. here it is: FM Global acts on the belief that the majority of loss is preventable. they tend to be smaller and less frequent.700 engineers around the world to minimize your risk. It’s also why we created a $100 million state-of-the-art research campus and employ more than 1.

riskonnect. 11 www.com/gl Paul Davis. 33 www.com/us/RIMS FM Global. I was often confused. 4th cover www. 12 www.org International Risk Management Institute. but it seemed strange. but it felt like the equivalent of finding out that NASA was still measuring the re-entry pitch of the Space Shuttle with a slide-rule. The rise of ERM and.com/rimscanada Breaking news editorials Podcasts and more.fmglobal. the blog of Risk Management. a lot of the things I had always assumed that any successful company would naturally have to do to just remain in business—let alone become a thriving Fortune 500 firm—were not commonplace.com/RIMS Liberty Mutual.gardere.libertymutualgroup. There had been altogether too many major corporate catastrophes to presume that the status quo would suffice any longer. I was ignorant. but it seems as though leadership is starting to see the discipline’s value. Companies were obviously aware of most of the significant risks they faced.MLIS-CE.pdrestoration.. there is a better way. Advertisers Index Aon eSolutions. 15 www. visit the Risk Management Monitor.com Swiss Re.cna. and they were obviously doing something right. 4 & 5 www. and a little bit scary.com Ernst & Young. that so many appeared to be using little more than ad hoc methods to safeguard core operations. it might be working.com Zurich. –Jared Wade. 13 www. Sure. it started to seem obvious that. 37 www.ca Riskonnect. Senior Editor MONITOR the news you need when you need it For up-to-the-minute insight and analysis on the stories important to you.com/tree Autonomy. 35 www.autonomy.com/insuranceevolved/light Gardere Wynne Sewell LLP. Much to my surprise. 3rd cover www. 2nd cover www. It seemed as though all this risk management talk—stuff that my younger self didn’t even realize was “risk management” and just thought was “conducting business”—had little bearing on the way companies actually operated.com Chartis.rsagroup. 7 www. It will be a slow process likely full of fits and starts. now.theinstitutes. RiskManagementMonitor. 9. 31 www.Preface Learning the Ropes When I first started writing about risk management back in 2002. yeah.ey. but isn’t there a better way? By the time 2008 rolled around.zurichna. I remember one financial industry expert telling me that banks—even some big banks that you have heard of—were often keeping track of multimillion dollar securities trades by recording them in an Excel or Word files and just saving them on some community server where they likely wouldn’t be seen again anytime soon.com/choosetheright 6 September 2010 . 2 www.aon-esolutions.swissre.com/compliance CNA.chartisinsurance. 24 & 25 www.com RSA.. strategic risk management is starting to change that.com The Institutes.

risk is the raw material with which we work. what we create is opportunity. Commercial insurance. Why? Because across all industries.There’s a lot more to Swiss Re than reinsurance. there’s a lot more to Swiss Re than reinsurance. large corporate risks and specialty insurance.com/rimscanada to schedule a meeting with one of our experts or visit us at booth #72/#73 at the 2010 RIMS Canada Conference in Edmonton. Insurance for aviation and space as well as environmental and commodity markets. industrial insurance. ©2010 Swiss Re . Isn’t it time you found out how much more? Don’t let the name mislead you. Financial tools like insurance-linked securities and catastrophe bonds. Visit www.swissre. Yet every service we offer and every challenge we face for our clients receives the same commitment and the same hands-on expertise.

It is not just higher education that is creating optimism. Then.” concludes the Brookings’ report. (Official death toll estimates still—somehow— vary by hundreds. in fact. Workers are now regularly finding employment in higher education. the largest economic downturn in 79 years began. As the Brookings Institution’s recent “New Orleans Index at Five” report aptly notes. however. it outperformed the rest of the country. putting tens of thousands of locals out of work and threatening to 8 September 2010 by Jared Wade cover the city’s shores with oil. Moreover. by 2009. On August 29. The entire school . destroyed more than 180. This job growth has been tempered by the recession.4% of its jobs between 2008 and 2009. a deepwater drilling rig exploded in the Gulf of Mexico. threatening to halt any progress that was made in the recovery. The population has rebounded to 354. “In fact. has been enough to cripple the Crescent City.400 people. New Orleans has gained the right jobs—those that will provide sustainable growth in an increasingly knowledge-based economy. jobs in higher education surpassed ship building and heavy construction and engineering to be the fourth largest economic driver in the metropolitan area. one of the worst catastrophes in American history flooded 80% of the city.” states the report. “The city and metro area have been recovering from Katrina and.) Just as the city was starting to regain some semblance of normalcy. may even be on the path to transformation.000 structures and killed some 1. legal services and insurance. which lost a national average of 4. 2005.S.3% of jobs. initiating the largest environmental disaster in U. history. but although the city lost 1.” None of this.850 (78% of pre-Katrina levels). and the metro area has recovered 85% of its jobs. The numbers back this up.Fore front Benefit corporations | iran sanctions | intelligence leaks | stadium food ap photo/judi bottoni Five Years After Katrina It has been a rough five years for New Orleans. “New Orleans is in the throes of post-disasters recovery.

©2010. RSA is an established A rated insurer with a proven track record of delivering customized coverages and flexible terms to companies across different commercial sectors around the world.rsagroup. We have over 300 years of experience in finding insurance solutions for our business partners. We consistently offer innovative products and brilliant service to Risk Management professionals with large. RSA is a registered trade name of Royal & Sun Alliance Insurance Company of Canada. “RSA” and the RSA logo are trademarks used under license from RSA Insurance Group plc. complex or multinational risks. the risks and opportunities are constantly changing. RSA’s Global Risk Solutions team can provide the technical expertise to meet the needs of Canadian companies with national and international operations.ca for more information. Speak to RSA today or visit www.TAKING A RISK DOESN’T MEAN BEING AT RISK. In today’s business environment. .

nearly 80% of pre-Katrina levels. The spirit of those from NOLA. visit . Stay in the Loop Subscribe to Risk Management and get the latest in risk management news. however.com 10 September 2010 For more information. You should be. is now trying to publicize the problem. and while some are understandably skeptical of the transition to a charter school-based system. New Orleans residents will have little to cheer.” n New Orleans Recovery by the Numbers The city’s population is now back above 350.” he told PBS Newshour in early August. talking about it and coming up with a strategy to deal with it.” Until that strategy proves successful. Your competitors are reading it. Some people are doing both at the same time. And that always gives us continued hope. this is actually the lowest rate in New Orleans since 1979. something epitomized by the 2010 HBO television series Treme. I do think there is a sense of eternal optimism here. The city now has an unacceptable poverty rate of 23%—a full 10% higher than the national average. Mitchell “Mitch” Landrieu. And for the first time. we have it covered. “You get a tale of two cities. From the traditional worlds of insurance and disaster preparedness to the emerging realms of reputation risk and environmental liability. not hide it under the rug as he suggests has occurred in the past. though. RMmagazine.” said Landrieu on Newshour. the majority opinion is that the children of New Orleans are receiving a better education now than they have at any other point since Hurricane Katrina—and perhaps well before then. Still. “Some people are doing better. as hard as it’s been. who assumed office May 3. even if the progress the city has seen is not occurring universally. The people have been through the storm—literally and figuratively— and it seems like better days are ahead. opinion and analysis delivered directly to your door every month. too. Some people are doing worse. that’s not really a good number.Fore front system has been reformed. it is the lowest it has been in New Orleans since 1979. New Orleans’ poverty level is now 23%. and the city’s mayor. The number of students in the city who attend public schools that meet state quality standards has increased from 28% in 2003 to 59% in 2009. but it is down from 28%. Although 10% higher than the national average and nothing to celebrate.000. we’re actually counting it. One measure that remains troubling. is endemic poverty. “On the poverty rate. The number of total jobs in the city has risen to 85% of the August 2005 total. is resilient. “So it’s trending in the right direction.

With professionals and capabilities in more than 170 countries. coverages are underwritten by member companies of Zurich in North America. Certain coverages not available in all states.com.zurich. we are here to help you manage your risks and take advantage of the future with confidence. and insurance solutions backed by a strong. new opportunities are appearing in both established and emerging markets. * Zurich Financial Services Group.zurichna. Some coverages may be written on a non-admitted basis through licensed surplus lines brokers. In the United States.zurichna. including Zurich American Insurance Company. For more complete financial information about the Zurich Financial Services Group and ratings for Zurich Insurance Company Ltd. this is the time that matters most. Financial Enterprise. and Management and Professional Liability. access www. As the global economy recovers. Real Estate. In the United States.Insurance Risk Management Here to help you take the next step forward. including new insurance offerings for: Manufacturing. Healthcare.. Download our free whitepaper and guide to choosing the right insurance carrier for your business at www. But the lesson of the recent past is clear – it’s also the time to balance ambition with prudence. Technology. For many companies.com/choosetheright Here to help your world. Energy. access the ratings section on www. That’s why we are introducing a range of game-changing initiatives. stable financial position*. * For information about the ratings of Zurich American Insurance Company.com © 2010 Zurich American Insurance Company . risk engineering services are provided by Zurich Services Corporation. Never before has understanding your risks and preparing for them sensibly been more important.

Maryland Governor Martin O’Malley became the first to sign legislation to recognize this new type of corporation. BBMG. So in 2003. capitalists thought it was crazy. moneyhungry actions on the part of these blue-chip corporations were unearthed. also known by Emily Holbrook RecoveRy WaRRioRs Clients trust us.5884 jcooper@gardere.5833 smoll@gardere. as evidenced by the actions of several states. Adversaries respect us. consumers and the environment. As a result. giving them greater protection against shareholder lawsuits. choosing instead to spend their money at socially responsible companies whenever possible. along with more than 300 other companies. Gardere’s Policyholder Insurance Coverage Team Jim Cooper Stephen Moll Samantha Trahan John Pearson Beverly Godbey A law firm serving corporate policyholders for more than 25 years. however. Andrew Kassoy. it now seems the ice cream maker was just ahead of its time. Corporate governance experts worry about the rights of shareholders. recruiting likeminded companies and helping them access “purpose-driven” capital markets. they would have evaluated the risks and consequences of a spill and decided to invest in better safety and extraction methods. “Instead of cutting corners.com as the Vermont Benefit Corporations Act. New York. an organization that supports “benefit corporations” by certifying such corporations. they knew they wanted to create a company that was not only financially successful. In April. Looking back. some legislators seem to feel the same. developing their legal framework. Years ago. n 12 September 2010 . “If BP were a B corp. while some investors feel reluctant to put money into something if a portion of the returns will go somewhere else. that ultimately led to the Gulf oil spill. Lehman Brothers. Though some criticize this movement. no matter if it is for a good cause.Fore front Rise of the B Corp When Raphael Bemporad and Mitch Baranowski met in 1990. North Carolina. turning the stomach of the everyday American worker in the process. Though they were eventually successful in their mission-driven business plans.com gardere.5% of pretax profit to community projects.” Not everyone is onboard with B corps. meaning it is not only an environmental steward engaged with its community. many have abandoned the cutthroat ways of these market share mongers.276. claims if BP were a benefit corporation. planet and profit) are now legal entities in some states. And. Stephen Moll 713. Jim Cooper 713. is now a certified B corporation. but it also has responsibilities that include the interests of employees. when Ben & Jerry’s decided to donate 7. They wanted to be recognized as a beneficial company—one that stood out from the many greed-driven corporations of modern business. many consumers feel drawn towards the “do-good” companies.com Au s t i n Da l l a s Houston M e x i c o Ci t y Let us go to battle for you. but also socially and environmentally responsible. they launched BBMG. a branding and marketing firm. Pennsylvania and Washington.” he said. signing into law Act 113. it is unlikely the Gulf oil disaster would have occurred. It was the constant pressure to generate revenue. Enter B Lab. Oregon. Other states working to pass similar legislation include Colorado.276. And B corporations (also known as “triple bottom line” businesses for their consideration of people. they wanted more. co-founder of B Lab. Vermont’s Governor James Douglas followed suit. they would have looked beyond short-term profit and considered the environmental and community impact of their decisions. at all costs. In the aftermath of recent corporate debacles (AIG. BP and Toyota to name a few). suppliers.

We can help you through this complex process. prepare claims and reach settlement. each of which is a separate legal entity. What’s next for your business? ey. Business interrupted? It’s bad enough when natural disasters. But then come the insurance claims — which involve detailed financial modeling. We work with financial executives and risk professionals to help you assess loss.com/us/RIMS . We help you understand policies. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited. property damage or some other unexpected event disrupts operations. analyze data and implement a claim process that works so you can get back to business.© 2010 Ernst & Young LLP. volumes of accounting documentation and multiple submissions. Ernst & Young LLP is a client-serving member firm located in the US.

wheat exporter AWB and retail property company Centro Properties Ltd. Of the 22 class actions filed since 2004. generating headlines nationwide. a growing concern. but it can sometimes be difficult for companies to determine the appropriate time to disclose sensitive information. Even more security class actions are expected in the coming months. class actions have become too lucrative to ignore. These class actions have targeted a number of Australia’s largest companies. gaming machine maker Aristocrat Leisure Ltd. with six filed in 2009 alone. if the case succeeds. In the last decade. it is. The percentage is contractually agreed with the litigant and is typically between 30%–40% of the proceeds. To manage the security class action risk. companies interested in doing business in Australia should take steps to understand the country’s continuous disclosure rule and do their best . which created financial rewards for pursuing this litigation that previously did not exist. Between 1999 and 2003. none of them were. as cases related to the financial crisis of 2008 have not yet entered the pipeline. according to NERA. security class actions have been brought against companies such as insurer GIO Australia Holdings Ltd. This requirement may seem straightforward enough. The continuous disclosure rule requires companies to immediately inform the Australia Securities Exchange of developments that a reasonable person would expect to have a material effect on share price. as is customary in the United States and instead received only a flat fee for their 14 September 2010 by Mark T. The Australia Securities and Investment Commission began to increase its enforcement of the continuous disclosure rule after the 2001 collapse of HIH. which had been limited to handling corporate insolvencies prior to this ruling. for instance. according to a report by NERA Economic Consulting. the litigation funder is reimbursed for the costs of the litigation and receives a percentage of the proceeds. Further changes occurred in 2006 due to a court ruling that opened the way for litigation funding arrangements. In return. Changes in the litigation environment in Australia began around the turn of the century with an increase in regulatory enforcement of the country’s continuous disclosure rule. nonetheless. Shareholders. Under the new litigation funding arrangements. Although the litigation risk is far lower in the Land Down Under than it is in the United States. Even companies that do their best to comply with this requirement can end up as targets of a regulatory inquiry. were reluctant to come forward because of the risk of incurring significant litigation expenses. 17 of them were financed by a litigation funder. That number shot up to 22 between 2004 and 2009. only six security class actions were filed.Fore front D&O in the Land Down Under Security class action lawsuits are on the rise in Australia as a new system of funding this litigation has emerged in recent years in response to increased in regulatory enforcement activity. Law firms were prohibited from charging contingency fees. Up until this time there was little financial incentive. Lingafelter efforts. meanwhile. miners Sons of Gwalia and Oz Minerals. Before 2004. one of the country’s largest insurance companies. The scope of the increase can be seen in both the number of class actions filed as well as the size of these cases. litigation funding firms pay the cost of the litigation (including the fees to the law firm) and indemnify the litigant against the risk of paying the respondent’s costs if the case fails. This rise has also come at a time when regulators are getting tough on breaches of Australia’s continuous disclosure requirements. to receive a percentage of the proceeds. By allowing the litigation funders.

Learn more at www. with litigation funders on the prowl and regulators watching carefully. No one wants to become tomorrow’s headlines. and it is important for companies to have a carrier that understands the consequences of underwriting this type of business. While companies are at an increased risk of security class actions. protected as long as they take all reasonable steps to ensure that the company met its obligations—and as long as they believed the company was complying with its disclosure obligation. directors and officers themselves are generally rity class actions. Your due diligence to assure your D&O broker understands the many coverage nuances will be above reproach. only six security class actions were filed. Give your board extra peace of mind by using an MLIS for the D&O placement. Does Your Broker Really Know D&O? Three reasons to have a Management Liability Insurance Specialist (MLISTM) on your broker team: 1.MLIS-CE. the number of security class action lawsuits will undoubtedly grow. Companies should look for an insurer with expertise in security class action claims. MLIS is built by IRMI® and offered in conjunction with RIMS®–two names you trust. Currently in Australia. risk is heightened. n Mark T. 3. Likewise. buyers should consider their insurers carefully. 2. That number shot up to 22 between 2004 and 2009. but they are expected to discuss the steps they are taking.com/RIMS . and companies should proceed with caution. of Australia. Companies with strong corporate governance processes will be in the best position to obtain coverage at favorable terms and conditions. A broker who earns the MLIS certification demonstrates coverage savvy and client dedication. With the sharp increase in secu- Between 1999 and 2003. The Australia Securities Exchange has also established a set of best practices related to continuous disclosure.to comply with it. Lingafelter is managing director of Chubb Insurance Co. Australia requires companies to have an internal corporate governance committee and explain their corporate governance policy in their annual reports. insurers have become much more vigilant about the risks they are willing to accept and will want to be comfortable with their insureds’ exposure and business practices. To help them meet their disclosure requirements. As the security class action industry matures. while the severity of the claims will gradually decline. with six filed in 2009 alone. Companies are not required to comply with all of the best practices. These exposures can take years to work their way through the legal system.

It’s not over. sanctions against Iran. What’s not in the bill is a sense of clarity on how these sanctions are going to work with regard to insurance. insurance could touch any number of those activities. That is a tremendous distinction in the insurance world because $1 million in premium for one transaction—or $5 million over a year—is a lot. Whereas the former sanctions affected energy companies. we recently spoke with Pieter Van Tol and Bob Kyle. RM: Obviously. Van Tol: There is some good news: the due diligence provision. But I think the other two major bullet points here are what else is in the bill and what else is not in the bill. This bill expands the range of sectors involved. The one thing that reinsurers and insurers must do is continue asking questions. but we don’t know as we sit here today whether paying that claim is going to be sanctionable. To help add some clarity. This came on the heels of a similar UN resolution and the result is that more companies—both in the United States and abroad—are now prohibited from doing business that “directly or significantly assists” Iran’s petroleum industry. partners and international law practitioners from the law firm Hogan Lovells. RM: With the new sanctions in place. For example.Q&A Iran Sanctions On July 1. So the new sanctions would apply to any company that “directly and significantly” assists Iran either in importing refined petroleum products or in developing Iran’s refined petroleum production capacity. Arguably. that insurance company could be affected. what does this mean for companies that have to do business in the region? Bob Kyle: American companies have for a long time basically faced a complete trade and investment embargo with regard to Iran. Pieter Van Tol: We don’t know whether or not there were any efforts made behind the scenes to remove the insurance and reinsurance provisions. It says that if the president determines that a com- 16 September 2010 ap photo/richard drew . But the law’s language is ambiguous in some areas—particularly when it comes to how insurers must react. If you provide insurance for the transportation of refined petroleum products.S. RM: It seems there is much to work out. What’s not clear in the bill is whether that is $1 million in premium or $1 million in cover. President Barack Obama signed a new law to increase U. that software company could be affected. but one bullet point headline here is that they remained in the bill—and they are very prominent. if you provide software to those companies.” Even figuring out how to comply is going to be difficult and insurers will have to keep their eyes on the regulations as they come out over the next few months. You can’t just say. So the legislation that preceded this bill—which is the legislation that was amended by this bill—affected foreign companies that invested in Iran’s energy sector with $20 million or more. that’s not much. I’ll clarify. “OK. when the bill was enacted? What happens if you have a reinsurance contract that was written before July 1 and you have claims after July 1? It seems like the bill has prospective application. This new bill is intended to retard—or stop altogether—Iran’s development of its petroleum resources. how will it apply to coverage that was written before July 1. here’s the bill—I’m going to comply. these are much broader. Another question is how do the sanction thresholds apply? The thresholds are set forth as $1 million per transaction or $5 million over a 12-month period. But if you’re talking about coverage for an individual shipment of gas to Iran.

This gives the president the ability to say. If you have an existing contract. for some reason. they do engage in it. so we’re not going to enforce against you for what is essentially a mistake. But depending on what the wording is.” That’s the difficult situation. Lloyd’s.” It is important for people to keep an eye on how this is being enforced. But we don’t know how the regulators are going to view it or how easy it will be to take advantage of. there is a new law. please make sure you do not underwrite any new risks that involve gas shipment to Iran. Interview by Jared Wade Risk Management 17 . Things can crop up that they may not have ever even considered. and you have told your people not to do it.Fore front pany has exercised due diligence in coming up with a program to ensure it doesn’t underwrite insurance or reinsurance that supports the shipment of gas to Iran then it will be excepted from the sanctions. basically came out and said that it was going to abide by the law and that it didn’t want to be anywhere near this risk. the only thing I’ve seen is insurers and reinsurers saying they want to get out of anything that comes even close to providing coverage for shipments to Iran. if I submit a claim. And their counterparties might say “there is no provisions for you to get out of the contract and. Does the company pay that? And if they pay it. the whole market sits up and pays attention. That is an interesting thing we have not seen before. the leading marine insurer. you can go to your counterparty and tell them that there is a risk that you will run afoul of the law if you pay a claim under this contract. Van Tol: Here’s a real-life example: a company sends out guidelines to all its underwriters saying “look. That’s one of the things we have to work through and see how the regulations are enforced. But we do know from the buzz in the industry that people are asking “how do I go about putting a due diligence program in place?” Kyle: Another important part about the due diligence provision. they might not be able to get out of the contract. then the provision kicks in. despite their due diligence. you have been careful about monitoring it. mistakes happen. I expect you to pay it. RM: How difficult is that going to be? Van Tol: I don’t know the answer to that. mistakenly. Even though you have put this system in place. is that it assumes that if a company concludes that it will no longer insure or reinsure transactions that involve Iran and then. will that be considered a part of the sanctioned activity? But the one thing that I have been counseling people against is to not just assume that this is yesterday’s news and that they are “already out.” RM: How has the industry responded? Van Tol: Even before the bill was passed. as I read it.” But then one slips through the cracks. When [Lloyd’s] does something like that. “you’ve been trying to comply with the law. The day after the bill was enacted.

advocated a stronger British military presence in Boston to quell the budding rebellion and recommended the removal of certain liberties. from an unknown source. It was a nice gesture since historical evidence indicates that Buchanan. the royal governor of Massachusetts. was the source of the treaty leak. President James Buchanan appointed Nugent as a special agent to investigate American interests in what is now British Columbia.S. and Nugent was called into the Senate for questioning.S. the leaks demonstrate the increased vulnerability of all information—secret or not—in the digital age. received the secret treaty to end the Mexican-American War. government had misled the public regarding its intentions and goals in the war. while serving as secretary of state. but the Supreme Court would not allow it—and an already unpopular war became even less popular. the New York Herald. Ten years later. His paper. While the political fallout remains to be seen. the incidents have painted an unflattering picture of U. 1971 The Pentagon Papers The so-called Pentagon Papers were a top secret Department of Defense report chronicling the United States’ involvement in Vietnam from 1945 to 1967. Hutchinson was subsequently forced to go back to England. Capitol before finally being released. intelligence leaks have been with this country since its inception. Nixon resigned in 1974. we examine the most infamous. Hutchinson criticized colonial leaders. Leaked by military analyst and contributor to the papers Daniel Ellsberg. After a series of Senate investigations and with impeachment looming. but the letters were published in the Boston Gazette in June 1773. Coming on the heels of a classified video that was leaked to the site three months earlier showing an Apache helicopter firing on what were thought to be armed insurgents but proved to be a group of civilians. Mark Felt was outed as Deep Throat. 1972 Watergate After five men were arrested for breaking into and illegally wiretapping the Democratic National Committee headquarters in the Watergate complex in Washington.. In 2005. reporter John Nugent 1848 18 September 2010 . Washington Post reporters Bob Woodward and Carl Bernstein received secret information from a mysterious informant known as “Deep Throat. he was subsequently arrested and held for a month in the U. in 1971. while Franklin was reprimanded and returned to America where he would be an instrumental figure in the American Revolution. Franklin sent the letters to friends in Boston under instructions that they not be circulated. the papers revealed that the U.S. –Morgan O’Rourke 1773 The Hutchinson Letters In 1772.Time Line Infamous Intelligence Leaks The July publication of more than 90. Of course. Benjamin Franklin received a packet of letters written by Thomas Hutchinson. The government tried to suppress the publication of the papers. after decades of speculation former FBI agent W.org was the largest leak of military intelligence in U. After refusing to reveal his source. published the treaty. while living in England as a colonial representative.S.000 military documents detailing war operations in Afghanistan on the whistleblower website Wikileaks. Here. and published in the New York Times The Treaty of Guadalupe Hidalgo In March 1848.” who implicated President Richard Nixon in the resulting coverup. military involvement in Afghanistan. D.C. history.

including those of National Security Advisor John Poindexter. Washington Post columnist Robert Novak refuted Wilson’s account and revealed that his wife.000 military documents about the war in Afghanistan. 1986 Iran-Contra The Iran-Contra affair began when an Iranian militant reported in a Lebanese magazine that the United States was selling arms to Iran. was a CIA operative. But it was not until April. The Valerie Plame Affair In July 2003.Fore front While there has thus far been little actual political fallout from July’s release of 90. despite an arms embargo against the country. in a New York Times op-ed piece. accounts began to surface that prisoners in the Abu Ghraib military prison in Iraq were being tortured and abused by their American captors. that public uproar began. who had been in charge of the operation. 11 soldiers were convicted on charges stemming from the incidents with some receiving prison sentences of up to 10 years. President George H. Bush pardoned all those involved. A number of convictions resulted. The report also revealed that the United States was providing weapons to Contra rebels fighting in Nicaragua in exchange for the release of American hostages. Abu Ghraib In early 2004. former U. In response. Bush administration for the reasons it gave for invading Iraq and contradicted a statement made by President Bush that Iraq had tried to purchase yellowcake uranium from Niger. n Risk Management 2004 19 ap photo/brennan linsley . the incident now ranks alongside a long line of high-profile leaks that have become part of—and in some cases changed—American history.S. Ambassador Joseph Wilson criticized the George W. but the resulting investigation only led to the conviction of Lewis “Scooter” Libby.W. In 1992. His sentence was later commuted by President Bush. when both a 60 Minutes II news report and an article in the New Yorker by investigative journalist Seymour Hersh featured leaked photographs depicting graphic instances of abuse. Vice President Dick Cheney’s former chief of 2003 staff. former defense secretary Caspar Weinberger and Marine Lieutenant Colonel Oliver North. Ultimately. Wilson accused the White House of leaking the information as retaliation for his op-ed piece. Valerie Plame.

home of the NHL’s Coyotes. ArizonA Home to the Mavericks (NBA) and the Stars (NHL). Here. where the MLB’s Seattle Mariners play. But the food and drinks some teams are selling pose serious health risks to their spectators.com Arena. upon re-inspection. stadium food is becoming feared fare. 72% of vendors were cited for violations including inadequate hand-washing facilities and hot dogs kept at 71 degrees. Keeping with the flies-in-the-liquor theme. At the Seattle Seahawks’ Qwest Field. almost half of the required holding temperature of 135 degrees. texAs i Wouldn’t eAt thAt Stadiums throughout the nation cater to millions of sports fans each year. at the Jobing. approximately 15 locations were cited for not having adequate handwashing facilities. at the Pepsi Center. Around the corner at the Dallas Cowboys’ stadium. –EH 20 September 2010 . NHL and NFL venue.S. one location faced possible closure in December after inspectors found mouse droppings and. one food stand was cited for employees who did not properly wash their hands. inspectors found flies in a bottle of cognac. NBA. From vermin droppings to mold in ice machines and from Los Angeles to Boston. one citation claimed inspectors witnessed a worker scooping ice with his bare hands. Airways Center in Phoenix. the American Airlines Center in Dallas was cited for food stands carrying expired milk.Risk Atlas WAshington At Safeco Field. brown lettuce and employees caught drinking or eating in the stand. Also in Phoenix. inspectors found fruit flies in bottles of whiskey at three of the stadium’s bars. ESPN compiled a list culled from inspection reports for each MLB. where the Nuggets and Avalanche play. ColorAdo At U. found dozens of flies and a live roach in the dish room. home to the Denver Broncos. we point out some of the most unsanitary. At Invesco Field.

Further north. reported numerous violations. The Mets’ baseball stadium. Florida Risk Management 21 . home to MLB’s Tampa Bay Rays. at the RBC Center where the Carolina Hurricanes play hockey. At one food stand alone. most of them addressing dirty countertops. inspectors witnessed employees handling raw chicken while loading fryers then handling cooked food without changing gloves or washing their hands. Fore front michigan new york The Bank of America Stadium. Among the infractions. home to the NFL’s Carolina Panthers. But that pales in comparison to what was found at Madison Square Garden where the NBA’s Knicks and NHL’s Rangers play. inspectors found 53 mouse droppings underneath cash registers and in front of food prep areas. which is 30 degrees warmer than allowed.The NFL stadium that the Detroit Lions call home is rife with unsanitary conditions. reported several violations relating to cooked chicken stored at 70 degrees. utensils and equipment. wins the number one spot in this ranking with a whopping 100% of vendors receiving critical citations. inspectors witnessed one worker eating from a fryer basket. One location was cited 11 times in the past six years after inspectors reported seeing employees who did not wash their hands. north carolina Holy citations! Tropicana Field. The Red Wings’ ice rink fared only slightly better. the Orlando Magic’s Amway Arena reported 75% of food vendors with critical citations and Tampa Bay’s Raymond James Stadium reported 84%. Joe Louis Arena reported 52% of vendors in violation with one location cited for roaches found below a soda dispenser. Even worse. Citi Field.

22 From Tactical to Strategic September 2010 .

worked fine. But whereas in the past the main fallout of these failings may have been legal liabilities resulting from the accidents that occurred and the costs of conducting a product recall. manufacturing costs. will never outpace earnings or through vigilant leadership that ensures that a rival will not dominate the market to the point that the company can no longer compete. The ultimate strategy and future plans of the company are determined by the CEO. But the game has changed. the board and (maybe) a handful of other senior executives. unregulated airspace where traffic may come from all sides. Historically. In the past. there would be no successful businesses. decides that Toyota is a brand he no longer R Risk Management’s Next Move by Jared Wade daniel smith/corbis .isk. most companies that have grown into household names have managed their risks well. But in 2010. The rest of those involved in charting the course for the future are often consulted on a need-to-know basis to work out the specifics of the operation. existential threats through a business model that ensures that. for lack of a better word. rather. there would only be successful business. Well. the greatest asset at risk today is Toyota’s reputation. Risk is vital to the business world so that those organizations that are able to overcome their challenges can show the rest how it is done. The risks companies face today have multiplied. Well enough anyway. but they knew where to look for them and were generally able to take a glance back. they still come from there—but they come from everywhere else. much of the time. Or. however. say. someone who has a wider selection of safe cars to choose from than ever before. CEOs and boards have always faced a large number of threats. But they are rarely asked to assess the big picture. is good. its problems were rooted in faulty manufacturing and complacency towards safety. as being successful would be so easy that any start-up would have an idyllic path to quarterly revenue bonanzas. that method has. The lawsuits can be covered and the recalls can be paid for. four-lane road with expected intersections and a flying car navigating a chaotic. focusing—as always—on the road ahead. For a company like Toyota that is undergoing a prolonged consumer confidence crisis. The thriving company has mitigated its true. risks no longer always come from where the CEO has been trained to look. Typically. the risk manager has not been involved in this strategic level planning. Without it. and the distinction is akin to the difference between a car driving down a calm. too. helping to refine the operational processes in their area of expertise. But if the typical car buyer. no matter the occasional unforeseen price spike. There are a full 360 degrees to monitor now. gauge the situation and keep their foot on the gas.

ca 1764 We insure the home of Captain James Cook. We’ve BeeN UNderWritiNG proGreSS SiNce 1710. prior to the first of his legendary voyages 1844 We cover Down House.rsabroker. .www. where Charles Darwin wrote On the Origin of Species 1710 The Sun Fire Office is established 1959 The Sun Insurance Office merges with The Alliance Assurance Company to form Sun Alliance Insurance Limited 1961 The Western Assurance Company is acquired and later amalgamated with Royal Insurance Company of Canada from the epic to the everyday.

The principle that drove us to succeed in the embers of the Great Fire of London is the same one that drives us today: an unshakable belief that insurance should enable progress. And this year.ca . To learn more. From the epic to the everyday. visit www. we are believed to be among the world’s oldest insurers. our support helps keep it open 2009 We’re on the scene of the Halifax fire 2009 We provide a speedy response in the wake of the Vaughan tornado 1996 Sun Alliance Group merges with Royal Insurance Holdings. we continue to help the world’s people and businesses move forward. as we celebrate our 300th anniversary.2007 When a major food bank is threatened with closure.rsabroker. to become Royal & Sun Alliance Insurance Group plc 2007 Canadian Northern Shield becomes part of Royal & Sun Alliance Canada 2008 Royal & Sun Alliance becomes RSA Insurance Group plc 2010 The RSA Group is 300 years old Our business began life in 1710 with the establishment of the Sun Fire Office.

The company needs to know where the pitfalls are before deciding on a strategic direction and the risk manager is in a natural position to point them out to leadership. risk managers were insurance buyers. Then they were the stewards tasked to protect the company’s operational exposures by more creative means. It is what risk managers have been doing for a long time. Supply chain disruptions. Enter strategic risk management. Now. Without a larger How can you manage every risk— particularly emerging threats—when you do not truly understand the long-term direction of the company? a strategic shift or major new operation begins. each move might be fine. many found 26 September 2010 change below the leadership level. To truly do that. find ways to use that knowledge to increase shareholder value. Such reputation concerns are among the most frightening risks that companies are just now learning how to manage—just ask AIG or BP—but they are far from the only major emerging threat.” The risk manager can then go out and tactically approach all of the related risks and mitigate each of them. Both high-risk and risk-averse companies have been very successful. even the best tactical moves offer merely a temporary advantage. Because it is only by avoiding known pitfalls that the company can navigate its way towards greater profits and success. the agreed-upon risk appetite level. but if a company only allows it to effect plan. it is a lot like chess. But even with a greater license to work more closely with all areas of the operation and implement new loss control protocols. coordinated attack lowers the chance of winning and will always hold the player back—particularly when faced with tough competition. Conceptually. At the end of the game. First. will only prove to have been in the player’s best interest if they helped him protect his king and. climate change and extreme weather. n The company needs to know where the pitfalls are before deciding on a strategic direction and the risk manager is in a natural position to point them out to leadership. If player—generally plays the game thinking only about how to maximize each move. then even a seemingly sound business strategy of international market share acquisition and forward-thinking hybrid innovation may not make a difference. the company is not maximizing a resource that can both prevent major losses and drive earnings by telling the board which risks are the good risks. A casual player—even a very good casual . Ultimately. longterm objectives from the largest risks the company faces. All that matters is that everyone understands the strategy and that the strategy is based on an informed understanding of how high the risk levels are. and the scope of that their authority did not match the task. and if auto sales do not return to the company’s prior expectations. taking risks is what creates shareholder value. But involving the risk management department from the beginning makes more sense and allows the people who best understand the potential perils of the company to help guide leadership decisions. the strategic view should be similar. and leaders are relying on their analysis to not just protect shareholder value—but to help create it. Innovation and entrepreneurship simply must be balanced against the potential downside. It is the next natural evolution of risk management. however. But the lack of a strategic. the CEO can then tell the risk manager “figure out how to minimize these new risks. For the risk manager.Strategic Risk Management trusts. no matter how beneficial they seemed at the time. Next came enterprise risk management (ERM). Then. checkmate the king of his opponent. Just another day at the office. Tactically. As long as the top leadership is comfortable with the risks presented by the most informed opinions of those in the organization. ultimately. Take a potential problem and make it less likely to become one. How can you manage every risk— particularly emerging threats—when you do not truly understand the longterm direction of the company? Including risk management into strategic-level planning allows the function to better serve the organization. the risk manager needs a clear understanding of the corporate strategy and approach to risk—something that can only truly be attained through discussions with the board and senior leadership. protect assets first by insulating the core. First. counterparty default and dozens of other risks now pose greater challenges to companies than ever before. does not matter. risk managers are becoming involved in the senior-level decisionmaking process. and it is something at which they excel. risks that they were tasked with managing became wider—as did the net they were given to explore risks throughout the organization. Risk management can be valuable at all levels of the organization. those earlier decisions. in and of itself. global and local regulatory uncertainty.

Just another day at the office. coordinated attack lowers the chance of winning and will always hold the player back—particularly when faced with tough competition. and if auto sales do not return to the company’s prior expectations. But involving the risk management department from the beginning makes more sense and allows the people who best understand the potential perils of the company to help guide leadership decisions. Enter strategic risk management. those earlier decisions. A casual player—even a very good casual . ultimately. no matter how beneficial they seemed at the time. All that matters is that everyone understands the strategy and that the strategy is based on an informed understanding of how high the risk levels are. Both high-risk and risk-averse companies have been very successful. long-term objectives from the largest risks the company faces. the risk manager needs a clear understanding of the corporate strategy and approach to risk—something that can only truly be attained through discussions with the board and senior leadership. First. it is a lot like chess. even the best tactical moves offer merely a temporary advantage. protect assets by insulating the core. risks that they were tasked with managing became wider—as did the net they were given to explore risks throughout the organization. Innovation and entrepreneurship simply must be balanced against the potential downside. in and of itself. Tactically. taking risks is what creates shareholder value. Next came enterprise risk management (ERM). find ways to use that knowledge to increase shareholder value. risk managers were insurance buyers. To truly do that. First. each move might be fine. For the risk manager. many found 26 September 2010 change below the leadership level. Conceptually. Without a larger How can you manage every risk— particularly emerging threats—when you do not truly understand the long-term direction of the company? a strategic shift or major new operation begins. As long as the top leadership is comfortable with the risks presented by the most informed opinions of those in the organization. If player—generally plays the game thinking only about how to maximize each move. Risk management can be valuable at all levels of the organization. But even with a greater license to work more closely with all areas of the operation and implement new loss control protocols. The company needs to know where the pitfalls are before deciding on a strategic direction and the risk manager is in a natural position to point them out to leadership. checkmate the king of his opponent. Then they were the stewards tasked to protect the company’s operational exposures by more creative means. Then. n The company needs to know where the pitfalls are before deciding on a strategic direction and the risk manager is in a natural position to point them out to leadership. global and local regulatory uncertainty. then even a seemingly sound business strategy of international market share acquisition and forward-thinking hybrid innovation may not make a difference. Such reputation concerns are among the most frightening risks that companies are just now learning how to manage—just ask AIG or BP—but they are far from the only major emerging threat. the CEO can then tell the risk manager “figure out how to minimize these new risks. risk managers are becoming involved in the senior-level decisionmaking process. the agreed-upon risk appetite level. But the lack of a strategic. and leaders are relying on their analysis to not just protect shareholder value—but to help create it. the strategic view should be similar. the company is not maximizing a resource that can both prevent major losses and drive earnings by telling the board which risks are the good risks. counterparty default and dozens of other risks now pose greater challenges to companies than ever before. It is the next natural evolution of risk management. climate change and extreme weather. does not matter. Ultimately. It is what risk managers have been doing for a long time. Now. Because it is only by avoiding known pitfalls that the company can navigate its way towards greater profits and success. will only prove to have been in the player’s best interest if they helped him protect his king and. Supply chain disruptions.Strategic Risk Management trusts. however. At the end of the game. How can you manage every risk— particularly emerging threats—when you do not truly understand the longterm direction of the company? Including risk management into strategic-level planning allows the function to better serve the organization. but if a company only allows it to effect plan. and it is something at which they excel. Take a potential problem and make it less likely to become one.” The risk manager can then go out and tactically approach all of the related risks and mitigate each of them. and the scope of that their authority did not match the task.

The 3rd Annual Risk Management and Insurance Education Review Head e f th o Class by Emily Holbrook 28 September 2010 .

Drennan. the demand for new talent has never been greater. J Gibson.” said R. 29 Risk Management . they are also tailoring the coursework to meet modern risk management requirements.” But these university-level RMI programs are not merely graduating a record number of students.B. “Major changes include incorporating more traditional and enterprise risk management into RMI curriculums. both in the United States and around the world. president of the International Risk Management Institute stated in a recent report regarding risk and insurance education. faculty representative for Gamma Iota Sigma. so too has the discipline gained ground as a vital area of study in colleges and universities. Some schools are turning to nontraditional topics of study by putting more of an emphasis on alternative financing solutions other than insurance. Luckily for companies looking for graduates schooled in this area. risk management and insurance (RMI) undergraduate departments in close to 40 colleges across the nation are meeting this need by awarding degrees to a higher number of students each year. And with more and more risk management professionals nearing retirement age. As Jack P.ust as risk management has risen to prominence in the business world. the international fraternity for risk and insurance management professionals. “RMI programs can be an important tactic to help insurance organizations respond effectively to the talent crisis the insurance industry will face over the next 10 to 15 years when baby boomers retire.

Also new to the RMI education arena is East Carolina University. New York. The Greenville. Currently. and the Young Agents convention in Myrtle Beach. In addition to being active with industry partners such as the Risk and Insurance Management Society (RIMS) and the Insurance Council of Texas and Chartered Property Casualty Underwriters (CPCU).C. If the ambitions of UNT’s RMI program do not impress. So they have the dedication of the faculty as well. Its School of Continuing Professional Studies offers advanced certificates in financial risk management for those who are already in the workforce and are looking to advance their knowledge of financial risk and. Classes cover the measurement and management of financial risk. The school is beginning to develop a growing reputation in the area of risk management. hopefully. such as Lehman Brothers and Bear Stearns. North Carolina-based school started its program with a gift from the Independent Insurance Agents of North Carolina. swaps and other derivative instruments. several courses focused on financial risk management have sprung up in MBA classrooms from small colleges to Ivy League universities. assures that its environmental engineering majors will be prepared to tackle such frightening .” she said.” This class examines risk in a corporate context.” said Russell Walker. options. maybe its size will. risk management in practice is about understanding the role that uncertainty and human biases play in our decision processes. Clarkson University in Potsdam. as well as the nature and operation of markets in futures.” covers a wide array of topics from banking and insurance to loans and brokerage and uses case studies covering the usual suspects. UNT is active with the Risk Manager in Residence program. 30 September 2010 program places professional risk managers in a classroom setting at those universities that are awarded grants. Antiterrorism and Homeland Security.. and has secured several representatives from big-name insurance companies to lecture her students. but has tailored its curriculum Operational Risk Management. The course.D. Another school taking on the financial crisis in the classroom is the Kellogg School of Management at Northwestern University. D. their career. “Managing the Financial Firm.” Dedicated faculty can also be found at the University of North Texas. assistant director of the Zell Center for Risk Research at the Kellogg School of Management. For starters. the State University of New York (SUNY) Oswego announced in July that it is founding a new educational center. traveled with students to the Independent Insurance Agents and Brokers of America’s “Big I” legislative conference in Washington. which began in August 2009 and graduated its first student just last month. which includes 64 schools. but also support various other types of student education and continuing professional education. The Gordon A. She formed the ECU Society of Risk Management and Insurance. The to professionals within the field. Wells has proved ambitious in her leadership of the young program. for example. New York University has followed suit. courtesy of a grant from the Spencer Educational Foundation. Harvard University added a second-year elective to its MBA program that addresses the challenges and responsibilities that face the leaders in the financial services industry.” Crisis Control in the Classroom There is a relatively new breed of classes on the risk management education spectrum —courses focusing on disaster risk management. “Ultimately. while also devoting atten“Whether it’s for a study question or for insurance purchasing advice or how to file a police report after a car theft. there are more than 500 students enrolled in various risk management and insurance classes within the school.. the Lenz Center will focus on health care risk management. Ph. will soon offer classes with titles such as “Counterterrorism” and “Terrorism.Risk Management Education New and Innovative Schools Since our last look at risk and insurance education last year. A new course being added to the MBA curriculum next year is “Enterprise and “RMI programs can be an important tactic to help insurance organizations respond effectively to the talent crisis the insurance industry will face over the next 10 to 15 years. The University of Maryland. the current economic climate provides an excellent context for our research and great dialogue among our students.” tion to social responsibility and ethics within the RMI field. Lenz Center for Finance. there have been a few newcomers to the field. Brenda Wells was hired to direct and build the program. But Wells aims to be more than just an instructor of risk management and insurance. for any reason. The UNT undergraduate RMI program was established in 1949 and has the distinction of being one of the oldest and most innovative programs of its kind in the nation. Named after a well-known insurance industry innovator. “I offer my students my cell phone number so they are free to call me anytime. Dr. Insurance and Risk Management will support the first dedicated four-year program to focus on insurance and risk management studies in the entire SUNY system. Financial Risk Management Since the financial crisis began. “Coincidentally. giving students a more comprehensive view of risk itself. South Carolina.” Additionally.

and convenient online CE courses. We’ll even keep track of your credits for you. they provide in-depth understanding and practical skills. The University of Calgary’s Haskayne School of Business offers an RMI concentration—the only program of its kind in Western Canada. there are more than 150 undergraduate and graduate programs categorized as emergency management and another 50 plus programs categorized as homeland security. According to the Heritage Foundation. Studying Abroad The study of risk management and insurance reaches well beyond the classrooms of the United States. customer-focused options.org . When you’re more knowledgeable you make better business decisions.C. According to Shaw. • Continuing Education—Through our new CEU.. • Flexible Online Learning—Enhance your technical knowledge in a few hours without leaving the office. affordable. including: • Respected Credentials—Only The Institutes have the wide range of respected credentials including: CPCU®.org www. Suite 100 | Malvern.© 2010 American Institute For Chartered Property Casualty Underwriters issues as global warming. acid rain and pollution. school that has placed great importance on disaster preparedness and response. ARe. PA 19355 (800) 644-2101 | customerservice@TheInstitutes. D. in 1998. Disaster and Risk Management at George Washington University. and today it instructs 60 to 80 students each semester with an influx of interested students from across the GWU educational departments and other local universities. • Custom Applications—The Institutes collaborate with corporate customers to leverage our unique content and develop customized solutions that achieve their unique organizational goals. • Insightful Analysis—Our IRC division conducts vital public policy research on important current issues in property-casualty insurance and risk management.” That statement rings true if you consider the proliferation of disaster risk management courses on campuses nationwide. the GWU program was one of less than 20 emergency management-focused programs in the United States.org/options for more information and videos.” said Shaw. AU. D.C. How powerful are you? It’s really pretty simple. “academic institutions have become a core member of the national homeland security enterprise.com to learn more. want to make a difference and recognize the absolute necessity for professional emergency management at all levels of government and across all sectors. ARM. Today. Students must take a required six courses in the discipline that teach risk man- Knowledge is power. a Washington. Greg Shaw is the co-director of the Institute for Crisis. along with experienced practitioners. “Younger people. Visit www.-based think tank. And better business decisions yield measurable and meaningful results. The Great White North is no slouch when it comes to RMI education.TheInstitutes. The Institutes’ proven knowledge will help you achieve powerful results with a variety of flexible. Visit www.CEU. The Institutes’ cost-effective courses cover accounting to underwriting and everything in between. There has been no shortage of natural disasters in 2010—yet another reason students are choosing the disaster risk management track. INS. More than letters after your name. AIC. 720 Providence Road. we deliver quality. The institute was chartered in 1994 under the leadership of engineering and political science professors.TheInstitutes. AAI® and many more. a Washington.com business unit.

terrorists will remain set on plotting malicious attacks around the world and Mother Nature will continue to unleash her power on the earth. On an even higher educational level.org/Interactive 32 September 2010 .org/Book Need even more data? The Benchmark Survey is now available as an INTERACTIVE TOOLKIT Updated in real-time. Antiterrorism and Homeland Security.Risk Management Education Also in Southeast Asia. And these unfortunate events will provide a wealth of opportunity for the growing number of students brave enough to tackle the discipline of risk management and insurance. As history has shown. programs. ICRM professors work on risk assessment and management of natural and man-made catastrophes in collaboration with risk insurers and modelers from the finance. In January. The school also boasts that its graduates often command starting salaries well above entry level.” “Rehabilitation and Reconstruction” and “Seismic Hazard Management” are offered to students in the college’s fulltime (two-year) or part-time (four-year) program. and Canadian markets • Workers Comp best practices Purchase your copy at: www. Scotland’s Glasgow Caledonian University offers study in the discipline and claims to be the only school in the UK to offer an honors degree in risk management.RIMS. societal risk and other nontraditional risks. the Nepal Engineering College offers a masters in disaster risk management that focuses on natural and human-induced disasters that affect the Nepal region. enter your data and: • Benchmark your costs and coverage against peers • Compare the competition • Produce charts and graphs Learn more at: www. a program that focuses on catastrophe-triggered insurance and reinsurance risks. n The University of Maryland will soon offer classes with titles such as “Terrorism. the Copenhagen Business School (CBS) offers a Ph. Courses such as “Tools in Disaster Management.RIMS.” agement strategies and processes within the insurance industry. The 2010 RIMS BENCHMARK SURVEY™ is now available! Benchmark your risk program with: • Analysis on insurance services • Risk management trends • U. sovereign risk. Even further east is the Nanyang Technological University in Singapore. Across the Atlantic. CBS prides itself on being one of the world’s largest business schools and among the 10 largest in the world for Ph. With three doctoral schools. in financial risk management.D. financial firms will continue to take on risk.S. The ICRM is the first multidisciplinary risk management research institute of its kind in Asia and among only a handful of such centers worldwide. natural and man-made disasters will never cease. insurance and reinsurance industries. the school launched the Institute of Catastrophe Risk Management (ICRM).D.

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University of North Carolina-Charlotte 30 UNC Charlotte’s Belk College of Business enjoys generous support from the North Carolina insurance community.C. 2. 4. “RMI’s energetic. Here is a rundown of the top 10 schools ranked by the number of students they graduated during the 2009-2010 school year. 10. For a more in-depth list. and RMI students have earned prestigious scholarships. Appalachian State University 55 Though a relative newcomer compared to the top three. Since 2005. North Carolina Association of Insurance Agents. John S. But the largest programs are respected for both their size and the future risk managers they teach. With the help of the local insurance industry. and this year. 8. Mack Robinson College of Business at GSU is home to one of the largest risk management research centers in the world. The school’s RMI students also host the “Extreme Risk Takers” surplus lines insurance symposium for other schools. North Carolina Insurance Federation and Allen Tate Insurance. Memorial and Spencer Educational Foundation scholarships. Bickley.com. will have a multi-million dollar annual budget with a network of more than 100 researchers worldwide. impassioned faculty members are adept at making textbook material come alive. More than 130 students participated in internships over the summer. students are encouraged to pursue professional designations and participate in job shadowing. Indiana. The University of Hartford 39 Hartford’s RMI program has the distinction of receiving the Spencer Educational Foundation’s “Risk Manager in Residence” grant for the past 11 years. school has established a formidable RMI program since its inception in the late 1980s. Honeywell and Pepsi. The school’s long tradition of excellence in teaching. The program began in the late 1970s and has grown steadily. Even more impressive. Temple University 120 This Philadelphia school first offered risk management and insurance courses in 1913. Knox Center for Insurance and Risk Management Studies also provides financial support for student clubs and hosts symposia that majors are invited to attend. University of Wisconsin-Madison 94 UW-Madison’s RMI program began in 1938. 5. 6.The 10 Largest Risk and Insurance Schools by Emily Holbrook When it comes to teaching risk management. While enrolled. Temple’s RMI program has grown exponentially since then with approximately 800 students taking the program’s “Introduction to Risk Management” course each semester. the school’s RMI program has brought in more than $90. including the Angus Robinson. including the Carolinas Chapter of RIMS. The school’s RMI Society invites professionals to speak to students each month and schedules philanthropic events such as working with Habitat for Humanity. And GSU is keeping pace with the industry—the school recently created the Center for Economic Analysis of Risk. the J. Students are active with Florida industry associations and have travelled to the RIMS Annual Conference and Exhibition for the previous eight years. Ball State University 28 This Muncie. 3. and one of its students. Olivet College 30 Last year. And for the past 20 years. Robert Hoyt. visit RMmagazine. 1. when fully operational. went on to form the International Insurance Society. students from the program have been chosen to participate in the Anita Benedetti student involvement program. bigger is not always better. UGA’s chair of insurance. Florida State University 44 FSU’s RMI department houses two insurance centers—the Florida Catastrophic Storm Risk Management Center (Cat Center) and the Center for Insurance Research. The R. University of Georgia 129 UGA boasts the largest undergraduate program of its kind in the United States.” said Dr. a research center that. Cooley Law School to assist with the creation of the Master of Laws in Insurance law degree (one of only two in the nation).000 from local industry associations and individuals. The program has its own advisory board made up of industry leaders. Jr. 6. Olivet unveiled its Risk Management and Insurance Center. n 34 September 2010 . and its Terry College of Business grads have gone on to work for HBO. Georgia State University 39 Founded in 1953. 8. the school partnered with the Thomas M. research and service was given a boost this year with the formation of the Risk Management and Insurance Alumni Association. the school’s RMI program has had 13 students earn the University Associate— Certified Risk Manager designation. App State is a powerhouse. and nearly every student is involved in Gamma Iota Sigma. the international risk management fraternity.

which captured the staged accident. or helping to mitigate potential losses. and then came to us. When a patron claimed to take a bad fall outside the entrance of a major retail establishment. our general liability experts are committed to helping you protect your business. The fraudulent claim was then denied and referred to the local authorities. © 2010 Liberty Mutual Group. keeping you informed. Whether it’s responding quickly. the manager first went to her aid. contact your broker or agent or visit libertymutualgroup. Risk management planning had ensured there were anti-slip mats at the entrance and a surveillance camera. protecting the customer from unwarranted losses and potential litigation. For more information. LIABILITY COMMERCIAL AUTO PROPERTY WORKERS COMPENSATION .NOBODY WANTS TO TAKE THE FALL FOR A FICTITIOUS CLAIM. That’s our policy.com/gl.

Everyone realizes that [Penn State’s] reputation rises and falls with how we are perceived.” said Liebowitz.Safeguarding the Ivory Tower niversities have incredibly complex risk profiles. They don’t want to be in the news.[They] ask ‘what can we do to make our schools better?’” Fitting that this attitude is so aligned with the very concept of education.” said Liebowitz.” said Langsdale. But that 1% may have great drawbacks. and that can help translate across all operations. “When I came to higher education.” And when everyone is working to ensure that their individual shop stays clean.” said Langsdale. but because they are compelled to by the admiration they have for the 155-year-old name on their paycheck.. And.” Some students may disagree. even uncertainty cannot overwhelm the university risk managers of today. “Reputation is a result of other risks being managed well or not. universities have been among those that have done the best. “Kids continue to enroll.” Uncertainty can be similarly troubling for Liebowitz. “We have people all across the state thinking up new ideas. it is actually not the most difficult to manage.” said Altiere. director of risk management and insurance for New York University. Where else might you have teenagers and octogenarians intermingling alongside football stadiums housing tens of thousands of fans. who in addition to protecting students in the City That Never Sleeps has to keep track of both young adults and staffers all across the world— no matter how inaccessible they may be. n 36 September 2010 . “The thing that worries me the most is what we know we don’t know.” said Langsdale.” said Frank Altiere.” he said. “My ‘little’ city spans the world.” But much like their peers in the public sector. “you have to be comfortable standing in front of the press saying that you did all you could have done. “No matter what happens.. But they haven’t. Fortunately. The people I talk to really want to continue to improve their institutions. it’s easy to say ‘what if?’” said Altiere. But that has not been the case. “When there was an earthquake in Haiti. “Ninety-nine percent of them are great and may benefit humanity. that community is far from small. however.” “We love being on the front page of the sports section.” said Altiere. however. that same mentality is now driving university risk management. if fewer treated their college experience like Animal House. Keeping students safe would be a lot easier. Protecting buildings is one thing. Penn State University But according to Altiere.” said Langsdale. one of the PMA Companies. “In other places. Langsdale defi- nitely did not anticipate that when he entered the world of university risk management. a PMA client well versed in the risks of an institution where college football reigns. This constant search for personal improvement drives higher learning. they probably have it. “There is tremendous pride. that is improvement.” Gary Langsdale. higher education institutions also tend to be culturally attuned to the necessity of risk management. so they could become complacent. “But we have 20. The foundation of higher learning is parents wanting their children to live a better life than they had. The need to protect students is easy for anyone to grasp. “It is an operation that doesn’t sleep. who has been at Penn State for seven years and in risk management for more than three decades. “We don’t love being on the front page of the news section.” Penn State has a research nuclear reactor.. president of PMA Management Corp. The greatest—and highest profile—risk is the students. “We love being on the front page of the sports section. While student safety may be the greatest risk. “You name it.” – Gary Langsdale. as soon as he attends a football game with 50. “We have a really small risk management staff.” said Michael Liebowitz. university risk managers are also tasked with safeguarding what is essentially a small city. It’s the person that is running a program that I don’t know they’re unqualified to run.000 staff members who want to do what’s right. The school also has a sociology lab in Center City Philadelphia and conducts nanotechnology research.” One thing that helps Langsdale is the fact that the university is an iconic state institution. the risks of which may be very real but are still not widely understood. feels the same way. Those that PMA works with stand out for their ability to understand all the diverse exposures they face. but for Langsdale. for example. a Pennsylvania-based provider of risk management services to more than 200 colleges and universities. “These are the things. I thought it would be all about the risks related to the students. things can still go wrong. there is a pride for the products they create or for the work of the department.” said Langsdale. science labs containing combustible chemicals and fraternities hosting inebriated coeds? To handle all this. according to Altiere. “Now we’re down to number three. It’s 24/7/365. “We’re on every continent except Australia. working at Penn State is unlike working for any old company. “We have all the same exposures. This is different.” said Langsdale.” Of course. “It’s very similar to a multi-national corporation.” Making matters worse is how many exposures major universities face. but the lives of teenagers cannot be quantified. the universitywide image is safer. risk managers at higher learning institutions must do much of the same work of their corporate counterparts. “For the president of a university.000 people.” And since it is NYU.” They do what’s right not out of mandate. We don’t love being on the front page of the news section. “There’s a lot of what ifs. university risk officer for Pennsylvania State University. “Of all the industries that have gone through this recession.” said Liebowitz. I had to know where everyone who might be there was. even with the best risk by Jared Wade U management plans. For Pennsylvanians. “It is like a city. We have a student body in the tens of thousands. The key is being able to show that there was no negligence on the part of the school. “Penn State used to be the number-one party school. noting NYU’s global reach from Buenos Aires to a brand new campus in Abu Dhabi. We have a workforce in the tens of thousands.” said Langsdale. “I have to do that every time something catastrophic happens.

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there are several federal U. they have no obligation to advise clients in regard to policy terms and conditions. Nor are they obligated to ensure that their clients have the most appropriate coverage. In fact. court cases proving the importance of ensuring that your insurance broker is actually acting as your fiduciary.S.Brokers may not Be legally required to give the Best advice A MAtter of trust A lthough insurance agents have a duty to act with reasonable care towards their clients. by Marcus Wagner 38 September 2010 .

.Don’t let summer end without sharing the benefits of RIMS membership! Summer 2010 Member-Get-A-Member Initiative As an active member. you have experienced the value of RIMS. Anyone with risk responsibilities can join! Recruit new Corporate or Associate members and receive a $25 Amazon Gift Card for each new member you recruit between August 16 – September 30.org/SummerRecruit2010 *For the purposes of this program. Limited 5 gift cards per person. Take time this summer to share the learning.RIMS. a new member is defined as an individual who has never been a member of RIMS.* For details visit: go. resources and connections of RIMS with your colleagues.

1. federal court determined that a company’s agent did not have a duty to advise its client on the most appropriate insurance coverage. 2. uninsured event occurs. disagree. which will eventually be passed on to clients.. the agent of the insurer. Brokers typically receive a 15% to 20% commission for their services.” according to the London-based Association of Insurance and Risk Managers (AIRMIC).5% additional commission is justified for the services a broker provides in a changing marketplace heavily dependent on expensive technology. In some countries. Australia and New Zealand—brokers continue to believe that it is acceptable to work for the insurer and client. in reality. a Houston-based CPA firm. 40 September 2010 . had no fiduciary duty to its client because the broker was. If a trust does not exist. Great Northern Insurance ruled that the broker. reasonable prudential agent. This announcement came in response to Aon’s announcement that it has “decided to accept various forms of compensation available. claiming it is an effort for brokers to buy time to sort out business models that were previously dependent on contingent commissions at the expense of clients and carriers.S. “There should be total clarity about whether the intermediary is acting on behalf of the buyer or the insurer and that it is no longer acceptable for brokers to work for both parties during the same transaction. 4. In Europe. n Marcus Wagner. Given this. Dirk Verbeek. Customers should be made aware where there is a chain of intermediaries. including the United States and New Zealand. it is passed along to the client in the form of higher premiums. Ferguson & Wagner. disclosure and the conflicts of interest that exist in the commercial insurance market. In addition.” Another judge agreed. Critics of the 2. they still misunderstand the need to establish a fiduciary duty from their insurance advisor. every risk manager should question his or her broker relationship. said the 2.” While the highly contentious issue of contingent commissions has resurfaced of late. Customers should have clear and comparable information about the commissions that intermediaries receive. brokers sometimes charge their clients a fee. the insurance buying process will be sufficiently transparent for buyers to access the information they need and make informed decisions.4 million on top of a $2. most companies discover that they were inadequately insured only after it is too late—when a major. some brokers also want insurers to pay an additional 2. No client/broker relationship existed beyond those of an “ordinary.5% commission. this add-on fee was $1. The judge in Sewall v. a nonprofit advocacy group for risk managers and publisher of this magazine. a U. While many businesses are now more aware of the need for transparency. State Farm Fire and Casualty Co. tell them when they are underinsured or inform them of additional coverage that may be available from different insurers. which may include supplemental and/or contingent commissions. you may be paying more for coverage and receiving less.A Matter of Trust In 2008. Is Your Agent Your FIducIArY? A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. And while this.6 million actual premium. But in most countries—especially the United States. Most companies feel comfortable with their current insurance arrangements because they have a good relationship with their broker and have received prompt service in the past. The Risk and Insurance Management Society (RIMS). Unfortunately. In one example of broker exploitation. the most important thing for insurance buyers to understand is that all commissions paid to brokers comes out of the insurer’s profits. “RIMS reaffirms its position that contingent fees for insurance producers should be prohibited. And the United Kingdom’s Financial Services Authority (FSA) has identified five guidelines that will help all business insurance customers improve their relationship with their brokers. 3. will not be enough to establish the special relationship needed for your broker to be a true fiduciary. Insurance agents do not have any duty to identify their clients’ needs. and that in the absence of prohibition. Customers should have clear information about the capacity in which an intermediary is acting. Many insurance buyers also underestimate the power of fees in their broker relationship. these fees can be camouflaged into the premium so the client is not aware what is being charged above the actual premium. If the insurer is not prepared to absorb that cost. Customers should have clear and comparable information about the services intermediaries are providing. Customers should be alerted to their right to request commission information. Professional Lines Insurance Brokerage Inc. Some insurers claim they have difficulty understanding the potential for conflict of interest. UK chairman and CEO of Aon Risk Services International. 5. according to a 1998 ruling in Cameron School Board v. all compensation arrangements should be fully disclosed to the client.” stated RIMS. CPA. The FSA believes that if these guidelines are met.5% commission. in and of itself. it is a good start. is a partner and the advisory practice leader of Calvetti. Skeptics often claim that this inability to understand is blurred by money. once again spoke out against contingents in July.

visit www. . Through case studies. Contractual Risk Transfer* September 27-28 | Houston Developing a Risk Management Program for your Organization* September 30-October 1 | Edmonton Enterprise-wide Risk Management: Developing and Implementing* October 4-6 | Atlanta Developing and Implementing a Captive Insurance Company* October 4-5 | New York Financial Aspects of Insurance Companies and Captives* October 6-7 | New York Enterprise-wide Risk Management: Developing and Implementing* October 6-8 | Chicago Fundamentals of Insurance October 12-13 | Denver Techniques of Risk Management October 14-15 | Denver Empresas De Seguros Cautivas October 14-15 | Bermuda Directors and Officers Liability and Insurance* October 18-19 | San Jose Enterprise Risk Management for the Advanced Practitioner* October 21-22 | Vancouver Enterprise-wide Risk Management: Developing and Implementing* October 27-29 | Kansas City Claims Management* October 28-29 | New York Global Insurance Management* NEW November 1-2 | Toronto Enterprise-wide Risk Management: Developing and Implementing* November 3-5 | Dallas Business Continuity/Disaster Planning and Management* November 4-5 | Charlotte 2010 RIMS Enterprise Risk Management Summit November 4-5 | San Francisco Project Risk Management NEW November 15-16 | New York Enterprise Risk Management* November 18-19 | Nashville Fundamentals of Insurance November 18-19 | Orlando Risk Analysis Tools for Effective Risk Management* December 6-7 | New York Resources | Networking | Opportunities Enterprise-wide Risk Management: Developing and Implementing* November 17-19 | Seattle Supply Chain Risk Management* December 9-10 | New York Register today! go.RIMS.org/AboutRF.LEARNRISK RIMS Professional Development RIMS educational workshops help you solve today’s challenges and anticipate those of tomorrow. KNOW RISK? KNOW RIMS.org/SEPT For details on the RIMS Fellow (RF) designation.RIMS. our workshops will show you common pitfalls to avoid and provide solutions you can use immediately. group discussions and best practices.

thereby putting their employees at a disadvantage by not allowing them to capitalize on the latest in technology. At first glance. I do respect the band’s ability to inspire their devoted fan base of Deadheads and to remain successful for decades without ever really having a chart-busting hit. and became one of the most successful touring bands in music history. when the surviving members of the band. As authors David Meerman Scott and Brian Halligan point out. The Grateful Dead’s story can also teach businesses the value of embracing technology. they created networking tools like Facebook or LinkedIn. Believe it or not. however. Not bad for a bunch of dirty hippies. And they let their fans organically create a community where eccentricity was embraced. the fact that the band allowed fans to record and share their concerts. by going against accepted practices. faster end of the music spectrum when I discovered that I could listen to an entire punk rock album in the time it took the Grateful Dead to get through one of their seemingly endless jams. In each case. entertaining and thoughtprovoking.Shelf Life ruth be told. While every other band outlawed the practice for fear that people would stop buying concert tickets. but eventually my interests turned to the louder. It is a lesson that any company concerned with giving away their products online would be wise to consider. Take. They bypassed ticketing services like Ticketmaster and established their own ticketing office to give their fans access to the best seats. underneath all the tie-dye. the Grateful Dead actually set up special “taper sections” at each show so that fans could record the music for free. lie some valuable lessons for modern business. T MarkeTing LeSSonS froM The graTefuL DeaD What every Business Can Learn from the Most iconic Band in history by David Meerman Scott and Brian Halligan a mailing list from a direct appeal on an album jacket when most bands turned up their noses at such direct communication with their audience. I listened to them in college. But despite the fact that their music doesn’t really appeal to me anymore. the Grateful Dead continuously built a loyal following that sang the praises of their “product. This innovation continued in 2009. under their newest musical incarnation. the Dead were successful because their unconventional ways were actually a precursor to the social marketing strategies that so many companies have adopted today. for example. man. –Morgan O’Rourke 42 September 2010 . If a bunch of musicians can see the value in the latest gadgets. the band invented new sound equipment when the need presented itself and made their concerts into one-of-akind spectacles. Sure. patchouli and good vibes. In the mid-1970s. life-long Deadheads to write about their favorite band. But the book. like the band. there is more to the story. I’m not much of a Grateful Dead fan. According to Marketing Lessons from the Grateful Dead. So much for diluting their ticket revenue.” If only our own social media efforts were so successful. defies expectations and proves to be accessible. like a lot of people. businesses certainly should be able to as well. debuted a real-time iPhone app that included streaming audio of their performances. Contrast this with companies that still block valuable The Dead were successful because their unconventional ways were actually a precursor to the social marketing strategies that so many companies have adopted today. The result? The Dead gained more and more fans. Or what about other unorthodox ways the Grateful Dead developed and nurtured their fan base? In the early 1970s. sold out stadiums across the world. Marketing Lessons from the Grateful Dead seems to be a bit of a stretch—an excuse for a couple of selfavowed.

is a driving force behind succeeding in any field. must give precedence to the rules and procedures of the company over the needs and desires of the individual w she supervises. Pfeffer claims that following the “straight and narrow” does not always pay off. this also deflates the manager and leads to a corporate culture where every stakeholder is being forced to either adhere to or enforce protocols that are incongruent with their personal values. the tenets of Bury My Hear at Conference Room B make it just like any other management tome. For that. But it has worked in some places. “the rules tend to favor—big surprise—the people who make the rules. It seems radical. empathy with others and capacity to tolerate conflict. however. In turn. In a way then. illustrating approaches that may have otherwise gone unnoticed. Bidding homage to Malcolm Gladwell. it is at least worth exploring.” The paradox in this relationship is that the manager.” But earning power does not come without conflict.” he writes. telling the reader where to start. make sure you are effective at managing those in power. traditionally. And it just might be.D PoweR why Some People Have It and others Don’t by Jeffrey Pfeffer id you know that an outstanding job performance may not guarantee a promotion—but could actually hurt an employee’s career? Hard to believe.” enforcing hierarchal mandates and. who tend to be the people who are already winning and in power. these sound obvious. –Jared Wade BuRy My HeaRt at ConfeRenCe RooM B the unbeatable Impact of truly Committed Managers by Stan Slap Risk Management 43 . Power: Why Some People Have It and Others Don’t. –Emily Holbrook hen it comes to management.” More specifically. working 12-hour days and being glued to a Blackberry at night and on the weekends are not signs of emotional commitment. Ultimately. influence the dimensions used to measure your accomplishments. The manager must be the “boss. not just work performance or talent. Stan Slap attempts to explore perhaps the one thing that every great manager needs: commitment. “What really drives employees is a sense that their personal values are being met in both their company and the environment at work. how to stand out and that. Pfeffer presents the idea of power (and wanting it) in a positive light. He gives the fictional example of a young IT professional who was so good at his job. he asserts. Using examples such as Soichiro Honda (founder of the Japanese automobile company) and Henry Kissinger. confidence. Even without a total cultural overhaul. but Pfeffer ties in case studies for each bit of advice. He shows how companies can tear down the wall between managers and subordinates and create a working environment where everyone is engaged. Pfeffer offers advice such as “don’t take things personally” and “be persistent. So while it may not be realistic for every company. there is no one right way to get the job done. Many have tried to codify the exact tenets an executive should follow to become a great manager. he states. but that is what Jeffrey Pfeffer is throwing out there in his most recent book. his manager would not let him advance towards other areas of the company because he feared losing his star employee. Pfeffer lists seven personal qualities that he feels builds power: ambition. In Bury My Heart at Conference Room B. most importantly. Or a classroom. I guess. Slap suggests that it does not have to be that way. at least some of these ideas can translate to a business where iron-fisted management will never go out of style.” Sure. selfknowledge. it is more art than science. that it is OK to break some rules. Power shows how political skill. which requires the ability to enhance the ego of those above you. and. The soft skills matter. deflating the ambition and commitment of her employees. Though some may associate power with greed and corruption. “Getting a big paycheck. and knowing how to deal with individuals in unique situations is not something that can be taught in a book. energy. To sidestep problems. Pfeffer’s point here is that doing great does not guarantee a promotion or raise. in the process. focus. mostly. but even the best lists cannot ensure success. you “need to be noticed.

The implementation of enterprise risk management has become common throughout the energy and resources industry. tors. In fact. The many risks facing energy companies also further dampen the current state of risk management in the sector.Findings Crude ERM Implementation To recognize the importance of risk management in the energy sector. the Netherlands since 1997. operational. only 48% of companies reported that they have a “fully operational” ERM program—more than three-fourths of which have existed for more than one year.” states the report. but actually monitoring and reporting on risks in any sort of systematic. A recent study by Deloitte confirms this fact. But it is much more inspiring—and believable—if the motivation comes from the company itself. but another important point also states that much of this cultural change is also driven by external factors—namely regula- Actually monitoring and reporting on risks in any sort of systematic. meaning that the 52% of companies without proper programs have a long way to go to catch up. More troubling is the fact that it takes industry companies between three and seven years to “bring ERM to an operational level. political instability. some for even longer (the UK since 1992. financial and compliance objectives. improving risk management is beneficial no matter the inspiration. greenhouse gas emissions and the uncertain regulatory environment all present unique risks. –JW 44 September 2010 . New technology related to renewable energy production—as well as a potential prolonged economic downturn in the West—also present challenges.” Ultimately. “European Corporate Governance regulations have incorporated risk management for a decade. Germany since 2000). Resource scarcity. worthwhile way is still a large challenge for most energy companies. potentially adverse weather events. one needs to look no further than the Gulf of Mexico. and the result is that one of the world’s largest. worthwhile way is still a large challenge for most companies. infrastructure obsolescence. Safeguards at BP were not as high of a priority as they should have been. The European CG regulations also define a broader scope for ERM that includes the management of risks for strategic. The survey does note that the rising priority of risk management is certainly related to companies wanting to improve their operational performance.” according to the study. most profitable companies is hemorrhaging money to the point that asset sell-offs have begun and takeover talks have been broached. “Regulatory compliance has been the main driver for a certain number of years due to increasingly complex multijurisdictional compliance requirements. says the “Risk Intelligence in the Energy & Resources Industry” survey.

report co-author.” The report highlights how the technology’s recent rise in popularity has caused a shift from the reliable and secure traditional telephone network to an “internet environment of extreme risk.S. including the government. insurance providers. The security of VoIP is in question. corporate insurance brokers received an “excellent” rating from more than 30% of their corporate clients. But that is not the case currently.” Just as the information of users is at risk with each boot up of a computer. and Japanese wind and earthquake perils. At risk are a growing number of insured sectors that rely on VoIP. Despite the surge in activity. The report anticipates a drop in appetite for U.” –EH the 10 largest U. banking industry and hospitals.5% from the end of 2009. effort and money in trying to develop strong brands. the ability to transmit more than one call over a single broadband connection and location independence. which is a drop of slightly less than 1% from the first quarter of 2010 and 5. dependence and confidence. one of trust. Only two firms out of Betting on Cat Bonds Despite continued reports of an active Atlantic hurricane season.VoIP Phobia Voice over internet protocol (VoIP) has become a popular way for a tech-savvy society to conduct calls over the internet. but rather to the increased interest in catastrophe bonds as a method of risk transfer. companies and individuals can benefit from reduced communication and infrastructure costs. according to the “2010 Large Corporate Insurance Study” conducted by Greenwich Associates. spelling bad news for the major insurance brokers. historically.S.8 billion. The data does not point to a lack of faith in hurricane prediction. The risk managers surveyed expressed low satisfaction with the service they are receiving from virtually all U. By using this method. “The fact that companies see little distinction between major brokers and carriers will come as unwelcome news to insurance providers. according to Guy Carpenter & Company and GC Securities. hacking. the second quarter of 2010 was the second-most active quarter on record.S. have forced brokers to put their focus on their bottom lines instead of their crucial client relationships. however. “The effect on our economy will be profound. earthquake. users of VoIP will be at risk from hostile acts such as spying. client broker with Greenwich Associates. intrusion. totaling more than $2 ance losses. –EH billion in risk capital. A recent report issued by Emerson Development states that “the unprotected internet-based telephone services are expected to produce major insur- Rocky Relationship The relationship between corporate risk managers and their insurance brokers is. –MO’R Risk Management 45 . stemming from a stalwart economy. European wind. seven of the eight catastrophe bond transactions completed in the second quarter of 2010 included exposure to U. With eight catastrophe bond transactions (the one non-wind storm-based bond was for exposure to New Madrid earthquake risk in the Midwest). identity and intellectual property theft and interruption of service.S.” said Brett McNeice. rather than the public telephone network. “Cyber insurance products will be created for users of VoIP as well as for VoIP providers and vendors. Those two firms (Beecher Carlson Insurance and BB&T) are relatively small. many of which make large investments of time. hurricane losses. The survey finds there is a growing disconnect between corporate risk managers and their insurance brokers—a situation with alarming potential consequences. It seems that recent declines in revenue. however. military. the report revealed that total risk capital in the second quarter fell to $11.” said Glenn Tippy. Some analysts have theorized that the rise in transactions and the corresponding drop in capital invested indicate that the cat bond market lacks enough options for the diversification of risk. hurricane exposure but indicates that investors still have a strong interest in U.S.

2% 6. Implement a media relations plan. Monitor conditions for further catastrophe 16.8% 20.0% 5. communications and IT plans to avoid disruption 4.8% 8 StepS to take after a DiSaSter 1. Contact vendors and clients 8. if necessary Source: Allianz Source: Oliver Wyman/Financial Times’ “Global Emerging Risks Survey” 46 September 2010 .8% 10 3. Communicate emergency plan to employees 8.4% 8. Implement information. Separate and salvage equipment and stock that is damaged 6.2% 0 Liquidity/Credit Crunch Global Recession Regulation/Policy Risk Financial Market Volatility Commodity Price Volatility Natural Catastrophe/Extreme Weather Major Country/Economy Collapse Increased Protectionism Terrorism/Acts of War Accelerating Pace of Tech Change Data/Intellectual Property Theft Energy/Resource Scarcity Supply Chain Fragility Pandemics/Infectious Disease Expropriation/Political Risk Supply Chain Quality Cost In ation 5. 60 50 35. Document and photograph damaged property 7.8% 4.8% 30 21.0% 10. ” 34.8% 40 50.8% 20 9. a Haitian musician.4% 2. Contact your insurance carrier/broker 5.Hindsight Risks That Worry the Most Execs 80 68.2% – Wyclef Jean. after being asked about his campaign to become president of Haiti.4% 4.8% 70 “ Source: Time I can’t sing forever.8% 5.

” Only 8% say “very. 2010 – date that Paul ceglia sued Facebook and its owner Mark Zuckerberg $1. of all countries.” while 21% say “somewhat. plus another 1% of interest for each day after January 1.” of men think that. but not as much as I used to be. “i guess i’m going to have to hire [Zuckerberg] to keep running the company.” only 1% actually “did something about it. then 18 years old. 2009 Source: Bloomberg BusinessWeek Risk Management 47 .000 – amount ceglia alleges that he invested in “the Face book” in 2003. they purchased from ceglia’s company prior to him being arrested for fraud by state police officers on october 30. that the site launch was delayed 84% – stake in Facebook that ceglia alleges that he is now entitled to. North Korea (16%). that is an estimated $21 billion.” Source: AskMen. “if at some point in the future i start running Facebook. of men say that they have been sexually harassed in the workplace and while 6% admit to have been “bothered by it. not anymore. signed a contract giving ceglia a 50% stake in the project. 2004.” and 7% say “not at all. they’re still out there. 13% say they have betrayed their own sense of ethics for business but regret it while 9% have followed suit—and would do it again. when asked “how scared are you of terrorists?” say that “I never was.The State of Men 58% 27% 38% 43% of men think moral standards in business are in decline. which provide eco-friendly heating.” More than 24 – number of complaints from customers alleging that they had never received the wood pellets. China (28%).” said ceglia. based on the current value of the company.com’s “Great Male Survey: 2010 Edition” Fraudster sues Facebook For $21 billion June 20. after which Zuckerberg. of men. Iran (13%) and Pakistan (5%) round out the Top 5. the United States poses the biggest threat to the United States.

) IPv6 is a 128-bit system. But what this issue really shows is that. or IPv6. This will not be a problem initially since the two systems will run side-by-side for a while. where the calendar served as an hourglass. the internet is going to get some new numbers as well. but that doesn’t mean you should never carry an umbrella. there will come a time when your web applications will be obsolete and your trusty.) But there is a solution. While many of the major sites like Google. this makes the need for IPv6 adoption less immediate. smartphones and even the latest refrigerators to access the internet. many older systems (and we are talking only five years or older) are not. old computer will not be able to communicate with newer technology or access the latest websites.Last Word The End of the Internet It sounds unfathomable but. since it is an issue with little perceived urgency. service providers have also started implementing an alternative called network address translation (NAT). the vast majority do not. But the fact remains that IP addresses are running out. And they’re going fast—every day or two another million are used up. well. no matter how far down the road they might seem. Back 30 years ago. As of early August. (There are actually multiple websites that count down this sort of thing. According to experts. (For those of you wondering what happened to version 5. which lags behind Europe. Much like how phone companies add new area codes when they run out of phone numbers. you can’t predict the future. By constantly underestimating the impact of the latest gadgets. it will be moving to an entirely new system—internet protocol version 6. Sure. forever. In short. To put it another way. as it is more commonly known. when IPv4 was implemented. once again. in less than a year’s time. In the meantime though. particularly in North America. the internet will be completely full. But this is a bit more complicated than it seems because there is no deadline for the switch. This level of complexity will not only improve the performance and security of internet applications. like a nightclub that has reached its capacity. the internet is almost out of space. this new system should probably cover our needs for. believe it or not. that is more than 50 billion billion billion addresses for every person on earth. YouTube and Facebook already have IPv6 versions. but is actually 340 followed by 36 zeros. we end up costing ourselves so much more time and money than we would have had we just planned a little better in the first place. And although most new gadgets are made to be IPv6 compatible. Unlike Y2K. is a 32-bit data system that can “only” accommodate some four billion unique addresses. which allows for the allocation of a single IP address to multiple users depending on who is active at the time. Obviously. but since they are not compatible. This is because the current addressing system. four billion addresses seemed like plenty. Asia and Australia in IPv6 penetration. just like with Y2K. we will have run out of available IP (internet protocol) addresses—the codes that allow devices such as computers. known as IPv4 (internet protocol version 4). And it won’t matter if you know the bouncer—you’re not getting in. the IPv6 transition will happen more gradually. the transition will not be by Morgan O’Rourke simple. Supposedly. and a new system is inevitable. Once that happens. But the proliferation of internet-enabled technology across the globe has exhausted those addresses at a rate no one anticipated. there were less than 230 million addresses left. n 48 September 2010 . move everything to IPv6 and let everyone go on their merry way. It is not like the internet fairies can just flip a switch. In addition. it was designed for another application and has since been abandoned. According to some experts. you need an upgrade plan for your networked technology if you don’t have one already. Technology moves fast and we need to become more accustomed to moving with it and anticipating potential problems. it will allow for more than 340 undecillion IP addresses—a number that sounds imaginary. Actually. that’s enough to give an IP address to every grain of sand on the planet. Websites need to specifically configured to the new system. we seem to have a blind spot when it comes to new technology.

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to make sure that what’s most important to them is truly secure.YOU JOU R RNE Y. Coverage may not be available in all jurisdictions and is subject to actual policy language. Learn more at www.com All products are written by insurance company subsidiaries or affiliates of Chartis Inc.chartisinsurance. . please visit our website at www.chartisinsurance.com. Our financial strength and decades of experience mean we can go farther for our clients. Ma ke t he m ost of Chartis will be at your side. For additional information.

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