EVERGREEN BREWING

COMPANY

Enterprise Risk Management

Report

Prepared By:
Domonique Aguilera
Kathryn Arbogast
Kevin Arsenault
Lauren Ferrara

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INTRODUCTION

Over the past few weeks, our firm has been working diligently to review and examine Evergreen
Brewing Company, LLC (EBC) operations through an enterprise risk management approach.
We are pleased to provide your organization with insurance and risk management expertise in
hopes of reducing your total cost of risk, while preparing your business for the future. Like any
business, EBC has experienced continuous growth and innovation since the moment you
opened your doors for business. Continued growth calls for consistent monitoring and
implementation of an adaptive risk management program. We understand that your current
broker has not recommended any sort of changes to your insurance program for some time,
and that is why we conducted a complete overview of your operations to date. The report below
addresses each of EBC’s operational exposures on an individual basis. To provide deeper
analysis of the exposure, we go into further detail by indicating the potential loss size, how the
business’s practices increase this exposure, and our recommendations for minimizing the risk.
Below is a table that we utilized throughout our analysis to help quantify the risk that were
harder to measure in value. We also used a heat map to help give a visual representation for
those harder to measure risks. Our overall strategy of this report is to make sure that your
business has a risk management program that is tailored to your needs and supporting your
business goals. For our analysis we will use Figure 1 to measure EBC’s frequency and severity
using a scale of one to five.

Figure 1

Frequency: Likelihood of Occurrence  Severity: Cost of Risk’s Impact

 
 Low   Low 
 Low – Moderate   Low – Moderate 
 Moderate   Moderate 
 Moderate – High   Moderate – High 
 High   High 

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PROPERTY RISK

Machinery/Equipment

As a local brewery, Evergreen Brewing Company, LLC has agreed to take on the additional risk
that go beyond the traditional bar business model. The business operations for the company
entail not only the consumption and sale of alcohol, but also the creation of these alcoholic
beverages. In order, to fulfill the business’s operations, EBC had to invest in multiple pieces of
machinery for the brewing process. Some of the large pieces of equipment utilized are
fermentation tanks, brite tanks, and refrigeration. Most of the equipment is located on-site and
next to where EBC sells their product to the public. Some of the equipment is simple to replace
or repair, however, the larger ticket items used in the brewing process would take weeks to
replace. On average, not only would this impact the business productivity, but we believe the
replacement of these larger pieces of equipment would significantly impact EBC’s income and
expenses.

In addition to the brewing equipment, EBC invested close to $40,000 in handcrafted furniture
and equipment for the enjoyment of their patrons. Lastly, the use of computers heavily
influences the business operations of EBC. According to the information provided, sophisticated
computer systems help with the inner workings of the brewing process and help facilitate the
financial functions of the business. A loss to the computer systems and equipment would
drastically impact the daily operations of EBC. Based off our analysis, we see the frequency of
an equipment loss resting on the moderate side with a value of 3. However, we feel that the
severity of these events is on the lower to moderate side.

For EBC to properly protect their investment in equipment and machinery, we recommend both
risk transfer and loss control solutions. First, we advise that EBC obtain Equipment Breakdown
insurance to properly cover the direct loss to their machinery. The coverage would also provide
them with some business income and extra expense coverage in the event of a loss. We also
recommend that all machinery covered by the policy is on a replacement cost basis. Another
way to reduce the risk exposure associated with the equipment is performing routine
maintenance and test. If the organization makes it a priority to ensure the equipment is properly
running at all times, we can decrease the frequency of a loss and improve the lifespan of their
machinery.

Inventory

Evergreen Brewing Company, LLC has an annual capacity of 6,000 barrels of brew beer.
Throughout the year, the company provides their customers with a mix of rotational beers,
regular beers, and ones provided by other breweries. According to the information provided to
our firm, EBC on average has about $5,000 worth of beer throughout different stages of the
brewing process or in the taps. In addition, to the liquid product on premise, EBC has about
$300 worth of dry yeast located in their walk-in fridge. The company also has about $50,000
worth of malted barley located off premise at their warehouse. Due to the monetary values
associated with the product and our review of past inventory losses over the years, we valued
the frequency at a 4 and the severity at a 2.

Our firms believe that the best way to mitigate the risk of inventory exposure is through risk
transfer and some loss control. The high value for frequency was inputted due to the data
provided in the loss history. However, the events that contributed to those losses were out of

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EBC’s control and resulted from power outages. EBC can transfer the risk through a commercial
property policy, along with an endorsement that will cover the different finished and unfinished
product that the company owns. Also, for loss control strategies the company could think
of installing a generator to ensure that there is no spoilage of inventory or product in the event of
a power shortage.

Warehouse

Located just a short distance away from the brewery, is EBC’s off-site warehouse. Compared to
the business’s main location, the warehouse opens the business up to a huge property
exposure. The composition of the building is 15-year-old wood frame that is in fair condition. On
top of the less-than-ideal construction material, the building has no sprinkler or alarm systems
installed at this time. This exposure could pose a huge loss to the inventory, marketing
products, machinery that is located off-site in this warehouse. The only concrete monetary value
that we could tie to a fire loss at the warehouse is the $50,000 in malted barley that EBC stores
there. Based off our analysis, we believe that the frequency of this event is on the lower side
with a ranking of 2, but the severity of the event receives a value of 4 due to the structural
elements and lack of security.

To properly protect EBC from this risk moving forward, we need to ensure that the correct
amount of insurance is in place for the business. However, having a property policy in place that
covers the premise and contents to full values is not the only strategy we need to consider.
Although, sprinkler systems and alarms are not required by the law, the increased safety factor
of installing these systems greatly reduces the severity of a potential loss in the event of a fire or
theft. The leadership at EBC also needs to make sure that all emergency exits are free and
clear in the event of a situation. Currently, it is reported that heavy furniture blocks an
emergency exit, and this could increase the severity of a loss by not allowing rescue efforts to
easily access the building. A business practice like this could be quickly addressed by
developing and implementing safety rules and procedures for all EBC premises.

LIABILITY RISK

Product

While we understand that EBC is dedicated to providing their customers with the highest quality
of products, there are a few areas of concern in the business operations. After our extensive
analysis of the products and services offered by EBC’s business, we were able to uncover the
different risk exposures that could impact the business. These kinds of exposures are worth
addressing because these issues can not only open EBC to a liability claim, but it can also
cause reputational damage to the business. First, let’s start out by looking at the exposure that
was created due to the pandemic impacting the business. EBC decided to shift its efforts toward
packaging their product for customers to have their products at home due to businesses being
shut down. This introduces a new exposure for the business operations since the products are
now leaving the premise. This exposure could remain present after the pandemic if EBC picks
their talks up again about distributing their products through hotels and restaurants. Also, it is
unclear if EBC is going to replace the food trucks with their kitchen or continue hosting the food
trucks. Food trucks create an independent contractor’s exposure [1]. Although the food trucks
are a separate entity, they are on the property of Evergreen Brewing Company serving EBC’s
guest. Either way, EBC has a major risk exposure when it comes to including food in their
business’s operations. Lastly, there needs to be a consideration about possible contamination of
the grains and malted barley stored off premise in the warehouse. The chemicals and fumes

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from their neighboring furniture repair and re-finishing shop and pet supplies company, could
impact the quality of ingredients being served. Since, there has not been a claim to date
regarding these exposures we decided to provide the frequency and severity with the same
ranking of a 3. We feel that due to the nature of EBC ramping up the production and services
provided these risks could be of moderate impact to the business.

Since there are a few issues that create a liability exposure for EBC there are some safety
measures the business needs to consider moving forward. With regards to the food trucks, food
poisoning is a very big area of concern when serving food. If EBC continues using the food
trucks they need to make sure that the food trucks have proper permits and are in good
standing with the health department. Should EBC decided to move forward with open their own
kitchen is another area of concern that we could address through proper insurance coverage
and food safety techniques. Another area to address and mitigate is the possible contaminate
aspect of EBC’s neighbors at the warehouse. The companies mentioned prior were a pet
supplies company and a furniture refinishing business. Due to the contaminate from these
businesses that could impact the ingredients served to EBC’s customers, we recommended
containing all ingredients from the brewery process on-site and within the proper brewing
facilities. This will ensure that no chemicals or cross contaminate from off-site exposures or
transportation effect the quality of ingredients. Lastly, with the pandemic changing the business
operations to a more to-go model than on-site services, EBC needs to make sure that they are
updating their business operations with their carrier.
One type of liability that we identified within EBC’s products liability is contamination from
packaging, such as a foreign object in the containers or contamination since they outsource the
packaging of their 6-packs. This is a high risk, and it would be advised for them to either
cannister their own 6-packs or to ensure they have the proper coverage in case of
contamination, or a foreign object found in a can. In terms of the likelihood of such an event we
would say it is rare and would place it as a 1, and in terms of severity it would be high, around 4
or possibly 5. This is not the only product liability that is present for EBC, they also have the
liability of the beer canisters being pressurized and collapsing or causing an explosion and
damaging the surrounding area. This would also be considered a high risk due to the severity.
It would have a high severity rating because of the damage done to the brewery itself but it
would have a low frequency risk.

EBC gets its grain from one supplier, Cole, and this creates risks around the grain being
contaminated or an outage due to Cole not having enough grain. To help prevent contaminated
grain from being used it is suggested that the brewery have an onsite testing facility to test
products coming in to ensure quality control. The frequency of an item being contaminated or
outdated is around a 2 and the severity would be a 3 because the contaminated grain would
make a bad batch of beer. All foreign materials should be inspected before the brewing process
begins, to ensure the product is in order with FDA’s standards and that no foreign substances
have entered the processing area. Ensuring the products are not contaminated helps prevent
patrons getting sick from drinking the brews offered by EBC.

This is not the only liability present in terms of grain for Evergreen. EBC also faces liability
because they are considering giving their spent grains to a local bakery for dog biscuits. If they
were to give the bakery outdated grain which resulted in dogs that ate the biscuits getting sick,
then they would be liable. The risk of such action would be moderate, the severity would be a 4
and the frequency would be around a 2, since spent grains may be used for dog biscuits. The
American Homebrewers Association has several recipes for dog treats that use spent grains.

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One way to help Evergreen from using out of date grains we recommend they implement a date
rotating system, to help identify any grains that are old so that they can be properly disposed of
to prevent it from spoiling the brews. A date rotating system is needed, as well as an effective
recall program, especially if EBC does decide to donate its spent grains to the local
bakery. Before donation, we recommend they effectively label that the product may contain
alcohol, to prevent any liability in the future. EBC not having these systems in place is
unacceptable and to help prevent loses, it is recommended that they implement said systems
immediately.

General Liability

EBC has a wide array of exposures when it comes to their general liability policies. We analyzed
many aspects of their day-to-day business and have identified many issues that could cause
problems which need to be addressed. Some of the issues we have identified are relative to the
industry whereas some of the issues identified are specific to EBC based on the protocols they
either have in place or need to have in place. One of the first issues we would like to address is
that they are a brewery and potential restaurant which has recently expanded. Since they are
considering possibly incorporating a small kitchen with a pizza oven this report will include that
aspect as well and assume that they have the proper permits and licenses. They need to make
sure to follow industry standards as well as heath regulations for proper storage such as
temperature of the beer and food to limit their risk of causing food born health issues to guest. If
they decide to open the kitchen, they will need to make sure they have the proper storage and
refrigeration systems. They will also need to hire more employees which will be discussed in
the employment part of the report. We have concluded that expanding and having a kitchen
significantly increases their liability we rate it a 3 for frequency and a 4 for severity.

The next exposure we identified was that dogs are allowed on the patio. They need to
reevaluate and to make sure that EBC’s insurance is aware of the potential exposure of dog
bites, guest allergies to dogs, or another injury related to allowing dogs on the patio. In our
conclusion we advise EBC to not allow dogs on the patio, but if they are not willing to implement
this change, they need to inform their insurance carrier of this exposure and make sure they
have the proper coverage. We would also like to note that some carriers will only accept liability
for certain dog breeds and exclude aggressive breeds, this will need to be verified with the
carrier. Since dogs are unpredictable, but there have been no loses we rate it a 2 for frequency
and a 3 for severity. We do see it as a potential exposure by allowing minors into the taproom,
even if only for certain hours, because it is not an atmosphere for minors. Especially while there
is no food service provided by EBC. When EBC implements the kitchen, this exposure could
change and will need to be reanalyzed. This is a minimal exposure, so we rate it a 1 for both
frequency and severity.

EBC has significant foot traffic. We have been advised that there is a Cornhole game on the
EBC’s premises. We have identified this as a potential hazard. Guest could potentially become
injured whether they are playing the game or not playing the game. If EBC continues to
host Cornhole on their property we suggest that they have rules posted and not allow
intoxicated guest to play. They should have clear markings of where to stand to prevent guest
from standing to close to help reduce possible injuries. Although Cornhole is not a dangerous
game according to The Cornhole Life, “when there is throwing, bending, squatting, and
celebrating involved and then go and add alcohol into the mix, you can bet there will be injuries”
[2]. As with any business there is always the possibly of slip and falls. EBC should make sure
that they keep their premises free of debris as well as dry. They have a large space when you
consider the indoor and out areas, the staff needs to be observant of spilled drinks and food and

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immediately clean up any messes. We find these exposures moderate to high with a rating of 4
for both frequency and severity.

Liquor Liability

Since EBC not only serves alcohol, but their whole business is centered around the sale of
alcohol, we would like to discuss their liquor liability. Since liquor liability is typically not included
in other business insurance policies such as; general liability, business owner, and workers
compensation policies, EBC needs to make sure they have a standalone liquor liability policy
since EBC is involved in selling, serving, and manufacturing alcoholic beverages. This policy
protects EBC in situations that arise from the sale of alcohol. This policy does not negate the
need for proper training of employees and implementing appropriate policies and
regulations. Those details will be discussed in another part of the report. A liquor liability policy
typically covers businesses if a guest injured another driver in a car accident after being served
alcohol at EBC or if a patron gets into an altercation with another patron. This is not the case in
the state of Florida. Section 768.125 states, “Liability for injury or damage resulting from
intoxication. A person who sells or furnishes alcoholic beverages to a person of lawful drinking
age shall not thereby become liable for injury or damage caused by or resulting from the
intoxication of such person, except that a person who willfully and unlawfully sells or furnishes
alcoholic beverages to a person who is not of lawful drinking age or who knowingly serves a
person habitually addicted to the use of any or all alcoholic beverages may become liable for
injury or damage caused by or resulting from the intoxication of such minor or person” [3]. So,
unless it can be proven that EBC sold alcohol to a person who is not of legal drinking age, which
is 21 in Florida, or who knowingly served a person habitually addicted to alcohol they would not
be held liable. Because of this we conclude that the most important aspect of EBC’s liquor
liability is proper training of their staff with a liquor liability policy to supplement just in case the
victim can prove negligence on the part of one of EBC’s employees. As long as EBC
implements our recommendations relating to alcohol we rate this moderately with a 3 for both
frequency and severity.

Auto Liability
Next, we evaluated EBC’s auto exposure. There have not been any losses to date, but we
need to make some good-faith recommendations since they have one vehicle designated for
business use. According to the Florida Highway Safety and Motor Vehicles the required
coverage is $10,000 Personal Injury Protection (PIP) and $10,000 Property Damage Liability
(PDL) for automobile insurance [5]. PIP coverage is a no-fault coverage that pays for 80% of
reasonable and necessary medical expenses related to an auto accident as well as some lost
wages and death benefits. These are the minimum coverages required by the state. After
conducting our analysis, we have concluded that although Florida is a no-fault state, we are
going to recommend that EBC carry much higher than state minimum limits. It is crucial that
EBC make sure they a have a commercial auto policy and we are going to recommend
1,000,000 combined single limits (CSL). Just because a state is no-fault, does not mean the
entity cannot be sued. Also, Florida is in the process of revising its insurance laws and it soon
could change from a no-fault state [6]. Having proper insurance coverage for your business is
a necessity especially for EBC’s auto insurance as well a listing all potential drivers on EBC
insurance policy. We would also note that all company drivers should be screened and have a
clean driving record. As well, we recommend that no employee caught drinking on the job shall
be allowed to operate the company vehicle. Lastly, Florida Statute 561.57 states, “Deliveries
made by a manufacturer or distributor away from his or her place of business may be made only
in vehicles that are owned or leased by the licensee” [7]. The statute also states that they are

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not prohibited from transporting the alcoholic beverages to and from their storage facilities on
their property. We have concluded that EBC can transfer brewing supplies from the warehouse
to the brewery as well as transport beer kegs for delivery to regional craft beer shows and
competitions. Since there have been no known occurrences relating to the automobile liability,
we rate it a 2 for frequency and a 5 for severity.

Event Liability

Event liability is another major factor that EBC faces, especially with the different events the
brewery hosts. Risks associated with events like trivia night, open mic night, and “brewga”
would include/but not limited to intoxicated guests getting injured, possible fight due to
intoxication or even a sober guest injuring themselves while attending the event. The liability of
someone being injured at an event on Evergreen property would be a 4 and the frequency
would be a 3 since it is possible that someone often injures themselves while on property. A
fight also presents the liability of damages done to brewery property and causing broken
furnishings or even a fire.

EBC must have the necessary safety precautions in place to prevent any injury to a patron
attending an event. Precautions such as good housekeeping, nonslip floor finishes and warning
signs posted when drink or food is spilled. One unacceptable action related to event liability is
that EBC has its emergency exit blocked by unfinished furnishings. This is extremely
unacceptable and a major risk to both employees and patrons. In the case of emergency, it
would be difficult for people to use the emergency exit to get free from harm’s way. The
unfinished furnishings should be relocated somewhere where they are out of sight and range of
customers to prevent injury and to not be in the way of the emergency exit.
During the events that EBC hosts, they often have a musician for entertainment purposes. The
risk associated with them having entertainment work events is that EBC pays for their services
with free beer, not money. This is a liability, especially since their employees may over serve
them and cause the performers to be intoxicated. This could lead to many more risks involving
employees, the performer’s and most importantly risk to the patron. This action by EBC is
unacceptable and we recommend they immediately create a budget to help cover musicians
playing events that they host. The risk of a musician creating liability from intoxication has a
severity of a 4 and the frequency of a 3.

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Cyber Risk

EBC utilizes computer systems to help with their brewing process and business’s financial
operations. There were several red flags we noted in our analysis regarding the cyber and
software risk associated with the business’s operations. For starters, the software system that
EBC currently has implemented was brought over from a rival company’s disgruntled employee.
In addition, to this business practice, the contracted rival company’s employee is the only one
with access to the program and is the only one who can perform back-ups. Also, it’s reported
that the devices employees use in customer transactions have been downloaded with several
games. The nature of these business practices open EBC and its patrons to several risks. It’s
already been reported that a customer noticed unexplained charges on their credit card and
questioned the level of cyber security EBC has in place. Due to the nature of these risk and the
business they are in, we feel that a frequency rating of 3 and a severity of 4 is appropriate for
this risk exposure.

There are several recommendations that we are offering to EBC regarding their business
practices and how they might be able to mitigate this risk exposure. The first thing leadership
needs to consider, is purchasing a commercial cyber policy. A business that’s production
operation rely heavily on computer systems should consider having a policy in place. Also, a
business that operates and deals with customer’s credit card data are a massive target for
potential cyber-attacks and breaches. Since most cyber-attacks that happen these days are
targeting small to middle sized businesses, a cyber policy would greatly help in the aftermath of
attack and making sure the business and its patron are properly protect. However, there are
recommendations we can offer for EBC to be proactive in avoiding this risk exposure. First, EBC
needs to implement a software system that was not stolen from a rival brewery. This could open
them up to a lawsuit, and it is in their best interest to trust their own propriety software. EBC
needs to also consider hiring on or training more individuals to handle the maintenance and
back-up tasks surrounding their systems. It is never a good idea to trust a singular person with
such an important function of your business, especially if that person has already negatively
impacted another business in your industry. Lastly, EBC needs to provide routine trainings on
cyber exposures to their employees. The current practice of employees downloading games on
to the devices that hold customer credit card data is a huge risk for the business. Downloading
things of the internet on to your business’s device are an easy way for hackers to gain access to
your systems.

NET INCOME RELATED TO LOSSES

When analyzing EBC’s financial statements relating to their loses. It is apparent that most of
their claims are coming from slip and falls. Although they have not had a major impact on their
business yet, if they do not take adequate steps discussed in our report these situations could
become a larger issue and potential affect their bottom line. If EBC continues to have regular
employee losses their insurance company could drop them, increase their premiums
significantly, or make the amount of their retention high. This could erode their profits and
potentially require them to close. There were a few employees related issues such as a burn
injury, cut hand, and a back injury from lifting. We do not see these a huge issue. There is no
way to eliminate all injuries, but if the training and other suggestions we have outlined in our
report are implemented, we feel this will address these issues. There have been multiple
occurrences of spoilage from power outages. This needs to be addressed immediately since it
is an issue that has happened two years in a row. When you look at “EBC Losses Per Year”
graph it is clear that the main issue that EBC needs to address from a loss viewpoint is the slip
and fall injuries.

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EBC Losses Per Year

$25,000

$20,000

$15,000

$10,000

$5,000

$0
2018 2019 2020 2021

Slip and Falls Other Employee Claims Stolen Cash Power Outage/Spoilage Insect Infestation

WORKER’S COMPENSATION

There have been eight total work-related injuries, five of those injuries being slip and falls at
work. It is also unacceptable for employees to be working in a food/beverage service industry,
and not be required to wear non-slip shoes at work. Employees also conducting heavy lifting at
work may need a supportive back brace, and standard protocol for lifting heavy items. It is
unacceptable not to have a safety procedure and handbook in place, and readily available at the
insured. Employees should receive a copy of and acknowledge via signature that they received
a copy of the workers compensation injury reporting protocols and safety policies.

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In addition, the employer’s lack of response to an injured worker with an open workers
compensation claim is a completely unacceptable practice. This begins to create a negative
relationship between the employee and employer, which could lead to litigation of workers
compensation claims, which increases overall claims costs, and lengthens the overall life of the
claims. Aside from this, by allowing the workers comp carrier to bear the cost of paying benefits
while the employee is off work, the overall cost of the claim is increased, which of course will
translate to increases in the premium. The above chart noting EBC Losses Per Year, shows that
workers compensation claims have decreased since 2019. Based on this, we rate the loss
frequency at a moderate level of 3 and the severity of the potential losses also at a 3, in the
current work environment at EBC.

There are a variety of loss control measures that can be implemented to help prevent additional
workplace injuries. Implementing employee safety processes, and training employees on new
safety protocols are the most significant measures to follow.

Implementing a return-to-work program so that injured employees can return to work as soon as
possible, and work restrictions can be accommodated, is very important. This will prevent
employees from litigating and prevent them from becoming used to being compensated for
being off work. It is important to note as well that when injured and off of work, the morale of the
employee may begin to decline as well. It is just as important for EBC to maintain a good
relationship with their employees, and to support them, as it is for the firm to keep their business
operations running smoothly.

It is important that employees are provided with proper safety equipment to perform their work
duties. Non-slip shoes would assist tremendously in reducing the amount of workplace injuries
attributed to slip and falls. When lifting products, employees may also need back braces or
similar assistive devices. Additionally, if EBC is going to start making and selling food, they will
be required to implement a food safety plan and educate employees on safe food handling
processes. If the insured is to start cooking and selling food, no slip shoes are even more
essential as well.

As an organization with plans for continued success, it is extremely important for EBC to create
an employee safety handbook, that includes workers compensation policies and rights, drug
and alcohol policy, cleaning procedures, and potentially a food safety plan as well.

EMPLOYMENT LIABILITY

The Employment Practices Liability (EPL) policy that a firm maintains should cover many
employment-related issues that may arise, and the Commercial General Liability (CGL) policy
will cover bodily, property and personal injuries. However, there are many current practices that
contribute to potential increased losses by the employer that must be changed.

Because EBC is conducting business in the alcohol, and potentially entering the food industry, a
strict drug and alcohol policy should be enacted, to prevent employees from drinking on the job.
EBC should also implement repercussions if employees are caught consuming alcohol while at
work. This exposure can lead to the potential for additional workplace injuries, and third-party
claims, if employees injure themselves or someone else while intoxicated at work. A company
culture that is relaxed and promotes testing new products while at work, does not contribute to a
safe working environment. It is important for EBC to immediately introduce an employee
handbook, where safety, workers compensation, harassment and employment policies and
procedures are addressed, and clearly explained to employees.

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A significant risk exposure identified in the EBC company brief is the practice, or lack thereof of
conducting background checks on employees. This creates an increased crime exposure
and increases the risk of the firm hiring potential criminals. Even if the insured wants to give
people with criminal backgrounds and records another chance at work, they are not considering
the risk of hiring a person with the potential criminal background that could harm other
employees, customers, or the business itself. This causes a huge exposure for loss, such as:
injury, theft, property damage, harassment, and potentially more. It would be mindful for EBC to
begin conducting background checks and drug tests during the hiring process, so that they are
aware of the backgrounds of the employees that they are hiring.

Another risk identified is the upper management practice of providing too much information to
outside parties for references, which includes opinions of employees. This can be detrimental to
the insured. A former employee could potentially come back to the insured with a lawsuit for
violation of private information. Upper management should consider consulting with, and
possibly retaining a labor attorney for advice on how much information they should release to
third parties about employees. When examining Figure 1, if left unmitigated, all of these
potential risks currently present at EBC rate to a low to moderate frequency of 2, and a
moderate to high severity of 4.

Personnel Liability

Another type of liability present for EBC is personnel liability. Which is present when owner,
Paul Eastman, continued to work at the brewery while having COVID, which he had contracted
while attending a family Christmas party. This is a high risk, especially since he put his fellow
coworkers and danger and every patron that visited Evergreen while Eastman was sick. This
would be a very high risk; severity would be a 5 and the frequency would be 3 since he could
have given fellow coworkers COVID as well. Though he was asymptomatic, Eastman showing
up to work with COVID is unacceptable. As the owner, he takes higher responsibility than
others and must effectively stay on top of his outside activities to ensure he will be able to
effectively work every day. In the case that he does get sick, especially COVID, then he would
need to work remotely at home and take the necessary steps to recover so he can return to
work as soon as possible.

The consideration of adding a new partner adds to personnel liability. The addition of a partner
has advantages, but it also comes with the legal responsibility of that partner. This would
include actions, hiring of employees, and of course any borrowing of money by the new
partner. The risk of adding a new partner is always a moderate-high risk, the severity would be
at a 4 and the frequency would be low at a 1 since EBC is not constantly adding a partner. The
new partner must prove themselves to be a responsible, ethical, and moral business owner
before they would be made a partner.

BUSINESS INTERRUPTION

EBC also faces outages liability, due to hurricanes or other natural disasters. There is no
mention of a generator on hand in the event there is an outage from a disaster, which should be
in place to help kickstart the power to not waste product. We recommend Evergreen purchase
a generator to help save money from products being wasted, like in the case of Hurricane
Michael when all beers on tap and several batches of beers had to be disposed. If EBC had a
backup generator that would have kicked on, they could have saved a larger supply of the
wasted beer. The liability of these risks presents a high frequency at 4 since Florida has a long

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hurricane season and can face that type of liability for several months, and the severity would
be a 4 since it would cause a lot of money in wasted beer.

Lastly Evergreen has not reviewed their insurance needs since 2019 which is a huge problem
especially with the recent expansion. Their local insurance broker may not be properly advising
EBC the best or reviewing coverage properly. It appears that there may be risk that have not
been accounted for on their current insurance policy which creates shortfalls in their
coverage. If there is an exposure where the insurance company has not been informed there is
potential that there will not be coverage and the claim could be possibly denied. Without
reviewing policies at least annually, the chance that the business may be under or over insured
and not know it is a possibility. In the case of EBC we have concluded that they are probably
underinsured since they have expanded and are considering other expansions in the near
future.

REPORT CONCLUSION

This concludes our firm’s holistic analysis of Evergreen Brewing Company’s risk to date. As
previously mentioned, risk management is an evolving process that directly impacts not only
your business, but it is goals for the future. After completing our in-depth analysis of EBC, from
an Enterprise Risk Management standpoint, our team has determined that there are many
issues that need to be addressed. Some items are more critical than others, but every issue
mentioned in this report is important and should be a priority. We are confident that our report
and presented recommendations will help aid your organization in directly addressing these
listed exposures. The above risk recommendations are based on industry specific research and
approved risk mitigation techniques. Integrating these solutions into EBC’s risk management
program will greatly improve the business’s overall operations and provide you with the
framework for success. We thank you for your time and opportunity to work alongside
Evergreen Brewing Company.

Frequecy and Severity Analysis

6

Frequency Severity

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Evergreen Brewing Company – Enterprise Risk Management Report 2021