IRMI Update—Issue #102
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
December 14, 2004
In This Issue
Colleague,
I'm very concerned that many businesses are ill prepared for major loss events
arising from technology, media, privacy, e-commerce and related risks. People
don't seem to have fully grasped the potentially catastrophic nature of these
exposures and, frankly, most insurance programs will provide little coverage
for losses arising from them. While we tend to think this area only affects
technology companies, every business in America faces substantial technology
risks.
There is a critical need to understand these exposures and how insurance
programs match up to them regardless of the industry in which you work (or to
which you sell insurance). To help you better understand these risks and how
to handle them, we have designed an intensive seminar, Tech-eRisk 2005, that
we will be presenting in three cites around the country in March. (Yes, we chose
warm cities.) This is an updated version of the highly acclaimed seminars we
presented last summer, and I hope you will consider attending. To see the agenda,
speaker biographies, and venues, go to the Seminar section of IRMI.com.
As we approach the end of the year, please let me say again how much I appreciate
your support and encouragement. With your help, IRMI Update's circulation has
grown to nearly 30,000 risk and insurance professionals. Thank you for forwarding
the issues along to your colleagues or clients and, in particular, for recommending
that they subscribe.
Best wishes from all of us at IRMI for peace and happiness during the holiday
season.
Jack
Jack P. Gibson
President
IRMI
IRMI will add a new member to its editorial team in 2005. We're seeking a
risk management, insurance, or legal professional with 3–5 years' experience,
an intense interest in understanding risk management and insurance tactics,
and excellent writing skills. For more information on this unique employment
opportunity see the About
IRMI Career Opportunities section.
10 Hiding Places for Business Credit Risk—Following
the recent wave of corporate reporting irregularities, Atradius Trade Credit
Insurance developed this list of "10 Hiding Places for Business Credit Risk"
to help risk managers better spot unseen credit risk.
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Capitalization—Evaluate how the firm
is capitalized and if it has access to future capital. Determine sources
of capital and how capital is structured.
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Loss on Derivatives—Find out if complex
hedging strategies are in place that may not be actual hedges. Determine
if derivatives used are liquid and if there are "naked" positions.
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Mark-to-Market Accounting—Ensure derivative
positives in place are valued correctly and find out valuation rationale.
Determine if rationale has material impact on financials.
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Managing Leverage with New Forms of Debt—Determine
if convertibles that look like equity actually act as debt triggers.
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Goodwill and Intangible Valuations—Assess
if valuations are accurate and what assets are being valued and at what
price. Find out if big write offs are coming.
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Off Balance Sheet Transactions—Determine
if there are operating leases that should be capital leases or capital leases
that should be operating leases.
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Calculating Pension Liability—Reconcile
estimated needs with projected returns and see if projections are realistic.
Evaluate how options are treated.
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Financial Engineering with SPEs and JVs—Find
out if companies are being set up to assist in product financing to parent’s
customers and determine effect on parent if entity fails.
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Engineering with Mergers and Acquisition Activity—Establish
if any mergers or acquisitions impacted the firm’s overall debt/risk ratio.
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Revenue Recognition and Measurement—Determine
if company is booking future revenue in current periods for long-term contract
deals and if unrealized revenue is being calculated correctly.
By: Arjan van de Wall
Atradius Trade Credit Insurance
Baltimore, MD
arjan.vandewall@atradius.com
http://www.atradius.us
Suggest a Risk Tip. Send us a practical tip (less than 300 words) for identifying and managing risks,
buying insurance, managing claims, or filling gaps in insurance coverages. Submit your tips. We'll acknowledge
your contribution as we did for Arjan.
There are now 610 risk management and insurance articles on IRMI.com. Below
you'll find summaries of some recent additions with links to the articles.
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California Enacts
Sexual Harassment Training Statute—A new law dictates that employers
provide a harassment-free workplace and have the legal duty to prevent the
misconduct and remedy its consequences. Paul Siegel explains.
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Finite Insurance:
Is the Criticism Warranted?—Peter Polstein explains that as long
as the finite transaction is in compliance with accounting rules, there
is nothing illegal with taking advantage of the ancillary benefits that
finite structures provide.
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Hotel Security:
The Missing Amenity—Nowadays, American businesses and citizens
are targets, especially when traveling abroad. David Nicastro explains how
assessing your hotel security beforehand can ensure your safe return.
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Me Prospect? I'm Too
Busy!—Frank Lee explains how many in sales—and in their personal
lives—have difficulty setting and keeping goals. Termed "goal diffusion,"
there are ways to conquer the problem at work and home.
We have recently updated IRMI Online to include the latest issues of our
newsletters, The Risk Report, Captive Insurance Company Reports, and Strategic RM, as well as supplements to
a number of the reference manuals. See a summary of all the new stuff with direct links into the publications.
If you're still scrambling to fulfill your continuing education (CE) requirement
for 2004, IRMI has the answer with online courses that are easy to take and
informative as well. One newly revised course is IRMI on Additional Insureds,
which has been updated in response to recent changes in additional insured approaches
being allowed by insurers. You can purchase enough courses to meet most state's
annual CE requirements for less than $50! For more information or to order one
of these or other CE self-study courses, see the Training and Education section of IRMI.com.
The speakers' handouts from the 24th IRMI Construction Risk Conference are
now available on IRMI.com. Over 40 handouts cover such topics as additional
insured issues, avoiding contract risks, contractual risk transfer fundamentals,
workers compensation strategies and outlook, emerging environmental exposures,
builders risk claim tactics, and more, may be downloaded at no cost.
It is more important than ever that agents and brokers provide value-added
services and proper documentation to their clients to ensure their insurance
programs are well structured. Development and use of standards, such as insurance
checklists, can help achieve these goals. The new, 2005 edition of IRMI Insurance Checklists has been assembled
by IRMI to assist insurance buyers, risk managers, agents, consultants, and
brokers in developing insurance programs to respond to the unique loss exposures
of any business or client. Structured with three main divisions: property, liability,
and personal lines, the manual contains detailed coverage checklists for 58
common commercial and personal lines types. The checklists have been updated
to address new exposures and coverage changes. In addition to the publication,
purchasers (or subscribers) are provided access (online or in print) to the
checklists as Microsoft Word files that can be saved, filled out, and customized. Get yours today!
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