It is a New Year, and no one knows how the days ahead in Year 2009 will affect us. While we seek good fortunes as individuals, as risk managers, we need to focus continually on possible events that may be adverse to ourselves, coworkers, the public, and our organizations. What will you do today and in the days ahead to ensure that your property risk management program—including the appropriate use of insurance—is proper for your organization today and in the days ahead?
Many events lie ahead of us, some expected while others not. What will you do today to ensure that your property risk management program including the appropriate use of insurance is proper for your organization not only for today but for the days ahead?
The one constant for many risk managers in 2009 will be the continuation to limit their focus for property risk management (and unfortunately, likely for all facets of their risk management practices) on the continued view of their schedule of insurance as a risk management planning tool; a static list of insurance policies that is based on prior expectations of risk of direct damage and time element loss. Is this planning device adequate? No, and especially not in times of great economic and global uncertainty.
"Would you tell me, please, which way I ought to go from here?" asked Alice.
"That depends a good deal on where you want to get to," said the Cat.
"I don't much care where …" said Alice.
"Then it doesn't matter which way you go," said the Cat.
~From Alice's Adventures in Wonderland by Lewis Carroll
What can we learn from Alice's adventures in Wonderland? She needs more than a roadmap. She needs a plan; she needs a destination; she needs an objective. How many risk management professionals challenge themselves to know what may have changed or may change within their organization in the days, weeks, and months ahead? As the Cat says to Alice, without a destination, she can take any path from here and arrive somewhere. The unfortunate reality of following any path as a risk manager is the destination or objective may not be appropriate when viewed later, especially after an adverse loss event.
"One of these days is none of these days."
~H. G. Bohn
Procrastination undermines an individual's ability to seek timely satisfaction of critical tasks and objectives and thus becomes an operational risk to the risk management process itself. Mr. Bohn says succinctly putting off today for tomorrow will probably mean that nothing will be done and no directional changes will occur; status quo is a danger to all risk management professionals.
"There is only one thing about which I am certain, and this is that there is very little about which one can be certain."
~W. Somerset Maugham
To paraphrase Mr. Maugham, we must remind ourselves that uncertainty is certain; things happen—some good, some adverse. A recent television advertisement by Nationwide Insurance says it all, "Life comes at you pretty fast." Seize the moment today, not tomorrow, to understand your organization's exposures that may exist today and how they may change by tomorrow. Do not rely on exposures identified last year and simply rollover your risk management practices from 2008 into that for New Year 2009.
Many risk management professionals rely solely on their current schedule of insurance, recent statement of values, and business income worksheet as risk management planning tools for property exposures and use of insurance for possible direct damage and time element loss. When one continually focuses on a policy renewal date, it is possible that ongoing risk assessment will not be done, especially when needed in times of uncertainty as we expect change in 2009 and for the foreseeable future. How can risk prevention, risk reduction, and risk transfer be effective if the underlying risk assumptions are not frequently reviewed, understood, and tested? It cannot, unless one wants to rely on luck alone, an inadequate and uncertain tool in the risk management professional's toolbox.
Nearly all U.S. industry is and will continue to be affected by the current recession. This recession will create potential risks that may be new to many risk management professionals. A key resolution for 2009 (actually an activity that should never stop) is to determine what changes have occurred and may occur later in the New Year that may create new and larger risks of loss to your organization. This global view should not be just on direct damage and time element issues, but across the whole spectrum of an organization, especially if an organization is implementing an enterprise risk philosophy: risk is risk, and risk of loss can occur from many sources, not just "insurable" risks.
Risk management encompasses many activities and is a job for more than one person. A risk manager will manage risk only by leading, directing, soliciting, and involving others first, and in doing so, will manage all risk activities. This is especially true for large organizations with many locations and multiple operations. Unemployment is the highest in many years. Certain parts of the United States have higher employment than others. Thousands of jobs have been terminated. It is possible that some jobs lost were held by individuals that served the risk manager as his or her ad hoc eyes and ears within the organization.
Have these critical internal resources been lost? What happened to the keepers of an organization's institutional history that may have more in-depth organizational and operational knowledge than the risk manager? Are you as risk manager visible enough to others in the organization to receive proactive notice of organizational and operational changes that may affect the property risk management program? Is your past network still intact? Do others in the organization know that you are the go-to person for risk and insurance issues? If not, what can you do to increase and sustain this needed visibility?
Events external to the organization may affect fixed assets and the potential to generate gross income. Let's consider some events and how the risk management professional may need to respond.The organization expects a reduction in sales which causes it to reduce inventories and consolidate facilities.
The risk management professional will need to take stock of risk and exposure issues within his or her organization as the organization addresses the new and increased pressures of the New Year. Times of difficulty are times that can create great success and visibility for astute risk managers seen as solving problems through planning and execution. One need not be an Alice or a procrastinator. Some New Year resolutions are offered to risk managers as a starting off point for planning property risk management practices for 2009 beyond simple use of a schedule of insurance.
Resolution 1: Test your internal networks and usual contacts used to learn about the organization. Internal coworker resources for a risk manager include, but are not limited to, functions such as security, facilities, finance, human resources, procurement, operations, sales, and senior management. Identify other individuals in each department in case your primary contact leaves. Create the means to have frequent contact with these individuals and encourage all to reach out to you with any risk question or notice of an upcoming change in operations.
Resolution 2: Use the New Year to relearn the operations, activities, and exposures of the organization. Do not forget past history, but focus on the challenges the organization expects to have in the months ahead.
Resolution 3: Restructure the property risk management program based on information gathered during Resolution 2. Rank proposed changes on need and cost. Implement those changes that will have the greatest economic value to the organization. Counsel senior management on proposed changes, especially those that result in significant increased insurance expense.
Resolution 4: Communicate property risk management issues (for that matter, all risk management issues) to appropriate management. Include thoughts on possible solutions as well. Discuss the need for ongoing loss control initiatives, especially those that will require a capital expenditure. Provide management with a cost/benefit analysis of why the expense should be incurred now instead of later.
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