business risk management

Break The Bottlenecks With Business Insurance

The Harvard Business Review recently published an article titled “Break Your Industry’s Bottlenecks”. The concept being that to create a successful business “you have to break the rules and overturn the received wisdom about how things work.”

This could not be truer when it comes to the purchase of business insurance, which is a bottleneck for businesses and has been done the same old way since the Stone Age.

Two important items stood out:

When business as usual is set aside it significantly reduces cost, and

Outdated purchase is one of the five types of bottlenecks mentioned in the article

Premier Risk Management has also found these two items to be true. Too often the executive responsible for insurance has many responsibilities and business as usual is easy. Resource constraints force executives to stay the course, in turn abandoning meaningful savings opportunities. Companies often assume their broker is the only resource necessary. The executive has done it this way since he/she started in business, did it this way in their old company and this way in their new company. We can’t forget… they have been with the same broker for over 10 years.

Challenge the Business Insurance Status Quo

When companies and executives challenge conventional methods they will benefit and discover what they didn’t know … competition is a healthy alternative! Outsourced Risk Management helps remove the frustration and is an innovative way to provide expertise not otherwise available.

The Risk You Don’t Know Can Hurt Your Biz

Tom Bullen speaks on behalf of Premier Risk Management now part of the risk advisory arm of AETHOS Consulting Group in the Jennings Wire podcast.

Tom Bullen is with Premier Risk Management, the risk management advisory arm of AETHOS Consulting Group, a hospitality focused executive search and human capital services firm. AETHOS speaks with hospitality companies around the world and hears the concerns of CEOs and leadership, and the question of risk is always top of their minds.

Listen to the podcast here!

Who, What, When, Where – Does Your Risk Management Program Dig In?

We recommend using the 4W’s as a method of digging in to better understand the operations of a business. This concept is not new and sounds simple but is often not utilized appropriately.

The 4W’s concept can be used as the building blocks with a focus at all stages of operations when considering risk management. Here’s the problem; while every department head is very knowledgeable about their individual expertise it can be difficult if not overwhelming to think about it from the wide-ranging standpoint of risk.

“Digging In” – By using these four basic questions you can gather a wealth of knowledge about your business; the trick is to do this at the various stages of operation and not just the top-level thus coordination is important.

This valuable approach is overlooked and many times in Premier’s early analysis we find that businesses are generalized by the insurance industry and brokers. There is a lack of special attention to the individual company beyond “what is your business”.

This generalization becomes the cracks in the foundation … by doing these analyses you can better understand what risk you are accepting, how to transfer the risk, and/or mitigate the risk. While accepting risk is easy, when it comes to transferring risk most companies are unsure, and mitigating risk falls through the cracks because companies don’t know how to ask the right questions or utilize the services available.

After Premier “Digs In” we helps you better understand what risk to accept or transfer, ultimately we focus on mitigating risk. Imagine speaking to the insurance industry no longer being generalized but having a wealth of understanding. Not only will you be better prepared internally but since you are appropriately addressing risk this practice will result in lower premiums and lower total cost of risk. It’s a Win – Win.

Business Insurance & Managing Risk: You Don’t Know What You Don’t Know

What I do know is that it is hard to admit that you don’t know what you don’t know. Recently I gave a presentation at the 2015 Business Law & Corporate Counsel Symposium. The presentation was about business insurance and managing risk for businesses, the real message I wanted to leave my audience was that CEO’s, CFO’s and their advisors, like attorneys need to “know what they don’t know” and seek out an impartial expert to look out for their best interests.

How Well Do You Understand Your Business Insurance?

Over the years – I have heard so many people say “I didn’t know that”, “No one ever explained that to me” or “I really didn’t understand that”. It is all too common that people don’t fully understand the insurance products and services they have been sold.

So much focus is placed on the premium (cost of the policy) that the recovery aspect is overlooked and therefore not understood. When purchasing an insurance product you should understand how you will be indemnified should a loss occur (paid for your loss and returned to the condition you were in before the loss, no worse no better).

The exposures businesses face in the world are vast, complicated and dynamic. Insurance is only one of the avenues to address and transfer risk, but that too is complex and dynamic. There are many moving parts to coordinate to ensure a company is properly protected.

Here is a startling statistic: 75% of businesses that suffer a catastrophic loss go out of business within two years of their loss. I can promise that the reality and root cause of most companies’ problems who suffer these catastrophic events is that:

They didn’t “know what they didn’t know” about insurance and their coverage, and
They were SOLD insurance rather than purchased it – and there is a BIG difference

A number of attorneys at the symposium voiced their agreement and shared experiences regarding the misunderstanding of an insurance contract.. They valued the insight an impartial consultant can provide. That says a lot right there.

Be in the know! Seek out assistance to understand what you don’t know – it will pay off in the long run.

Premier Risk is proud to announce our strategic partnership with AETHOS Consulting Group

We are thrilled to partner with AETHOS Consulting Group in providing risk management services to the hospitality industry.

Press Release:

AETHOS Consulting Group Expands Expertise With Outsourced Risk Management Consulting

Embarking upon an era of expansion of hospitality advisory services AETHOS Consulting Group, renowned specialists in advisory and executive search for C-Suite positions in the lodging, gaming, and restaurant arenas, has now secured a strategic partnership with a leading risk management firm.

AETHOS Consulting Group Managing Director and CEO Keith Kefgen announced that the new outsourced risk management practice “takes a long-term approach to helping our clients cost-effectively manage their unique risk profile.”

In partnership with Premier Risk Management, AETHOS will serve as the outsourced risk manager for mid-sized companies that typically do not have the resources to bring this function in-house.

“Risk Management is an integral component of every business,” adds Kefgen. “All segments of the hospitality industry are extremely vulnerable to a multitude of risks including liability, health and safety issues, employment law, and client data protection concerns. We want our clients to optimize risk management, while minimizing costs.”

“Risk and solutions to risk and exposures have become very dynamic and complex. Outsourced risk management consulting for lodging and restaurant companies is a service that is critically needed for the hospitality industry, ” shares R. Scott Wolff, CIC, CRIS, president and founder of Premier Risk Management. “We act as an advocate in all matters of insurance and help minimize risk and the cost of risk mitigation.”

Premier Risk Management is comprised of seasoned insurance and risk management consultants, possessing a range of expertise regarding insurance coverage detail, risk management claims handling, contract analysis, and insurance program management. Wolff himself brings 30+ years of operations experience including work in product development, claims, and underwriting. Wolff is also the author of An Executive’s Guide to Risk Management and Insurance – Reduce the Risk/Boost Your Bottom Line – a book written for executives, CEOs, CFOs, Controllers, COOs, VPs, board members, and business owners who appreciate the complexity and importance of such issues and recognize the profit potential of making an intelligent risk management decision.

“We have partnered with Premier Risk Management for a number of reasons,” adds Kefgen. “Premier Risk Management does not in fact sell any insurance products, and is not associated with any insurance firm or people who sell insurance. The insurance solutions presented to clients are completely objective with no conflict of interest. Clients can rely on Premier Risk Management for unbiased and independent advice for their insurance and risk management needs.”

About AETHOS Consulting Group: AETHOS Consulting Group is a hospitality-focused advisory and services firm, renowned in human capital and executive talent search and compensation, culture creation and organizational effectiveness. AETHOS’s survey research and white papers are highly regarded throughout the industry, and its film, The Power of Advice, was honored with a Silver Dolphin in the Online Media category at the Cannes Corporate Media & TV Awards in 2012. Additional expertise, through strategic relationships, include risk management and insurance consulting for hotels, restaurants and gaming. AETHOSCG.com also provides daily industry news wire headlines as provided by Gaming Ventures USA, publisher of the Daily Gaming, Restaurant and Casino reports. With offices in the United States, United Kingdom and Asia Pacific, AETHOS consultants value global citizenship, honesty, transparency, flexibility, humility and leadership, innovation, sustainability and meaning. For more information, please visit www.aethoscg.com.

Risk Tip: 2 important tenets of risk management

Don’t risk more than you can afford to lose…& don’t risk a lot for a little.

Comment: These two are both basics – the first refers to the idea that if you don’t have enough money to pay for the exposure to loss (risk) out of your pocket/balance sheet, then insure for the risk, transfer the risk or avoid the risk. This becomes the client’s comfort level with the risk at hand. Some companies are very comfortable with risk – they plan for it and manage it. Some companies are very uncomfortable with risk and want to chance nothing.

The second has to do with the fact that a business organization can protect vast fortunes and assets for a relatively small amount of money, comparatively speaking. That would be the prudent move for any business owner.

Bottom line: Everyday and in just about everything we do we are faced with risk. Sometimes we choose to take the risk – sometimes we are a little more conservative. No matter how big or how small the business, we all must make choices relative to appropriate risk tolerance for that business. Therefore we must know what those risks are and what the choices and alternatives are to better protect the business organization.

Decisions, Decisions, Decisions…are you capable of making them?

In a recent Harvard Business Review post by Nick Tasler 3 Myths That Kill Strategic Planning, he shares that the most “precious ability” a great leader has is his or her ability to make decisions based on strategic thinking. He uses a Napoleon quote to make his point:

“Nothing is more difficult, and therefore more precious, than to be able to decide.”

It may seem like common sense but decisions go hand in hand with knowledge and as the old saying goes “knowledge is power”. However, leaders should ask themselves – “Do I feel comfortable enough to solely make decisions?”

The goal of get things done well, deciding where to focus, and ultimately having an actionable decision could also be the chapters seen in a risk management 101 course. The reality is, senior management typically wear multiple hats and suffer from resource constraints when it comes to risk management. So the question again is – “do you feel comfortable with the go-at-it alone approach?” As Nick stated in his blog “strategic thinking is about deciding on which opportunities to focus your time, people, and money.”

Fortune 500 companies utilize the knowledge of an in-house risk manager to assist with strategic thinking and in the past many middle market firms assumed an adviser was unnecessary given the presence of a broker. While a broker offers a certain level of knowledge, an outsourced adviser’s knowledge does not come with the sale of a product and the broker relationship is maintained like it does with Fortune 500 firms. Times have changed and in the absence of a full-time in-house risk manager, many middle markets firms have realized the need of an outsourced adviser. It is becoming an industry standard and the companies are realizing both the short and long-term benefits.

While Nick clarified the 3 myths that kill strategic planning; the shortage of knowledge can also be a killer.

The 5 Forces That Shape Industry Competition

As a person that considers himself an endless student of business, I was searching the Internet and thus came across a Harvard Business Review article written by Michael E. Porter, The Five Forces That Shape Industry Competition. This article is not only a good read but reminds me of the importance of getting back to the basics.

The Five Forces described in the article are basic concepts that apply to all industry groups. When reading the article one can see how appropriate these strategies are from the perspective of the insurance industry … to be honest they also shape Premier’s business model.

Without a doubt we can benefit from the study by understanding the guidelines that Porter details in the article. Porter stresses the importance of “awareness”… and that a business that is aware of the “five forces” will be better suited to understand the structure of its industry and can create a position for itself that is more profitable and less vulnerable to attack. Aligned with the message of the article, our business model is shaped by the understanding of competition and other risk management philosophies. It is important to have an educated point of view and an advocate for insurance matters!

All businesses are buyers of insurance products that protect their company. When you refer to Porter’s chart – if you are the buyer then you must ask yourself – who is the supplier?

If you said the supplier is the insurance carrier, then this is exactly what the insurance industry wants … overlooking the Broker as the true supplier.

How does a supplier gain bargaining power? Reducing competition and creating so called expanded services to make it harder for customers to leave.
How do you gain bargaining power as the buyer? By being a savvy buyer and forcing down prices by playing rivals against one another.
If you said the supplier is the Broker then what is your strategy for managing the procurement process? Do you internally have the skill set to understand and interpret factors such as market intelligence and product knowledge?

Remember the insurance carriers are experts when it comes to their products … are you?

Too often businesses as the buyer look at the insurance carriers as the Supplier. If you really think about it the Broker is the supplier and what the insurance carrier provides is the product.

So why, when it comes to insurance procurement do buyers not create competition at the supplier level? Remember, suppliers gain power by reducing competition. It truly comes down to being a savvy buyer. The real dilemma here is that buyers don’t know that there is in fact a niche business of insurance advisers or the “substitute” as identified in this article that can help shape competition.

Porter’s article would suggest that you can reshape the forces in your favor by using tactics designed specifically to reduce the share of profits (premium) leaking to other players. An example; neutralize supplier power by standardization, or as we would say “you can’t standardize it unless you understand it” thus making it easier to vet out your vendors.

The journey is not a straightforward path but one that is complicated and though it is sometimes considered a necessary evil – insurance matters.

The Life of an Insurance Policy

A few weeks ago I participated in a panel discussion regarding insurance issues. The first part of the discussion was to center around “the life of an insurance policy” – I thought to myself what exactly is the life of an insurance policy and trying to have a little fun with it, I came up with this poem. I am sure many of you can relate.

The Life of an Insurance Policy

Mine is somewhat of a lonely life.

I am born from an insurance company to satisfy a need,

a need for peace of mind and financial protection against many worldly risks.

I am courted by, and eventually partner with, individual consumers and businesses alike.

The way I get matched up is sort of like a blind date, if I look good on the outside then I can’t be too bad on the inside

Once I am with my new-found customer I sit on a shelf, stuck in a file cabinet or I’m in a PDF file somewhere…

No one touches me, reads me, caresses me or understands me – a lonely life

But they know I’m there…somewhere…

Ah, but when there is a loss and claim – that’s when the fun begins.

Then I have so many friends…claims adjusters, agents, attorneys

Everyone is interested in what I have to say…they want to understand me better.

I feel fulfilled – everybody’s reading me when there is a loss, even fighting over me – I’m feeling loved.

Although, sometimes people get mad with me…I didn’t provide what they thought they had

And to them I say…you really didn’t get to know me, with all of the good and all of my flaws.

All I wanted in life was a little peace, love and understanding.

R. Scott Wolff, CIC, CRIS

Proposition 65: How are you exposed?

Imagine your company receiving a 60-Day Notice of Violation related to California Proposition 65. Are you familiar with this Proposition? The Notice alleges that one of your products contains lead and as a result of the sale of this product, exposures to lead have been occurring without clear and reasonable warnings on the product as required by Proposition 65. The Notice also contends that California residents, through the act of buying, acquiring or utilizing the product are exposed to the lead in this particular product.

According to the Notice, this particular product was purchased via a major retailer. The lawyers trace the product to you as the distributor (a US domiciled company) who had the products manufactured in China.

A little bit of history as this is not something new. “In 1986, California voters approved an initiative to address their growing concerns about exposure to toxic chemicals. That initiative became the Safe Drinking Water and Toxic Enforcement Act of 1986, better known by its original name of Proposition 65. Proposition 65 requires the State to publish a list of chemicals known to cause cancer or birth defects or other reproductive harm. This list, which must be updated at least once a year, has grown to include approximately 800 chemicals since it was first published in 1987.”

What really becomes a problem for companies is that once the process begins – a notice filed (by a consumer advocate) and later a lawsuit – it becomes a hidden cost you didn’t anticipate. What I mean is, there will be no insurance coverage to offset legal representation, fines and penalties that will be assessed as a result of violating Proposition 65. And don’t forget the internal cost of changing your internal operations. Settlements can range from $5,000 to $700,000 ….view here the various settlements of 2012.

Risk management tip – if you are doing business in California, review the chemical ingredients going into products being manufactured, distributed and sold to determine if there are any that may be on the Proposition 65 list. Review contracts with suppliers of goods/ingredients being sold to determine how the transfer of risk issues may or may not be addressed in this regard.

Don’t think you are immune, Pepsi seems to be in exactly this situation… “Study Found that Pepsi Contains Potentially High Levels of a Reported Carcinogen”