BP found its “Company Killer”: Do you know yours?

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Time will tell if the Gulf of Mexico oil spill will kill BP or just severely cripple it, but whatever the case I’ll bet they didn’t see it coming!  Will you?

It looks like this spill will be (if it isn’t already) the biggest man-made disaster ever.  The extent of the spill, the scope of damage and the resulting impacts on the environment, marine life, economies, and people remains to be seen, but catastrophic sums it up.  BP and all of the other world’s oil companies plan for spills.  They build complex risk models, examine alternative worst case scenarios, look at maximum probable losses, and they are generally very good at measuring and managing risk.  But what if the worst case scenario that you imagined turns out to be wrong?

In BP’s risk modeling they would have factored in the US government’s cap on environmental clean-up and damages at $75 Million.  Did they predict that the government would significantly raise the cap or remove it all together?   Did they predict that in addition to the significant increase in damages that their ability to earn would be affected by Obama’s restrictions on new drilling; or that taxes and royalties would be increased significantly ; or that people would boycott their products on mass?

The point is, no matter how sophisticated your risk management process, you can be wrong.  Don’t take that to mean that it isn’t worth trying!  What I’m saying is that no matter how much you prepare and plan and execute, things can happen that are worse than you could have imagined.

When it comes to company killers, all companies big or small have them lurking around and if the perfect storm happens you could be next!  So what can we do?  Most company killers are closely related to reputation risk.  Whether it’s an oil spill, a product recall, or a fraud scandal, the resulting damage to the company’s reputation is where the biggest losses are felt.  Incidents such as these rattle customer and shareholder confidence which can often lead to a rapid and irreversible downward spiral.  Reduced sales, increased costs, battered share value, employees leaving the sinking ship and on it goes until there’s nothing left to salvage.

Do not despair!  As with any risk, big or small, there are ways to manage reputation risk.  Here are a few general tips:

• Consider all underlying risks that can lead to damaged reputation, and mitigate them as best you can within your means.  Ask yourself (and your team), what things could happen that would damage our reputation enough that it will cause significant harm to your company?
• In addition to managing the underlying risk, treat reputation risk as one of your company’s biggest risks.
• Develop emergency and contingency plans that deal directly with reputation risk.  How will you respond?  How will you communicate to customers and other stakeholders?  How will you control the damage?
• Look for ways to diversify your operations enough that significant harm to one division or company won’t necessarily damage the others.
• Check with your Insurance Broker to make sure you have the necessary coverages and limits to deal with the fallout from reputation related risks.  For example, coverages such as products recall, environmental impairment and business interruption are often not carried and are seen as unnecessary, but can provide the necessary buffers in the case of major losses, so that reputation can be dealt with effectively.

All organizations need to start to understand reputation risk and realize that it is one of their greatest risks. The following are starting points to consider in managing reputation risk using a hotel chain as an example.  For more information on this and other risks, please visit the free ClearRisk Library.

Tools:

ClearRisk’s Reputation Risk Management Tool

ClearRisk Library

References:

http://www.businessweek.com/news/2010-06-30/senate-panel-moves-to-lift-cap-on-oil-spill-damages.html

http://www.foxnews.com/story/0,2933,521341,00.html

ClearRisk 2.0 Launched Today!

Today ClearRisk Inc is proud to announce the  launch of version 2.0 of its ClearRisk Manager application. Version 2.0  is built to improve every user’s experience. The site is faster, it enables easier collaboration and includes functionality that will allow our users who are Insurance Brokers to interact with clients in ways they’ve never been able to before.

ClearRisk Manager Version 2.0 is designed to be lightning fast. “We’ve increased the speed of the site by almost 4x,” said John Downey, Director of Systems for ClearRisk Inc “we’ve created a seamless experience for brokers; almost unnoticeable page loads and large reports take only a few seconds, unlike minutes or hours for some competitive systems.”

Clients of Insurance brokers are demanding risk management options that go beyond insurance coverage. Some brokerages are struggling with how to effectively provide these services to their clients. That’s why we built ClearRisk Manager. We want Insurance brokers to have an affordable way to provide their clients with risk management plans, risk maps and risk management resources – even if they have little to no risk management training.

Using ClearRisk Manager to help identify, prioritize and manage client risks, brokers can offer affordable risk management support to clients; helping clients get the best terms in the insurance market

We’ve built on this concept in Version 2.0, by adding more client and broker collaboration tools, and increasing the speed of the site even more. ClearRisk Manager 2.0 can be used to store, track and share all relevant risk and insurance information such as insurance policies, claims documents, and insurance certificates. It gives Brokers and their clients the ability track progress they make over time.

In addition, ClearRisk Manager 2.0 introduces functionality that allows Brokers to Co-Brand the secure online portal. It’s important for Brokers to have multiple touch points with clients throughout the year. Every time a client logs on to ClearRisk Manager to work on their Risk Management plan, the host Broker’s logo can be prominently displayed. From the client’s perspective, the Broker is providing them with a software solution comparable to those offered by only large multinational brokers. This, in combination with the collaboration tools above, shows the clients firsthand the value the Broker is bringing to their business.

ClearRisk’s focus has been on increasing broker profitability with mid-market Risk Management Solutions. ClearRisk Manager 2.0 provides brokers with even more functionality to help them become the preferred provider of risk management and insurance products and services.

The following video is a popular resource for insurance brokers who are evaluating the use of risk management as a value added service.

Top 10 ways to use Risk Management to Increase Brokerage Revenue

Come view the new functionality with a 30-day free-trial

or let one of our associates walk you through ClearRisk Manager 2.0 with a 20 min tutorial

The Risk Management Process – In 5 Steps

I have always been a firm believer that good risk management doesn’t have to be resource intensive, difficult for SMBs to undertake or insurance brokers to provide to their clients. With a little formalization, structure and a strong understanding of your organization, risk management planning can be rewarding.

Risk management does require some investment of time and money but it does not need to be substantial to be effective. In fact it will be more likely to be employed and maintained if it is implemented gradually over time. The key is to have a basic understanding of the process and to move towards its implementation.  That is exactly why ClearRisk has developed its newest whitepaper: The Risk Management Process

There are many different risk management models available. Often times these models are unnecessarily complicated or written for an academic audience. We’ve developed this whitepaper from industry best practices and experience and in a way to which business people can relate.

In summary, the five steps in the risk management process are:

1.   Identify Potential Risks:
What can possibly go wrong?

The Risk Management Process

2.   Measure Frequency and Severity:
What is the likelihood of the risk occurring and if so what is the impact?

3.   Examine Alternative Solutions:
What are the potential ways to treat the risk and of these, which strikes the best balance between being affordable and effective?

4.   Decide Which Solution to Use and Implement it:
Find the needed resources, get the necessary buy-in and pull the trigger.

5.   Monitor Results:
Is your plan working? Are changes or updates required?

The whitepaper explains each of these steps in detail so you can move towards implementing a risk management plan. Click to view the free whitepaper on the Risk Management Process.

The Downside of Upside

The economic downturn has presented its share of challenges for business around the world. Adjusting to the “new economic normal” hasn’t been an easy task as the broad scope of operational changes, closures and bailouts have shown. It’s been a trying time for business, but positive signs of change are beginning to emerge; strategies are being aimed at making the most of the upturn, investments are leading economic activity and strategists are identifying early increases in consumer confidence.

Edging out of the recession and seeing better economic conditions around the corner, it’s important that businesses be aware of the downside of the upside of risk!

It’s common to view risk negatively, but every entrepreneur knows that there is no reward without risk. Risk brings opportunity and is the balance between the upside and the downside. There are many changes that will come with a global economy that is on the upswing; credit will become more widely available, businesses will begin to prosper and begin hiring, business spending restrictions will ease, investments will be made in infrastructure and companies will look for ambitious growth.

As discussed in one of our blog posts from last year, the downturn has been a time for improving operations, strengthening relationships with customers and preparing to make the most of the recovery. Now that the upswing is upon us, bringing positive change and room for growth, it’s important to plan for the risks that will no doubt accompany the opportunities presented. In the upturn of the economic recession, make sure you don’t become your own worst enemy.

Read more

Using Risk Management to Increase Brokerage Revenue

We’ve written on the benefits of risk management and on its application by brokers in blog entries like Using Risk Management to Win in the Mid-Market and An Ounce of Prevention: Does Risk Management Really Work? So expanding on that, today The ClearRisk Blog brings you some of the ways that risk management can increase brokerage revenue.

• Attract New Clients: Providing something of great worth doesn’t go unnoticed. Including risk management advice and support as a value-added service for clients can make a brokerage stand out in the eyes of a potential customer.
• Better Terms in the Insurance Market: In working with your clients to identify risks and to ensure they carry the right coverages, you help your clients to become ‘best-in-class risks’. Having clients who are informed and knowledgeable about the risks that face their operations will bring them better preparedness as well as access to better rates and terms in the market. Organizations that work towards risk improvement are perceived more favorably by insurers.
• A Better Book of Business: Clients who take an active role in managing their risks have better loss ratios over the long term. With better client loss ratios, brokerages can earn higher CPC.
• Stronger Relationships with Clients: Providing risk management guidance to clients not only provides value, but it gives you the opportunity to meet and work with clients on positive, relationship-building terms. Working with them to identify potential risk areas and gaps in their coverages helps you to be seen as a provider of solutions; someone who is looking out for their best interest and who shares the same goals. This can help take your interactions with your clients to a whole new level, where long term and beneficial partnerships are built, maintained and valued. Think about your longest and best relationships with clients. What if you could replicate that trust and loyalty in all of your client relationships?

These are just four of the many benefits that the provision of risk management services brings to brokerages and brokers. On Thursday, April 22nd, 2010 at 2:00pm EDT, I will be conducting a free webinar on the Top Ten Ways to Use Risk Management to Increase Brokerage Revenue.

UPDATE:  You can view a recording of the live webinar here:  Risk Management for Insurance Brokers

Be a Better Insurance Consumer

Most organizations look to financial risk transfer through insurance as their first response to managing risks. Out of all the risk management tools available, insurance can often be the most expensive option. There are a number of simple things that can be done to minimize your insurance-related costs and to get better terms in the insurance market through your broker.

Read more

Using Risk Management to Win in the Mid-Market

Insurance brokers are thought of as trusted advisors. Being an important point of contact between businesses and the insurance industry, brokers look out for the best interest of their clients and are depended on to ensure that their client’s businesses are protected.

But what does it really mean to be a trusted advisor? This role, as suggested by Maister, Green and Galford in their book, The Trusted Advisor, is first about gaining the confidence of clients. For brokers, there’s no better way to do so than to provide something of value.

Read more

Social Media Policy: Avoiding a Death-Blow!

A company’s reputation is its biggest asset! Successful companies have always guarded their reputations at all costs. Corporate communications have always been very structured and deliberate and the messaging meticulously controlled by dedicated professional spokespersons. That was before blogging, Twitter, Facebook and all the other new social media that gives all of your employees and customers a soapbox and a bullhorn with a global audience!

You’d be hard pressed to find someone these days who can argue against the impact that social media has had on the way that we conduct business. From customer support and advertising to internal controls and knowledge sharing, social media has changed the way we work and has changed the expectations of customers.

As we try to better understand how to use social media to our advantage, it’s important to consider managing the associated risks. We need to ensure that employees know the Dos and Don’ts and the potential impact on the company and them of going “off script”. Read more

10 Steps to a SMB Risk Management Process

This week, ClearRisk presents a guest post by Thomas M. Bragg. Tom, who has specialized in business planning, strategy and business risk management for 20 years, writes a blog about practical risk management for small business.

More and more is being written about risk management for small and medium sized businesses (SMBs). In fact, if you do a little bit of research, you’ll probably find yourself soon overwhelmed with advice, methods, terminology and tools.

Getting started with any new process is tough. It’s hard to get out of the blocks. It’s scary. It seems overwhelming.

Don’t be overwhelmed. I’m here to tell you that establishing an effective risk management process for your business doesn’t have to be difficult.

Read more

ClearRisk.com: New and Improved!

I am very pleased to announce the launch of the new ClearRisk.com! Over the past few months, our ClearRisk team has been working to create a website that is strong in design, content, usability and interactivity.

In creating the new site, our focus has been on :

• Improving navigation
• Providing new risk management resources
• Incorporating more accessible support and 24/7 chat
• Improving speed and usability for our online risk management solution ClearRisk Manager.

Now that it has been launched, we would really like to hear from you. Visit the sites, browse around and tell us what you think! All feedback is greatly appreciated so please help us make ClearRisk.com even better.