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

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 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.

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Twitter Recovered from two Service Interruptions. Can you?

On August 6th, microblogging service Twitter.com was the victim of a distributed denial-of-service (DDoS) attack that kept it offline and scrambling to recover for over two hours. On the 12th of August, it was again the target of a second DDoS attack that this time kept it offline for a mere 30 minutes.

While a politically-fuelled attack on multiple social networking sites may be pretty far down the list of anticipated risks, we wonder – What planning and procedures did Twitter have in place to address and recover from such an event?

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Will Organizations Start Listening to their Risk Managers?

Last week we asked the LinkedIn community, “Will organizations start listening to their risk managers?“. The response that the question has received has been extremely insightful – despite the respondents’ discouraging predictions.

The question in full highlighted the fact that many organizations were forewarned about the financial crisis and that the choice was made to continue to focus on marketing and sales rather than risk management. We asked in light of this, will organizations start listening to their risk managers, or will it be business as usual once the crisis is over?

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Following the H1N1 Influenza Outbreak

The spread of the H1N1 virus and its accompanying media coverage has been quite a phenomenal thing to follow over the past few weeks. The momentum that the infection built in a very short period of time is overshadowed only by how quick and how global the human response has been. The number of fatalities linked to H1N1 cases appear to be slowing and medical response to cases are improving.  Past influenza outbreaks similar to this one tend to peter out in North America in the Spring and Summer while they often increase in scope and severity in the Southern Hemisphere (their winter).  The fear is that they will make resurgence in North America in the Fall as a stronger and perhaps more resilient virus.  Now is the time to prepare, not just for this virus, but use this as a wakeup call to make your organization prepared to deal with a Pandemic.

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