ERM-BC-COOP: "Usual suspects" replaced

Make way for economic turmoil, commodity pricing fluctuations and business/supply chain interruption

Companies in the global industrial and materials industry face three specific global risks: economic turmoil, commodity pricing fluctuations and business interruption, which includes supply chain disruption, according to a new study from Aon.

The new "primary risks" for global industrial and materials industry operations replace the usual suspects: environment, human, and technology.

The new threats also highlight the need for true enterprise risk management, vs. "just" business continuity or "just" disaster recovery.

For the typical business continuity practitioner, economic turmoil, commodity pricing fluctuations typically are "out of scope." These are areas requiring a financial guru's crystal ball. Traditionally, business interruptions, including supply chain disruptions, are within the business continuity practitioner's scope.

The Aon report focuses on "the global industrial and materials industry," but when practitioner's look at what any organization does to justify its existence, all are in one way or another directly or indirectly in a "global industrial and materials industry."

Pick a product or service,. Somewhere along the way to product or service delivery there is an international link. It is a global economy; what happens in Greece impacts Japan, half-a-globe away.

Commodity pricing fluctuations may seem to be a problem for the Fortune organizations, but they impact even a Mom-n-Pop operation, particularly if it makes deliveries. (Have you checked the price at the pump lately? Oil is a commodity, as is the corn that goes into ethanol instead of on the dining room table.)

This all connects back to the threat of supply chain disruption. If the vendor (supplier) cannot

(a) Make the product because it lacks raw materials (for any reason)

(b) Deliver the product because it can't afford the transportation

Mom-n-Pop will fail to meet their service level agreements with their customers.

The "usual suspects," while supplanted by the new trio, remain in the wings and must - not should, but "must" - get practitioner and management attention.

OK, so the practitioner is hardly a commodity pricing authority. But the practitioner also is not an authority on HR employment laws nor competitive analysis, but we expect the practitioner to know where to find Subject Matter Experts (SMEs) in these fields.

Likewise, the commodity pricing authority - an SME for the practitioner - also turns to other SMEs for input before predicting the future. Experts in a variety of disciplines, not the least of which is the weather forecaster, are queried by the commodity expert.

The "bottom lines are that

(a) The only way to protect the organization is with a true, enterprise risk management program

(b) The risk management practitioner needs to be a Subject Matter Expert in risk management with the ability to ask the right questions of the right people, both inside and outside the organization

(c) Nothing should be "out-of-scope" for the enterprise risk management program

It should go without saying, but the enterprise risk management sponsor must be a Very Senior Executive or Board member with fiduciary responsibility.

If I wrote it, you may quote it.

Longer articles at https://sites.google.com/site/johnglennmbci/

EMC-BC-COOP: Insurance companies “don't get it”

I recently sent emails or Web messages to several insurance companies (AIG, Fireman's Fund, GEICO, Mass Mutual, and State Farm) asking each one very simple question:

Does your company give discounts to organizations that have business continuity plans?

A simple Yes or No answer was in order.

If the answer was “yes,” the next question was “How do you evaluate the plan?”

It's been about a week and so far I have responses from Fireman's Fund, GEICO, Mass Mutual, and State Farm.

GEICO's Donna Giordano, a Rewrite Supervisor, wrote that “Currently we do not have a partner that offers business continuity insurance.”

I didn't ask if GEICO SOLD business continuity insurance; only if its 'business customers could get a DISCOUNT if they had a business continuity plan.

State Farm's Internet Customer Response Team referred me – twice in response to one request – to its Winter Haven Operations Center (because I reside in Florida).

My question was global in nature and had nothing specifically to do with Florida. Worse, the Internet Customer Response Team advised me that it was “unable to provide the requested information via email.” Worse still, there was no phone number or contact person provided in the email.

Fireman's Fund's Cindy Umsted of Customer Service in the Commercial Insurance Division, wrote that “As you may know, Fireman's Fund uses the American Independent Agency System to sell our products. Based on the information you provided, below is a preferred agent in your area you may contact about your needs.”

To Ms. Umsted's credit, she did provide a local phone number – but I don't want to buy insurance; I want I*N*F*O*R*M*A*T*I*O*N.

Someone at Mass Mutual (I'm sure it used to be Massachusetts Mutual, but with the economy in the tank and the cost of ink . . . ) forwarded my inquiry to Michael E. Klavan, a partner in the Eppy Financial Group in Fort Lauderdaale; he in turn sent me an email asking that I call. (When I did I talked to his voice mail.)

Mr. Klavan's email gave me a clue that whoever read my message at Mass Mutual – like those at the other companies – didn't get it; he wrote that “I have been forwarded your request for information regarding MassMutual and various business coverages.”

The question I asked requires a corporate-level response. Why should it make a difference where my organization is located in order to provide a generic Yes or No answer. Granted, an insurance company may not want to write insurance in a specific geographic area or the discount may vary by location, but again, the question remains:

Does your company give discounts to organizations that have business continuity plans?

Why do I care?

As an Enterprise Risk Management (Business Continuity – COOP) practitioner, it would be nice to tell my clients that in addition to greatly increasing the organization's survivability, there might be an insurance discount available.

It's good for me as it means someone – hopefully a qualified someone – vets my plan, and it may mean more business; it's good for my clients, and it's good for the insurance companies (since the claims would be reduced).

If this is how insurance companies handle inquiries, I wonder how they handle claims.

John Glenn, MBCI
Enterprise Risk Management Practitioner
Hollywood/Fort Lauderdale Florida
JohnGlennMBCI at gmail dot com