ERM-BC-ERM: Ripple effect

 

I talk about the ripple or domino effect quite a bit.

Sometimes this is in connection with vendors.

According to a United Press International (UPI) piece on Advisen FPN, "The (U.S.) Federal Reserve said manufacturing production fell 0.4 percent in April after nine consecutive months of increases. The most notable drop in the sector was a decline in vehicle production, which fell to an annual rate of 7.9 million units from a previous rate of 9 million." (Emphasis mine.)

The Fed blamed the decline in auto production on Japan's earthquake.

Consider the global picture.

Japanese parts destined for US assembly plants were not manufactured, so they were

• not stuffed into truck-to-train-to-ship containers

• not shipped to Japanese ports
• not inspected by U.s. agents stationed in Japan
• not shipped to the U.S. west coast ports
• not off-loaded by union steveadores at US ports
• (import duties, if any, were not collected)
• not shipped by rail and truck to assembly plants
• not assembled into "American made" vehicles
• not shipped by rail and truck to dealers across the U.S.
• not sold by sales people at the dealerships

Plus, additional parts never made it to dealership maintenance facilities so faulty or damaged parts were not replaced, possibly putting unsafe vehicles on the road

But it doesn't stop there.

I'm not sure is anyone at any of the Japanese assembly plants in the U.S. was laid off, but I am sure that sales people who have nothing to sell have $0 commissions so unless they have a nice financial buffer in the local bank, there could be missed mortgage payments, reduced spending at the supermarket, fewer entertainment-related purchases, less miles traveled - and less fuel bought, and on and on.

Granted, there may - MAY - be "pent up demand" when Japanese parts start arriving on America's shores again (meanwhile Korea's Hyundai and Kia are enjoying record sales and even U.S. automakers are noting an up tick in sales).

We have a global economy; no longer is any country's economy independent of others' economies, be they across the border or around the world.

The U.S. had an "economic meltdown" and most of the world felt the heat.

When the dominos start to fall, they fall around the world.

Something to think about.

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