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WEF Spotlights Insurers, Risk Response Network

The annual World Economic Forum (WEF) kicked off yesterday in Davos, Switzerland, welcoming more than 2,500 business leaders, politicians and social activists.

A laundry list of issues awaited those in attendance, from the global economy to Eurozone debt to responsible capitalism to preventing the next financial crisis.

These issues, along with several others, are what prompted the WEF to form the Risk Response Network (RRN), “to better understand, manage and respond to complex, interdependent risk.”  In response to the new RRN, Kevin Steinberg, chief operating officer for the WEF in the United States commented:

“Over the past several years, the world has been very reactive. If you look at the number of crises that have hit from financial to social to economic ones, almost everybody has felt they’ve been trying to avoid falling off the cliff. One of the moods we’re starting to see here in Davos is the sense we need to be more proactive. We need to think about risk not only in terms of responding to events after the fact but structuring our thinking before, being prepared.”

The RNN will be comprised of risk officers from top corporations, governments and global risk regulating bodies who will draw from the WEF’s own knowledge and insight with the aim of helping decision-makers better understand risks and respond to them proactively. The project also involves WEF-led partnerships that mobilize rapid response teams after disasters.

In other news from Davos, insurers became the topic of conversation when the question was raised as to whether large insurers should be included in a shortlist by regulators “for big players in need of more safeguards to avoid posing a threat to the whole financial system” These “big players” are known as Systemically Important Financial Institutions (SIFIs), and even though it has been said time and time again that insurance companies are not inherently systemic, the questions arises yet again. Needless to say, insurance execs at the WEF resisted being grouped as a SIFI.

“I don’t see any reason to elevate the status of insurers in a way that they are systemic,” said Dieter Wemmer, Chief Financial Officer at Swiss insurer Zurich Financial Services. Sometimes the word systemic is being used very loosely and we should understand what it means.”

‘Round and ’round we go…

Color-Coded Terrorism Alerts Are Being Phased Out

About time, Department of Homeland Security.

I’m all for authorities trying to inform citizens about specific threats to public safety, but let’s not treat people like they are in the third grade. Nonspecific, blanket statements about an increased risk just make little sense. And color-coded labels? Works for a stoplight. Not so much for terrorist plots.

Fortunately, government officials have seen the error of their ways.

The officials, speaking on condition of anonymity to discuss the pending announcement, say the Homeland Security Department will begin a 90-day phasing out of the system on Thursday.

The Homeland Security Department plans to tell the public about a terror threat much like it has been doing for the past few years – through government announcements and the news media.

The five-tiered color-coded terror warnings were created after the Sept. 11, 2001, attacks, and they quickly became the butt of late-night talk show jokes.
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The government hasn’t made changes in the colored alert levels since 2006, but it has been reviewing its usefulness for more than a year.

You know it’s bad when AP stories are citing “late-night talk show jokes” as a legitimate criticism of how silly the system is. The new system of communicating threats won’t do anything to lower the risk. But hopefully it will prepare all of us to better understand the world in which we now live.

Toyota’s Troubles Part Two (Or Three or Four or . . .)

Here I am again, writing about Toyota’s troubles.

Today, the car company announced another massive global recall of close to 1.7 million cars due to fuel leak problems. The car models in question affecting the U.S. are the Lexus IS and GS sedans. And though Toyota says it has received no reports of accidents or deaths due to the malfunction, it has had numerous complaints from North American, European and Japanese customers.

It’s been a horrible two years for the world’s largest car manufacturer. Last February I wrote about the Prius recall and the numerous questions that followed regarding the company’s totalitarian business environment.

The “Toyota Way” is the company’s long-standing philosophy that, among other things, places an extreme emphasis on maximizing efficiency by minimizing waste. Some have even said it acts almost like a religion amongst Toyota’s 316,000 employees. There is even a Toyota-approved way of turning corners when walking around the company’s numerous hallways (you must do say at a 90 degree angle). Think that’s bad? Toyota also demands that their employees never walk around the office with their hands in their pockets.

Now if only they could be that vigilant and careful with their car manufacturing process. Does Toyota value waste-cutting and efficiency more than product quality and customer safety? It’s a question that has been asked more than once.

BELFOR’s CEO Goes on Undercover Boss

I had never seen the CBS show Undercover Boss until this weekend. Honestly, I didn’t even mean to watch it. That type of thing just isn’t the brand of TV I make time for. But my DVR decided on its own to keep recording for another hour after 60 Minutes (which featured a great segment on Tucson gunman Jared Loughner that evening), and I noticed that this episode of Undercover Boss was featuring the CEO of BELFOR, one of the world’s biggest disaster restoration companies. So I watched, curious to see a major show profile a company connected to the risk management industry.

The premise of the series is pretty self-explanatory: the head honcho of a big company puts on a disguise to anonymously work for a few days alongside his front-line employees, and in the process, he learns that these salt-of-the-earth workers are the key to his company — a revelation that forces him or to rethink the jet-setting lifestyle of luxury. It’s basically like Goldie Hawn in Overboard but with more inspirational music and voiceover.

And that’s exactly what happened in the BELFOR episode.

Company CEO Sheldon Yellen slapped on a comical wig, donned some Coke bottle glasses and grew a terrible beard to go hang drywall, inspect moldy insulation and clean smoke damage. Then, due to his frustration at how bad he was at these tasks and how much he was touched by the sad-sack stories told by those he worked with, he cried. A lot. Like “five, maybe six, times in a 44-minute show” a lot.

Like I said, this type of television really isn’t my cup of tea, but even I thought some of it was heartening drama. At one point Yellen gets so emotional while talking to a woman with whom he had just inspected insulation in a crawl space that he becomes compelled to remove his wig to reveal his identity. She had been promoted to the position of “water technician” many, many months ago and was clearly really good at this job — but due to a companywide freeze on all pay increases that Yellen and his fiscal decision-makers in corporate had implemented to weather the financial crisis, she still hadn’t gotten her raise. She was just discussing this casually, talking about the difficulty of paying bills with some guy she thought was named “Tom” and mentioned off hand that she didn’t think anyone from corporate would know who she was if they tripped over her. Yellen broke down and hence the big reveal, with him assuring her that he — and the company — does care. Cue the piano strings.

At the end, he continued this theme by bringing back all the workers he spent time with and showering them with bonuses, raises and new opportunities at the company. It was all rags-to-riches, and because you know these are indeed real people whose lives will instantly improve due to a $15,000 check, it was definitely uplifting to watch.

At the outset of the program, I was wondering why an executive would go on Undercover Boss. It’s not so much this show in particular, I have just never understood why someone would want to be on a reality show at all. For reference, I’m the type of person who is still pretty upset with my boyhood hero Jerry Rice for debasing himself by going on Dancing With the Stars. I suppose I can understand a relatively anonymous CEO wanting some “fame” more so than Jerry Rice caring about such nonsense, but it still seems silly.

By the end, however, Yellen’s decision to do this was obviously very good branding for his company (depending on how viewers feel about a weeping CEO, I guess). And I imagine the higher profile for the company, particularly a firm in a relatively obscure industry like this, will help BELFOR draw new applicants. I mean, I was probably one of the few people watching who was familiar with the concept of disaster restoration, let alone heard of BELFOR, so the name recognition benefits gained through Undercover Boss had to exceed anything else the company could do from a marketing perspective. And since the emotional heartstrings gimmick even (somewhat) moved a crusty, skeptical cynic like myself, I imagine the company came off in a pretty good light to most viewers.

Here’s a clip from Yellen’s time on the job.

You can watch the whole episode over at CBS if you want.