There are many ways a company’s long-term strategy can fail.

The problem may be execution. Or perhaps continually shifting the plan aka moving the goal posts (*cough* … Hewlett-Packard). Another common downfall is expanding too fast (*cough* … Toyota). Sometimes companies fall victim to their own success, deluding themselves into believing they can thrive in areas in which they aren’t suited to succeed (*cough* … Bank of America buying Countrywide) or emerging areas they simply don’t understand (*cough* … AIG insuring mortgage-backed securities). Or companies can fail via the inverse: resting on their laurels and failing to change as the world around the does (*cough* … Blockbuster).

In short, there are eight millions ways to die.

There may only be one, however, that predestines a company to fail: starting with a flawed plan. Or, to play on the cliché: failing to plan may be planning to fail — but planning poorly might be just as bad.

To that end, Forbes has compiled a “top ten ways strategic plans fail.” Head over there for the full list but these are the five I consider to be the most insightful lessons.

1. Having a plan simply for plans sake. Some organizations go through the motions of developing a plan simply because common sense says every good organization must have a plan. Don’t do this. Just like most everything in life, you get out of a plan what you put in. If you’re going to take the time to do it, do it right.

3. Partial commitment. Business owners/CEOs/presidents must be fully committed and fully understand how a strategic plan can improve their enterprise. Without this knowledge, it’s tough to stay committed to the process.

7. Having the wrong people in leadership positions. Management must be willing to make the tough decisions to ensure the right individuals are in the right leadership positions. The “right” individuals include those who will advocate for and champion the strategic plan and keep the company on track.

8. Ignoring marketplace reality, facts, and assumptions. Don’t bury your head in the sand when it comes to marketplace realities, and don’t discount potential problems because they have not had an immediate impact on your business yet. Plan in advance and you’ll be ready when the tide comes in.

10. Unrealistic goals or lack of focus and resources. Strategic plans must be focused and include a manageable number of goals, objectives, and programs. Fewer and focused is better than numerous and nebulous. Also be prepared to assign adequate resources to accomplish those goals and objectives outlined in the plan.

1. State Farm Group—$50,808,635
2. Allstate Insurance Group—$24,796,656
3. Liberty Mutual Insurance Cos.—$21,483,996
4. Berkshire Hathaway Insurance—$21,358,316
5. Travelers Group—$20,594,458
6. American International Group—$19,687,720
7. Nationwide Group—$14,489,531
8. Progressive Insurance Group—$14,476,676
9. Farmers Insurance Group—$14,129,512
10. USAA Group—$10,679,414
11. Hartford Insurance Group—$9,688,760
12. Chubb Group of Insurance Cos.—$8,927,736
13. CNA Insurance Cos.—$6,188,618
14. American Family Insurance Group—$5,324,290
15. Allianz of America—$4,666,301
16. Auto-Owners Insurance Group—$4,485,442
17. Munich-America Holding Corp.—$4,413,834
18. Zurich Financial Services NA Group—$4,400,123
19. Erie Insurance Group—$4,019,273
20. Ace INA Group—$3,705,475
21. Transatlantic Holdings Inc. Group—$3,418,020
22. W.R. Berkley Group—$3,392,330
23. The Hanover Insurance Group Property & Casualty Cos.—$3,053,508
24. MetLife Auto & Home Group—$2,983,236
25. Cincinnati Insurance Cos.—$2,965,462

Swiss Re, the world’s second-biggest reinsurer, has estimated it will face claims of about $1.2 billion from the earthquake and tsunami in Japan.

The figure is low because Japan’s government insures residential properties covered by non-life companies against earthquake and tsunami damage and this protection is not reinsured internationally, the Zurich-based company said in an e-mailed statement today. The preliminary claims figure is net of retrocession and before tax, Swiss Re said.

Eqecat, a catastrophe modeling firm, has stated that insurers and reinsurers will likely have losses of $12 billion to $25 billion. However, AIR Wolrdwide has estimated losses of up to $35 billion from the quake alone.

AIG has recently reported that it will record $1 billion in claims for the first quarter, most of which can be attributed to the Japan earthquake and tsunami.

Zurich-based ACE Ltd., a major player in the insurance and reinsurance market, said its initial loss estimates are $200 million to $250 million.

Though Lloyd’s of London has not officially released an estimate, an anonymous market source has said “$3 billion in losses for the Lloyd’s market as a whole sounds plausible.”

QBE Insurance Group Ltd. of Australia has said it estimates $125 million in claims from the quake and tsunami.

Below is a video of the always-entertaining Joe Plumeri speaking on the topic of Japan’s insured losses.

You’re watching Willis’s Plumeri Says Japan Insured Losses Still Unknown. See the Web’s top videos on AOL Video

“AIA will work jointly with ICBC in areas such as sales and marketing system, product innovation, service quality, technological advancement and sustainable profitability,” Tucker added.

That’s not the only thing AIG’s Asian unit has going for it. AIA Ltd is planning an IPO for sometime next month. As for now, the Hong Kong listing committee is in the process of approving the IPO application. Once approved, the IPO could raise close to $15 billion — some of which will be used to pay back AIG’s $182 billion taxpayer bailout. The insurance giant is seeking a September 21st approval.

Though it’s a small fraction of the amount AIG owes, it’s a start.

Let’s take a look at the timeline of many of the events surrounding the AIG disaster (with help from ProPublica, the New York Fed and Bloomberg).

• August 5, 2007: During a conference call with investors, various high-ranking AIG officials stressed the near-absolute security of the credit-default swaps. “The risk actually undertaken is very modest and remote,” said AIG’s chief risk officer. Joseph Cassano, who oversaw the unit that dealt in the swaps, was even more emphatic: “It is hard for us with, and without being flippant, to even see a scenario within any kind of realm of reason that would see us losing $1 in any of those transactions…. We see no issues at all emerging. We see no dollar of loss associated with any of that business.” Martin Sullivan, AIG’s CEO, replied, “That’s why I am sleeping a little bit easier at night.”
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• October 1, 2007: Joseph St. Denis, the VP of Accounting Policy at AIG Financial Products, resigns after Cassano tells him, “I have deliberately excluded you from the valuation of the [credit-default swaps] because I was concerned that you would pollute the process.”
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• November 7, 2007: In an SEC filing, AIG reports $352 million  in unrealized losses from its credit-default swap portfolio, but says it’s “highly unlikely” AIG would really lose any money on the deals.
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• December 5, 2007: In an SEC filing, AIG discloses $1.05 billion to $1.15 billion in further unrealized losses to its swaps portfolio, a total of approximately $1.5 billion for 2007. During a conference call with investors, CEO Martin Sullivan explains that the probability that AIG’s credit-default swap portfolio will sustain an “economic loss” is “close to zero.” AIG’s risk-modeling system had proven “very reliable,” Sullivan said, and since the transactions were so “conservatively structured,” AIG had “a very high level of comfort” with its risk models.
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• February 28, 2008: In its year-end regulatory filing, AIG sets its 2007 total for unrealized losses at $11.5 billion. AIG also discloses that it had thus far posted $5.3 billion in collateral. It’s the first time the company has disclosed the amount of posted collateral. AIG puts the notional value of the entire swaps portfolio at $527 billion. But as we said above, about $61 billion of the swaps had exposure to subprime mortgages. AIG also announces that Joe Cassano, the chief of the unit that dealt in the swaps, has resigned. What AIG doesn’t disclose is that he’s kept on under a $1 million per month consulting contract.
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• August 6, 2008: In its second quarter filing, AIG ups its unrealized loss in 2008 from the credit-default swaps to $14.7 billion, for a grand total loss of $26.2 billion. It also discloses another impressive number: It’s posted a total of $16.5 billion in collateral.
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• September 16, 2008: The Federal Reserve Board saves AIG by pledging $85 billion [11]. As part of the deal, the government gets a 79.9 percent equity interest in AIG.
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• October 8, 2008: The Fed pledges another $37.8 billion to AIG.
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• November 10, 2008: Board of Governors and Treasury announce the restructuring of the government’s financial support to AIG. The restructuring includes a Treasury purchase of AIG preferred shares through the Troubled Asset Relief Program (TARP), reduction of $85 billion revolving credit line to $60 billion and the creation of two limited liability companies (LLCs) to lend against AIG’s residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs).
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• March 15, 2009: AIG, under pressure from regulators, releases a statement that discloses the names of its counterparties, which includes banks such as Goldman Sachs and Deutsche Bank AG. The counterparties received about $50 billion in forfeited collateral postings and Maiden Lane III payments since the Sept. 16, 2008, rescue, the statement says. The statement lists a sum of payments to each bank. It doesn’t identify the securities tied to the swaps or list the value of individual purchases by the banks.
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• March 18, 2009: AIG Chairman and Chief Executive Officer Edward Liddy testifies before House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises.
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• March 24, 2009: Federal Reserve Chairman Ben S. Bernanke and New York Fed President William C. Dudley testify before House Committee on Financial Services.
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• May 7, 2009: AIG reports first quarter 2009 earnings. (Risk Management Monitor coverage)
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• May 21, 2009: Edward Liddy leaves AIG after eight grueling months acting as chairman and CEO with no pay. (Risk Management monitor coverage)
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• December 13, 2009: Eli Lehrer writes an editorial entitled “Kill AIG Now.” (Read Risk Management Monitor’s reaction to the piece, plus an in-depth comment from Lehrer himself)
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• Jan. 7, 2010: Bloomberg reports that e-mails obtained by Representative Darrell Issa show the New York Fed pressed AIG to withhold details from the public about the insurer’s payments to banks.
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• March 1, 2010: AIG agrees to sell its subsidiary American International Assurance Company Ltd. (AIA) to Prudential Financial, Inc. for approximately $35.5 billion.
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• March 8, 2010: AIG agrees to sell its subsidiary American Life Insurance Company (ALICO) to MetLife, Inc. for approximately $15.5 billion.
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• June 10, 2010: A Congressional watchdog criticized nearly every move the Fed has made during the AIG fiasco. “The government’s actions in rescuing AIG continue to have a poisonous effect on the marketplace,” said the congressional oversight panel led by Harvard University law professor Elizabeth Warren.
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• June 17, 2010: The SEC ends its probe of AIG and its executives.

No charges were ever filed against AIG or its executives, and since the Justice Department’s probe ended and May and the SEC’s probe ended today, no charges will likely ever be filed.

As one would imagine, talk of the Deepwater Horizon incident and the insurance implications surrounding it emerged. Berkley, one of the many insurers of Transocean, said his company lost $5 million from the offshore accident, but that number is far from what Llyod’s, Excel and ACE lost. Berkley, however, was not upset at the relatively small chunk of change his company lost. Rather, he was excited that his firm, for the first time, was able to raise prices 40 to 50% for offshore insurance — calling the Gulf of Mexico disaster both very unfortunate and an opportunity for insurers.

I asked Mr. Berkley if he perceived the Deepwater Horizon incident as an enormous lack of risk management. He reponded:

“I don’t think it’s an enormous lack of risk management in the offshore drilling industry, no. I think it was more a lack of understanding of all the alternative things that could go wrong.”

The very definition of risk management is to identify and assess any and all risks of an operation and then work to minimize, monitor and control the probability and/or impact of unfortunate events. Maybe I’m crazy, but the Deepwater Horizon catastrophe seems like an enormous lack of risk management to me.

The topic of discussion soon turned to the topic of financial regulation, to which Berkley agrees is needed. But he also wonders what other aren’t asking:

“If all these giant financial institutions are taking on such great risks, how come they have such crummy returns? No one is asking that.”

Indeed, I have not heard anyone asking that question.

Then questions about the P/C market prices arose. He was asked why he saw prices starting to firm up and he answered:

“You can only hide from reality for a certain length of time. You’re going to see some people go broke because they’ve mispriced their business. They won’t survive through the good times, maybe not even through the first quarter of 2011. People are accumulating adverse reserve deficits and that will affect them soon.”

And when asked how he would grade the government’s involvement with AIG, Berkley confidently responded, “D,” citing that “part of the problem with government is that process becomes more important than outcome.

True words indeed from a well-respected figure in the insurance industry. Even if I do disagree with him about the failure of risk management in regards to the Deepwater Horizon situation, he is a wise man that has proven his knowledge of the industry with the success of his own company.

Yes, now that only a handful companies are still benefitting greatly from public assistance, the administration has agreed to cap the pay for the top 25 executives of the five companies “still receiving extraordinary aid” via bailout. And really, it’s more like three companies since it comes down to only AIG, GM and its financing company GMAC, and Chrysler and its financing company Chrysler Financial.

Feinberg’s announcement was the administration’s latest effort to deal with public outrage over bonus payments provided to executives at companies receiving billions of dollars in taxpayer support.

Detailing the 2010 pay rules, Feinberg said cash salaries would be capped at $500,000 for 82 percent of the top 25 executives at the five firms. These executives would have to receive any further compensation in stock. Feinberg is seeking to link the executives’ decisions more closely to the success of their companies.

In addition, “pay czar” Kenneth Feinberg is also mandating that 419 companies that benefitted from bailout money before February 17, 2009, give detailed information on any salaries in excess of $500,000 paid to executives in late 2008 and early 2009. What exactly Feinberg plans to do with this information eludes me, but companies have 30 days to comply.

Under the law, Feinberg cannot require executives to return any compensation such as 2008 bonuses that he deems excessive. But Feinberg said he would review the compensation paid during that period to see if any of it could be deemed “inconsistent with the public interest.”

I think many interested members of the public could tell Kenneth their thoughts on that topic immediately, but it’s nice to know that he will have some more detailed info into the matter next month.

Before the cap, he would have been carrying three bags.

• A “phisher” looking to gain access to people’s banking details managed to upload a malicious app to the app store for Google’s Android smart phone (which is Google’s answer to the iPhone). And while it was quickly removed once discovered, this brings into question whether or not Google needs to be more stringent on the apps it allows into the Android Marketplace. “The rogue Android application posed as a legitimate banking applet, but was actually designed to trick marks into handing over bank login details to fraudsters, an alert by credit union First Tech warns. The credit union, which said it wasn’t targeted by the attack, doesn’t even have an app for Android as yet.” And the macro-level threat here is, of course, the vulnerability of smart phones, which are increasingly becoming indispensable web portals for millions. Many expect similar attacks to rise in 2010.

• In a candid Wall Street Journal interview this weekend, Hank Greenberg questioned the terms of the AIG bailout and instructed journalists to start looking deeper into Goldman Sachs’ actions before the financial collapse. “There’s too much smoke, too many smart people asking questions that deserve an answer. I would hope that investigative reporters do the job they love to do and bring out the truth. I would hope that Congress would then say we must do something about this in all fairness. The American people should know about this and then bring about the changes necessary to avoid the total destruction of a great company that was the pride of America in the insurance industry.” Hank would seemingly be the first in line among AIG shareholders to file a class-action lawsuit to recoup all the losses that have (in his view, unfairly) occurred since the Fall of 2008, but — for now at least — he isn’t going that far. He has, however, presented the Fed with a plan in which AIG’s “$112 billion loan [would be] stretched out to, say, 20 years and the interest rate slashed to something closer to the government’s own cost of borrowing.” Good luck with that.

• The 14th Annual P/C Joint Industry Forum is tomorrow.

• Frigid weather in Florida has damaged up to 5% of the state’s orange crop.

• The Basel Committe on Banking Supervision has identified several areas that it must address in more depth, including coming up with more concrete principles to help replace International Accounting Standard (IAS) 39. And that might prove contentious. “This could put regulators on a collision course with the International Accounting Standards Board (IASB), which published proposals for consultation on November 5 to replace the incurred loss model with an expected loss model as part of the overhaul of IAS 39.” You know what that means? ACCOUNTING FIGHT.

• Vermont nears its 900th captive.

• A look at Philippe Jordian’s new paper “Risk Management Lessons from the Financial Crisis,” which focuses on how risk management’s job is not to avoid losses, but to “convert unknowns into ‘known knowns.’”

• Looking at the tax implications of paying to protect corporate reputation.

• A man who was pretending to be a rock concert promoter was indicted for running a Ponzi scheme. “According to the indictment, [Miko Dion] Wady operated and had an ownership interest in various business enterprises that purportedly were engaged in the business of promoting concerts or tours of well known entertainers and artists.”The indictment alleges that Wady and others misled victim investors into believing that Wady entered into performance contracts and other business arrangements with nationally and internationally known entertainers, arranged performance venues throughout the world, and greatly profited by putting on these concert or tour events. The indictment alleges that from 2004 through 2007, Wady claimed to have promoted concerts for The Rolling Stones, U2, Barbara Streisand, Faith Hill, Tim McGraw, Mariah Carey, George Strait, Billy Joel, Jamie Foxx, Jimmy Buffet, Mary J. Blige, Pearl Jam, and at least 30 other well known artists and entertainers. Also according to the indictment, during this period, Wady appears to have actually promoted fewer than 10 concerts, all involving only local or lesser known artists.”

Find an interesting link? Email me any stories, videos or images you come across. Or just follow me on Twitter @RiskMgmt to pass along the news.

• Geoengineering in regards to the environment and climate change has increasingly been gaining mainstream interest over the past year after spending most of its days mired in obscurity or outright condemnation. I’ve personally written about it twice in the past few months both in regards to Bill Gates’ discussion on thwarting hurricanes and SuperFreakonomics‘ assertion that widespread geoengineering to slow climate change is a good solution. Still, the concept remains widely misunderstood and obviously has both positive and worrisome components. To help everyone become better informed about the concept, the MIT Technology Review has taken an exhaustive look at the possibilities of society geoengineering our way out of climate change.

• Yesterday’s 7.2 magnitude earthquake that triggered a tsunami and landslides has left some 1,000 people homeless in the Solomon Islands.

• A Learjet crash outside of Chicago has left two victims — although officials are holding out some hope that they may still be alive. “Asked if both were dead, an official on the scene said ‘This is a recovery operation.’”

• AIG has hired several new senior execs. The beleaguered insurer is also reportedly stalling its planned sale of its Chartis P/C arm.

• Rick Nason teaches an ERM class and while skeptical of the practicality of teaching this within an MBA curriculum, he has a question for you: “ERM has created a lot of excitement, but very few successful examples. Explain why you believe ERM has so few successful implementations.” Head over there to answer. And show your work. (via RiskCzar)

• “The Nigerian man accused of attempting to blow up a US plane has provided ‘usable intelligence’ to FBI investigators, the White House says.”

• And in related news, new security rules for the airline industry are forthcoming from the Obama administration.

• The reinsurance world is in good shape. Aon is highlighting the “Remarkable Recovery” of the reinsurance industry in a new report and Willis sees all “talk of a hard market evaporat[ing]” in it’s January reinsurance renewals report. National Underwriter breaks down both reports.

• Les Krantz breaks down the 200 best and worst jobs in the U.S. in his “Jobs Rated Almanac.” And you know what’s number one? Actuary. “Actuaries, who evaluate the financial impact of risk on an organization, fared best because they work during standard business hours and in favorable conditions — indoors and in places free of toxic fumes or loud noise — as opposed to those jobs toward the bottom of the list such as iron worker, dairy farmer and the biggest loser from last year’s study, lumberjack.” Google “Norm MacDonald,” “Weekend Update” and “worst job” to find out what ranked dead last this year — again.

Find an interesting link? Email me any stories, videos or images you come across. Or just follow me on Twitter @RiskMgmt to pass along the news.

• Forbes published a good piece on how Credit Suisse has aided clients from rogue nations like Iran, Cuba, Burma and Libya sidestep U.S. sanctions for nearly a quarter century, an infraction that will cost the Zurich bank $536 million for violating the the International Emergency Economic Powers Act as well as New York State law. “Credit Suisse first started dealing with rogue regimes that were sanctioned by the U.S. government in 1986, when the Zurich-based bank began to assist Libyan customers in evading sanctions by executing payment orders without stating their names, according to U.S. authorities. Later Credit Suisse started to refine its methods, processing payments for clients in sanctioned countries with payment messages that concealed the identity of customers by using false codes. Credit Suisse did this kind of business for other clients in countries that faced U.S. sanctions, including Sudan, Libya, Burma, Cuba, and Charles Taylor’s Liberia, the Treasury Department says.”

• The SEC approves enhanced disclosure about risk, compensation and corporate governance. “The Securities and Exchange Commission today approved rules to enhance the information provided to shareholders so they are better able to evaluate the leadership of public companies. Beginning in the upcoming annual reporting and proxy season, the new rules will improve corporate disclosure regarding risk, compensation and corporate governance matters when voting decisions are made.”

• RSA Insurance Group and the WWF (the environmental group, not the wrestling association that was renamed the WWE) began a three-year partnership that will center on conducting joint research efforts into all things Mother Nature and risky.

• Coincidentally, however, WWE wrestler John Cena talks about the importance of composite risk management. Odd. But kinda cool.

• The percentage of commercial insurance buyers who have an exposure insured with Chartis has dropped from 90% in July to 80% now. Still a high number, but a significant drop. Although Barclays is saying that most of those who are still on board with the AIG insurance arm now plan to stay. “Of commercial buyers that insure with Chartis, Barclays said roughly 75% of those customers plan to stay with the unit despite AIG’s troubles, up sharply from 40% of customers who said they would stay with Chartis in July.”

• Bank of America finds its new CEO, Brian Moynihan, from within its own ranks.

• A guy named TJ Sullivan who is CEO of CampusSpeak, Inc. has dubbed the crackdown on Greek life shenanigans on campus as “the risk management era.” He explains in more detail: “The emphasis was on rules and policy adherence. It dominated everything: chapter services strategies, fraternity education, volunteer training and duties, consultant training, board meetings, etc. Someone a lot smarter than I will write a book about this, and I’m sure opinions will vary on whether or not it was a good, important era, or a harmful one. Was there any net benefit? Some will say that fraternities and sororities grew stronger during this time. The values congruence crowd will continue to crow about how risk management draws us closer to the values we were founded upon (a weak argument, I’d say). Others will say fraternities and sororities lost their fun, their innocence, and their relevance. One thing for sure, lawyers and insurance agents made a lot of money. Yet, students are still dying from alcohol poisoning and hazing on a regular basis.”

• The Maryland insurance commissioner is moving on to the FDA.

• A new Swiss Re Sigma study analyzes commercial liability insurance. “Emerging risks due to technological and social developments are a constant challenge: new insights into and changing standards around food safety, environmental pollution, employment practices and the compensation of financial loss are, for example, risks that insurers closely monitor. Roman Lechner, co-author of the sigma study, said: “Fortunately, none of these emerging risks has evolved into the next asbestos — yet.”

UPDATE:

• MF Global was fined $10 million by the Commodity Futures Trading Commission for three risk management failures related to supervision. “The $10 million penalty imposed by the Commodity Futures Trading Commission is the latest fallout from rogue wheat-futures trades in 2008 that forced the company to take a $141.5 million charge, triggering a restructuring that led to the departure of its chief executive, Kevin Davis.”

• In his latest View from the Press Box, Sam Friedman gives us some 20/20 hindsight on his previous predictions for 2009. “Way back on Jan. 5, I peered into my crystal ball for the likely Top-10 Property and Casualty Insurance Stories of 2009. Before I reveal what turned out to be my actual picks here on Dec. 21, let’s see how accurate my predictions were.”

• Markus Haering is the latest corporate leader on trial. What for? White collar crime? Nope. He faces up to five years in jail for causing earthquakes by drilling for geothermal energy sources.

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