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Risk Link Roundup

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Link Roundup

Here are a few recent articles highlighting some interesting issues that impact the world of risk and insurance. They include information about Hurricane Patricia’s impact on Mexico, corruption in China, the impact of women chosen for cybersecurity posts, some of the deadly dangers present in enclosed areas of ships and a survey about the level of social responsibility of chief executive officers in relation to the gender of their children.

Lessons of Past Disasters Helped Mexico Sidestep the Brunt of a Hurricane

Meteorologists called Hurricane Patricia one of the most ferocious ever seen in the Western Hemisphere, a monster bearing down with unprecedented energy on the Pacific coast of Mexico on Friday as residents and tourists evacuated or hunkered down in fear. But just hours later, the storm had passed over and, despite uprooted trees, landslides blocking some roads and the destruction of humble homes, there were no immediate reports of any deaths or damage to major infrastructure.

China Probes Graft in Angola Oil Deals

Wall Street Journal: Anticorruption investigators are zeroing in on oil deals in Angola by one of China’s biggest energy companies, part of President Xi Jinping’s nearly three-year probe into graft in the industry.

Why Corporate Boards are Picking Women to Fill Cybersecurity Posts

BloombergBusiness: Earlier this year, American International Group Inc. added Linda Mills to its board, attracted partly by her expertise in cybersecurity. In February, Wells Fargo & Co. selected Suzanne Vautrinot for its board for similar reasons. Before that, Walgreens Boots Alliance Inc. picked Janice Babiak. All directors, all focused on cybersecurity, all women.

Safety: The Unseen Killer

MarineLog: Accidents resulting in death or injury on board ships in enclosed spaces continue to occur at unacceptable rates. A shift in the approach to safety management of enclosed spaces on board ships is needed.

CEOs with Daughters Run More Socially Responsible Firms

Harvard Business Review: Henrik Cronqvist of the University of Miami and Frank Yu of China Europe International Business School compared the corporate social responsibility ratings of S&P 500 companies with information about the offspring of their chief executive officers. The researchers found that when a firm was led by a CEO with at least one daughter, it scored an average of 11.9% higher on CSR metrics and spent 13.4% more of its net income on CSR than the median.

 

Enterprise Risk Management Needed in Battle Against Corruption

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Even though the U.S. government has broadened its pursuit against corruption, only about 9% of organizations see Foreign Corrupt Practices Act monitoring as a top concern, according to “Bribery and Corruption: The Essential Guide to Managing the Risks” by ACL.

Many companies have policies against corruption, but it still exists. Although remaining competitive can be difficult in some parts of the world that see payments, gifts and consulting fees as part of doing business, companies need to identify these risks and manage them across the organization. There is much is at stake, as penalties are rising and more companies globally are being fined, the study found.

According to ACL, if a formalized ERM process exists within an organization, then the anti-bribery and anti-corruption (ABAC) risk assessment process should ideally be carried out within that ERM framework. In some organizations, however, the overall risk management process is fragmented, meaning that the risks of bribery and corruption are considered in relative isolation. Whichever approach is taken within an organization, the process of defining the risks should involve individuals with sufficient knowledge of the regulations and ways the business actually works.

“We encourage companies to maintain robust compliance programs, to voluntarily disclose and eradicate misconduct when it is detected, and to cooperate in the government’s investigation. But we will not wait for companies to act responsibly,” said Leslie Caldwell, assistant attorney general in the criminal division at the Department of Justice. “With cooperation or without it, the department will identify criminal activity at corporations and investigate the conduct ourselves, using all of our resources, employing every law enforcement tool, and considering all possible actions, including charges against both corporations and individuals.”

The study’s findings also include:

Top Ten Most Corrupt States in the U.S.

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Most Corrupt States

A new study from researchers at Indiana University and City University of Hong Kong on the most and least corrupt states in America calculates that government corruption costs American taxpayers tens of billions of dollars a year. In the 10 most corrupt states, for example, simply reducing corruption to an average level would lower annual state spending by $1,308 per person, or 5.2 percent of state expenditures.

In “The Impact of Public Officials’ Corruption on the Size and Allocation of U.S. State Spending,” Cheol Liu, assistant professor in the Department of Public Policy at City University of Hong Kong, and John Mikesell, Chancellor’s Professor in the School of Public and Environmental Affairs at Indiana University Bloomington, found that corruption is directly linked to excessive state spending, and noted that corrupt states particularly spend more on construction and capital projects and less on services, including education.

The researchers used data from more than 25,000 convictions for violations of federal anti-corruption laws between 1976 and 2008 to create a “corruption index,” then compared convictions with the number of government employees. This method, they explained, avoids the issue of state differences in police, prosecution and court resources, making the results a reflection of the extent of corruption, not of law enforcement effort.

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 Defining corruption as the “misuse of public office for private gain,” the authors found that public and private corruption can have a range of negative effects, including lower-quality work, reduced economic productivity and higher levels of income inequality and poverty.

According to the study, the top 10 most corrupt states are:

  1. Mississippi
  2. Louisiana
  3. Tennessee
  4. Illinois
  5. Pennsylvania
  6. Alabama
  7. Alaska
  8. South Dakota
  9. Kentucky
  10. Florida

“The results of this article suggest that preventing public officials’ corruption and restraining spending induced by public corruption should accompany other efforts at fiscal constraint. Increases in states’ expenditures on capital, construction, highways and borrowing are not problematic in themselves,” the researchers concluded.

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“However, policymakers should pay close attention that public resources are not used for private gains of the few, but rather distributed effectively and fairly.”