Category Archives: Risk Management

Simon Sinek Addresses RIMS 2013 with Lessons on Neuroscience and Leadership

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Author and leadership expert Simon Sinek addressed the General Session at RIMS 2013 today with an inspiring keynote speech that looked at what makes good leaders and effective organizations so successful. But unlike a typical business presentation that relies on platitudes and buzzwords to state its case, Sinek turned to human biology to illustrate what motivates us and why we behave the way we do. According to Sinek, our actions boil down to the good feelings we get from four key chemicals in our body – endorphins, dopamine, seratonin and oxytocin – and that understanding these reactions may be useful for business.

For instance, endorphins provide a boost to complete physical tasks giving us the endurance to put in a little extra effort. Dopamine is why rewards make us feel so good.

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Seratonin inspires positive feelings of pride while oxytocin relates to generosity.

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These reactions are hardwired into us from the earliest days of primitive man and his search for food but they are still relevant in today’s business world as people still follow these instincts to achieve common goals. We basically traded life and death goals of the tribe for the business goals of our organizations.

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As a result, Sinek says that organizations need to understand that “business is not like a family, it is a family.” If leaders don’t understand these needs, people will not be motivated or loyal to their modern tribe. Even worse, if these chemicals are not balanced it creates stress in employees, which blocks oxytocin and its immune-boosting powers for instance, and actually makes employees sicker. “Our companies are murdering us, and murdering our children,” he said.

The key is to promote a work-life balance that isn’t only about time spent, but about about building quality relationships even within the organization, so that people will be inspired by their leaders to do the right thing, not for their own self-interests, but for the good of the group.

Countdown to RIMS ’13

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In just two days, the RIMS 2013 Annual Conference & Exhibition will kick off in Los Angeles. Each year this event plays host to inspiring keynote speeches, educational sessions and countless opportunities for networking. And this year is no different — just better.

Some of the highlights of RIMS ’13 include:

  • Keynote speaker Simon Sinek, the author of Start with Why: How Great Leaders Inspire Everyone to Take Action and Ted Talk alumni.
  • Howie Mandel, who will give the crowd a few laughs during the conference finale Wednesday, April 24th at 2:15pm
  • The RIMS Thought Leader Theater, which will deliver more than 20 fast-paced, 25-minute topical presentations not offered at any other time during the conference
  • The RIMS Smart Bar, which will provide a place for attendees to learn about the latest hints and tips for engaging with the global risk community through social media
  • A series of 60-minute “power hours” offering educational sessions designed specifically for the adult learner
And of course, the staff of Risk Management will be on hand to deliver post after post — writing about the various sessions, events and people we will meet. So tune in here and through the various RIMS social media apps to keep up with the RIMS 2013 Annual Conference & Exhibition.
Here we go!

Obama Budget Proposal a Mixed Bag for Risk Managers

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President Barack Obama released his budget proposal for the 2014 fiscal year on April 10. Media attention has focused on its plan to reduce the nation’s deficit. But for risk managers, the budget is also noteworthy for two other reasons: what it includes and what it doesn’t.

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As in years past, the administration’s budget includes a provision that would eliminate the current tax deduction for reinsurance premiums ceded by domestic insurers to foreign affiliates. Many in the industry, including RIMS, have expressed their opposition to this provision being included in any final budget.

In an April 15 letter to the House Ways and Means Committee, RIMS stated that the administration’s proposal would have “demonstrable negative implications for the global reinsurance market and the United States businesses that rely on this market” and would have a “chilling effect on the use of foreign reinsurance.” (View the full letter for a deeper explanation of the tax deduction.)

The Coalition for Competitive Insurance Rates (CCIR) published a study in 2009 (with an update in 2010) that found eliminating the tax deduction would lead to a 20% reduction in the overall supply of reinsurance available in the U.S. market.

This would in turn lead to consumer price increases of at least billion and up to billion annually.

A brighter spot for risk managers comes from an item not found in the administration’s proposed budget: a cut to the Terrorism Risk Insurance Act.

In President Obama’s first few budgets, support for TRIA was significantly reduced. In his proposed fiscal-year 2011 budget, for example, the administration called for eliminating nearly $250 million in federal subsidies to insurance companies for terrorism insurance; increasing deductibles and copays for insurers that participate in the program; and eliminating coverage for acts of domestic terrorism.

With TRIA set to sunset at the end of 2014, the industry looked to this year’s budget proposal for a sign on where the president stands on the issue.

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While not including a cut for the program in a budget proposal is not the same as support, it is viewed as a positive sign that the administration will get behind an extension.

It should be noted that government’s final budget rarely looks anything like the initial proposals put forth by the administration and Congress.

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While President Obama has included the reinsurance tax provision in the past, that provision has never been included in any final agreement. The same holds for years in which the administration included cuts to TRIA.

The administration’s initial budget proposal does still carry weight, however.

And what is — and is not — included remains notable for risk managers and worth keeping an eye on going forward.

Lessons Learned from the Lululemon Recall

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Lululemon’s Chief Product Officer, Sheree Waterson, recently announced she would be stepping down following the fallout from the yoga apparel company’s recall of some of its unintentionally see-through yoga pants. The popular piece of workout clothing makes up about 17% of all women’s yoga pants sold in Lululemon stores, and the company noted that the recall would “significantly hurt its financial results.” From the financial hit on earnings to the reputational damage to the brand to the forced departure of Sheree Waterson, Lululemon’s voluntary recall highlights the importance of thinking through and planning for potential risks, which means having a strategy in place for product recalls.

In the event of a recall situation for a popular product, it is important for companies to consider not just the day of the recall, but anticipate the processes and communications in the weeks following. Companies must have a complete plan of action for ensuring that the recall is effectively communicated to distributors and customers, the product is removed from shelves, and the potential varying ramifications—in this case, the decrease in quarterly sales for Lululemon and the exit of a top executive—from a voluntary recall are considered in the action plan.

As we’ve seen in recent news, it’s not an “if” but “when” a company faces a recall, and so being prepared for the outcome is imperative.

Even in a voluntary recall, the fallout that could occur is unclear and can be damaging.

The best way to navigate a voluntary product recall is to ensure that there is not only a process in place for the immediate actions, but also that there is a full plan to better alleviate and potentially avoid the multiple risks that might stem from it.

Lululemon’s recall highlights how proper preparation must address various scenarios and risks in order to avoid having a recall spiral out of control. In today’s market with global supply chains, companies face increasing uncertainties that make developing a recall management plan an even more pressing issue.

It is critical to not wait for a crisis to strike before developing a plan for such events, and instead build a plan now in order to best mitigate a product crisis.