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Cavalcade of Risk #144

It’s almost turkey time. With that in mind, Nancy Germond culled the best risk management and insurance related posts on the web and related them to all things Thanksgiving on her blog, Insurance Writer.

Topics cover:

  • How one human turkey in the workplace can actually cost your organization
  • The case of an insurance investigator shot by the claimant he was investigating, allegedly after being mistaken for a turkey
  • The big turkey making people sit up and take notice (also known as climate change), which is addressed right here on the Monitor in the post, “GRC Preparedness in a Changing Climate
  • The “biggest turkeys of them all: mortgage makers”

There are more themed post to be seen at Insurance Writer — check it out.

 

Managing Strategic Risk: How IBM Looked Ahead, Revamped Its Operations and Profited

New IBM chief executive Virginia Rometty

In 1981, IBM revolutionized the computer industry — and arguably the world. In introducing its IBM Personal Computer, the company’s goal was to offer a machine capable of competing for sales in a burgeoning market against the likes of Commodore, Apple, Atari and Tandy. But what it really did was create a product that was so successful that its makeup became the standard for all home computers.

Fast forward 10 years. The massive market share of the home computer segment that IBM devoured following the success of the IBM PC, while still substantial, was dwindling. The “IBM Compatible” army of imitators was growing by the year and the company no longer retained the popular cache among consumer to give it any real advantage over “PC Clone” rivals like Compaq and Hewlett-Packard.

It became increasingly clear that the company’s domination of the hardware market was over.

 For some companies, this could have been the beginning of the end. But it was merely a new beginning away from the machines that had once been so much at the heart of its business that they not only comprised most of its revenue but one third of its very name, International Business Machines.

Like the long version of its name, however, the past model is long gone. In 2005, IBM made it official, selling off its venerable ThinkPad brand of laptops to Lenovo and culminating a mission began by Samuel Palmisano, who took the top executive spot in 1993, to find a non-hardware-driven way to not just survive, but thrive.

Leaders knew that their company’s long-term success would come from services and software, not hardware. In 2002, the company made its marquee splash into a pool it now dominates, by spending $3.5 billion to purchase PricewaterhouseCoopers’ consulting arm, something the company lists as “the largest acquisition in professional services history.”

And it was largely due to the vision of IBM’s recently appointed new CEO Virginia Rommety.

In 2002, Ms. Rometty championed the purchase of the big business consulting firm, PricewaterhouseCoopers Consulting, for .

5 billion.

The deal was made shortly after [former chief executive Samuel] Palmisano became chief executive and it was seen as a big risk. The PricewaterhouseCoopers consultants were used to operating fairly independently, in a very different culture from the more regimented I.B.M. style of the time. The danger, analysts say, was that the business consultants would flee in droves, leaving the business a shell.

Ms. Rometty was put in charge of coordinating the work of the acquired firm’s consultants with I.B.M.’s technologists, to tailor services and software offering for specific industries. Ms. Rometty, analysts say, worked tirelessly and effectively to win over the consultants. “She did the deal, and she made it work,” Mr. Palmisano said.

This shows two admirable leadership qualities of Rometty: the ability to think long-term and the ability to successfully navigate a tricky merger. Its rare for anyone to be capable of pulling off even one of those tasks. She has done both.

And its not just those inside IBM that see it this way. Outside analysts agree.

Ms. Rometty has led the growth and development of I.B.M.’s huge services business for more than a decade. The services strategy, analysts say, is partly a marketing tactic. But, they add, it also represents a different approach to the technology business, with less emphasis on selling hardware and software products. Instead, I.B.M. puts together bundles of technology to help business streamline operations, find customers and develop new products.

“I.B.M. is selling business solutions, not just products,” said Frank Gens, chief analyst for the technology market research firm IDC. “Rometty has been at the forefront of that effort.

And this.

“Ginni Rometty combines performance and charisma,” said George F. Colony, chairman of Forrester Research. “She orchestrated a massive charm campaign to bring the PricewaterhouseCoopers people into the fold. That was the trial by fire for her.”

As its hardware dominance started to wane, the company didn’t panic. Its leaders, notably Rometty, just found new ways to maintain the company’s status as a leader in the tech market. Now, the company is the 18th largest in the country, the 2nd largest tech firm on the planet (trailing only Apply) and the world’s 2nd best brand (according to Interbrand).

Warren Buffet even wants in on the action, yesterday announcing that his company just paid $10 billion for a 5% stake in IBM in a deal that is the “most Berkshire has ever paid for a minority stake in a publicly traded company” and “a massive bet on a technology services company after years of eschewing technology stocks.”

Managing a strategic risk is perhaps the hardest thing for a company to do. It takes considerable vision, and even more effort, to redirect operations in another direction or — harder still — revamp a business model. But any company that thinks it can last for decades doing the exact same thing it has always done is likely fooling itself.

We can all learn a lot about risk management from the IBM turnaround.

The 42 Best Insurance Blogs

For the second year in a row, we here at the Risk Management Monitor are honored to announce that we have been named by LexisNexis as one of the world’s top insurance blogs. The company recognizes the best of the best each year and recently released its best insurance blogs of 2011 winners.

I’m not familiar with all of the those listed, so I can’t speak to their overall quality, but I will certainly be poking around all week to find some new good sources of content. And I do know that some of these listed are indeed stellar. Congrats in particular to some of my favorite industry blogs, including InsureReinsureGC Capital Ideasreinsurance girl’s blog and Terms + Conditions.

Here is how LexisNexis describes its list.

These top blogs offer some of the best writing out there. They contain a wealth of information for all segments of the insurance industry, and include timely news items, expert analysis, practice tips, frequent postings and helpful links to other sites and sources.

These sites demonstrate the power of the blogsphere, by providing a collective example of how bloggers can—and do—impact and influence the law and the business of insurance.

And here’s the full list (in alphabetical order):

  1. Ask Tim (Independent Insurance Agents and Trusted Choice)
  2. Binding Authority (Randy J. Maniloff)
  3. Boston ERISA and Insurance Litigation Blog (Stephen Rosenberg)
  4. Corporate Insurance Blog (Scott Godes)
  5. Coverage Counsel (Mura & Storm)
  6. CyberInquirer (Cozen O’Connor)
  7. Disability Insurance Lawyer Blog (Frankel & Newfield)
  8. Gauntlett on Intellectual Property/Antitrust Insurance (David A. Gauntlett)
  9. GC Capital Ideas (Guy Carpenter)
  10. GlobalTort (Kirk Hartley, Steve Sellick and Tim Greene)
  11. Healthblawg (David Harlow)
  12. Health Care Law Reform (McDermott Will & Emery)
  13. Insurance Claims and Issues (Dennis Wall)
  14. Insurance Class Actions Insider (Wystan Ackerman)
  15. Insurance Coverage Corner (Carlock, Copeland & Stair)
  16. Insurance Coverage Law Blog (Dunn Carney Allen Higgens & Tongue LLP)
  17. Insurance Coverage Law in Massachusetts (Nina Kallen)
  18. Insurance Litigation and Regulatory Law Blog (Barger & Wolen LLP)
  19. Insurance Law Hawaii (Tred R. Eyerly)
  20. InsureReinsure (Edwards Wildman Palmer LLP)
  21. Life, Health and Disability Insurance Blog (Barger & Wolen LLP)
  22. Life Insurance Law Blog (Currin Compliance Services LLC)
  23. Loree Reinsurance and Arbitration Law Forum (Loree & Loree)
  24. National Insurance Law Forum (National Insurance Law Forum)
  25. Nevada Insurance Law Blog (Mills & Associates Law Firm)
  26. No-Fault Defender (Jason Tenenbaum)
  27. North Carolina Insurance Law (George Simpson)
  28. PLUS Blog (Professional Liability Underwriting Society)
  29. Policyholder Perspective (Farella Braun + Martel LLP)
  30. Property Insurance Coverage Law Blog (Merlin Law Group)
  31. Reinsurance Focus (Jorden Burt LLP)
  32. reinsurance girl’s blog (Rein4ce)
  33. Reinsurance Law Blog (Stauffer & Nathan)
  34. Risk Management Monitor (RIMS)
  35. Subrogation & Recovery Law Blog (Cozen O’Connor)
  36. Tennessee Insurance Litigation Blog (Brandon McWherter and Parks T. Chastain)
  37. Terms + Conditions (Insurance Information Institute)
  38. The D&O Diary (Kevin M. LaCroix)
  39. The Insurance and Reinsurance Report (Goldberg & Segalla)
  40. Tort Talk (Dan E. Cummins)
  41. Traub Lieberman Insurance Law Blog (Brian Margolies)
  42. Zalma on Insurance (Barry Zalma)

Preparedness in a Changing Climate

Could Mother Nature disrupt your business? This is an old tale for many companies who make their homes in states that regularly experience extreme weather — but what about the rest of us? When the tail end of Hurricane Irene tracked over the Northeast this past August, it left behind some of the worst flooding and storm damage the region had experienced in more than 70 years. Meanwhile, Texas is coming off the harshest drought the state has ever experienced while a rash of tornadoes has been plaguing the South and Midwest. The February 2011 blizzard brought Chicago and New York to a standstill and did I mention Hawaii reported snowfall — in June?

As extreme weather becomes more widespread, no one is safe from nature’s wrath. Having a disaster preparedness plan, including backup and recovery for critical systems, will help your organization mitigate risk and maintain compliance, even in the event of a natural disaster.

Is Your Business Prepared?
Is your business ready? Could it recover in the event of an extreme weather occurrence or natural disaster? Plenty of companies think they are doing the right things in risk management. They are conducting regular business continuity business impact analyses (BIAs) and putting disaster recovery plans in place for their key applications, but often these activities are standalone processes with outputs held by business owners in emails, filing cabinets or limited file shares. IT security or risk management teams may have little visibility of any of this documentation, and as a result, have no easy way to identify emerging IT or business risks that might affect business continuity or disaster recovery planning. More serious still, senior business executives often also lack insight and simply assume that IT can get a data center up and running again quickly — completely failing to understand the extent of what might happen to the business while those critical processes are down.

Requirements for Preparedness
A GRC approach to disaster preparedness calls for greater control and visibility. It’s important that organizations look at this as a business function, not just an IT function.

An important part of disaster recovery planning is to be able to differentiate between your organization’s critical and non-critical functions and activities. You should be able to measure the value of your business processes and IT assets in order to risk-rate them according to the potential impact of an outage. How will this effect revenues, brand image, stakeholder confidence and customer loyalty? By doing this risk-rating, you can focus your disaster recovery plans on critical or high-value systems and processes and tie them to the company’s bigger risk concerns.

Another cornerstone of disaster planning is centralization of all of your analyses, plans and related documentation in a single repository. Centralization is not just about improving access and control, but also about making it easier to standardize by bringing everything together in one place so you can more easily view and respond to any overlaps, inconsistencies and gaps. Furthermore, it helps improve reporting by providing a holistic view of your business resilience program at any point in time.

As we’ve learned with all the events of this year, Mother Nature can be fickle. Even with plenty of warning of what’s coming, you can’t always be sure your assets will be protected. Your best option is to be very sure that you are prepared with options to keep your most critical operations running, and that you know exactly how to implement them.

Committing to Change: Don’t Be Afraid of What You Find
Once you have identified what your company needs and you have committed to making the required changes to your current preparedness program, you may have to brace yourself for some of the things you may discover as you start to delve deeper. Some examples of typical problems are:

  • Disaster recovery plans are missing, incomplete, or not fully adequate
  • There is a significant gap between the risk and business strategies
  • Vague plans for on-call/emergency coverage
  • Lack of staff training/expertise for disaster recovery plans

Ultimately, most of these issues can be resolved with proper planning and clear communications. IT, finance, legal and the business departments all need to be on the same page when it comes to disaster planning. What is important to the marketing department, for example, may not be viewed as a high value business process by IT and as a result may not be tiered appropriately — leaving the marketing department out of luck in the event of an outage. Without clear, deliberate and well thought out plans, the risk to both businesses and employees increases and the recovery process takes more time than it should — eating away at revenue and reputation.

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How Can You Make Sure Your Company Is Ready?
Once you have identified the issues with your preparedness plan, and the improvements you need to make, you are well on track to ensuring the readiness of your company.

As I touched on earlier — communication and collaboration is of the utmost importance. You need to ensure a common understanding across departments of the processes, assets and functions that are of most importance to the business and, therefore, to its customers.

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This understanding is what will underpin the risk-rating and BIAs that will drive your preparedness planning.

Next is tying together people, processes and technology to avoid conflicts, gaps and wasteful overlaps. Specialist software tools can support this effort by streamlining workflows and making it easy for non-technical users to carry out activities like running real-time reports. These tools also typically provide the central repository you need for all your documented output.

Finally, training and testing are absolutely vital to a solid disaster preparedness plan. What good is a robust plan, if no one knows what to with it?

Preparedness depends on knowing exactly what to do, when to do it and how to do it.

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There is no second chance when a disaster strikes, only lessons learned.