organization Archives - World Risk Management

4 Ways Scenario Planning Supports Decision-Making

Oct 31, 2018 | Blog-All

Have you ever been in the room when someone suggested doing scenario analysis? Did you see everyone in the room cringe at the thought?

I have, and I felt pity for the person who made the suggestion.

Most likely, everyone in that room has gone through the endless “what if” scenario analysis that takes 4 or 5 hours and ends without any solid conclusions.

But if done correctly, scenario analysis can be extremely effective in its support of decision-making.

Personally, I prefer to use the term “scenario planning” instead of “scenario analysis” for the simple reason that “scenario analysis” sounds painful and very computer-driven. On the other hand, scenario planning is human-based and sounds like the effort and results will be useful for the participants and the final audience.

At its core, scenario planning is a “creative and structured process to guide deliberate thinking about risk,” as defined by Aries de Geus in his book The Living Company. De Geus, as the corporate planning coordinator at the Royal Dutch/Shell companies, used scenario planning and described its effectiveness in this Harvard Business Review article…from 1988!

So, with all that being said, how can scenario planning support decision-making?

1. Tests and validates assumptions being made as part of the planning process

When corporate planning occurs, whether called strategic planning, annual planning or something else, management believes that a certain set of assumptions will become true. How many times has management stated an assumption as fact? But what if they are wrong?

2. Provides management with the tools to proactively prepare

Risk management activities are supported by scenario planning, which looks at possible events. While most people inherently want to say the most positive event will occur, proactively preparing for events is always better than being reactive. Being proactive rather than reactive is a key difference between traditional risk management and ERM.

3. Encourages innovation

Scenario planning helps people to think outside of their comfort zone, taking next steps to a big innovative moment. Sometimes that innovation is triggered by the proactive preparation. An organization that is constantly innovating is a step ahead of its competitors.

4. Gives the organization a competitive advantage

Being prepared and innovative are two enormous parts of a competitive advantage. What company would not want that?

Management improves its way of making decisions simply by using scenario planning. It will take time for this way of thinking to take hold, but it stands to reap immeasurable benefits in both the short- and long-term.

After all, de Geus believes that scenario planning is the reason there are companies that last for 200 and 300 years. From the same Harvard Business Review article,

Sociologists and psychologists tell us it is pain that makes people and living systems change. And certainly corporations have their share of painful crises, the recent spate of takeovers and takeover threats conspicuously among them. But crisis management—pain management—is a dangerous way to manage for change.

Once in a crisis, everyone in the organization feels the pain. The need for change is clear. The problem is that you usually have little time and few options. The deeper into the crisis you are, the fewer options remain. Crisis management, by necessity, becomes autocratic management. The positive characteristic of a crisis is that the decisions are quick. The other side of that coin is that the implementation is rarely good; many companies fail to survive.

The challenge, therefore, is to recognize and react to environmental change before the pain of a crisis. Not surprisingly, this is what the long-lived companies in our study were so well able to do.

All these companies had a striking capacity to institutionalize change. They never stood still. Moreover, they seemed to recognize that they had internal strengths that could be developed as environmental conditions changed.

Don’t you want your organization to be around for 300+ years? Embedding scenario planning into management’s decision-making processes will help make that happen.

Author: Carol Williams

Source: ERM Insights

Insurance market evolving to handle terrorism risks

Aug 31, 2018 | Informative, Loss Control, RIsk Management News

While the number of incidents and casualties declined in 2017, a report released Monday by Marsh L.L.C. said terrorism is still a significant threat and that the insurance market is adapting to handle the evolving risk.

Marsh’s 2018 Terrorism Risk Insurance Report, which explores the state of the terrorism insurance marketplace, said that in the wake of recent events, terrorism insurers are expanding terrorism definitions to include active assailant events.

In some cases, the report said, insurers also are developing specialty products that offer first- and third-party business interruption protection for businesses that suffer lost income or revenue without the need for a direct property damage trigger.

Although fewer people were killed in terrorist attacks in 2017 than in 2016, the Marsh report said the means of attack and perpetrators have shifted.

“Past attacks were carried out primarily by specific groups against perceived high-value-high-profile targets,” the report said. “While that threat remains, many recent attacks have come against soft targets and been perpetrated by ‘lone wolves’ and small groups with no direct connection to known terrorist organizations. Weapons of choice now include vehicles, knives and other handheld devices.”

In 2017, the report said, pricing increased in five of the 17 industries surveyed by Marsh, with the sharpest increases being felt by hospitality and gaming companies, public entities and nonprofit organizations, which have been targets of terrorist acts in recent years.

Pricing declined in seven industries, the report said, most notably for energy and mining and construction companies, reflecting the generally positive conditions in the property insurance market prior to the 2017 Atlantic hurricane season.

Sixty-two percent of U.S. companies in 2017 purchased coverage embedded in property policies under the Terrorism Risk Insurance Program Reauthorization Act of 2015, or TRIPRA. Companies in the Northeast U.S. were most likely to purchase terrorism insurance, Marsh said.

The number of Marsh-managed captive insurers actively underwriting one or more insurance programs that access the TRIPRA increased 44% to 166 captives in 2017.

After incurring sizable ransomware losses in 2017, kidnap and ransom insurers are seeking to restrict coverage for cyber risks in their policies.

Terrorism insurance capacity remains strong, the report said, but pricing could increase as global insurance costs generally increase following natural catastrophe losses in 2017. January 2018 year-over-year pricing changes for a majority of reinsurance program renewals that included terrorism coverage averaged flat to an increase of 10% on a risk-adjusted basis, according to the report.

The Marsh report made several suggestions for businesses in the face of evolving terrorism risk, including continually reviewing and reevaluating their risk financing programs to ensure they have adequate protection for property, business interruption, workers compensation, general liability and cyber losses.

The report also encouraged businesses to effectively model their terrorism risk and to build and test robust crisis management and business continuity plans.

Author: Rob Lenihan

Source: Business Insurance

Risky business: Keeping employees safe in a world of emerging threats

Aug 24, 2018 | Blog-All, Informative, Loss Control, RIsk Management News

Recently, I had the chance to spend some time at Walt Disney World in Orlando, Florida, when I attended the NAMIC conference in February. One session included a presentation by Barry Dillard, director of claims for Walt Disney World, where he shared the company’s approach to handling a wide variety of claims.

I sat down with their vice president of risk management to learn about some of the strategies they employ, and I had the opportunity to tour Walt Disney World itself to peek behind the curtain and see how this massive theme park creates the magic for its guests and cast members while keeping everyone safe.

Believe it or not, the Walt Disney World Resort covers 40 square miles and is twice the size of Manhattan. Within its confines, this world-class attraction employs 75,000 cast members, each of whom plays a critical role in spreading the Disney magic. Their emphasis on safety is both taught and caught, which is especially important when serving the millions of guests who visit the Disney attractions around the world.

The Walt Disney Company is extremely proactive in their risk management strategies — it truly is everyone’s responsibility — not just the realm of those at the corporate level. As is often the case in life, the simplest things can make the biggest difference. Merely walking the parks, hotels, shops, and restaurants can yield valuable information, allowing cast members to identify small issues before they become larger ones. Even in one of the most magical places on earth – reality tends to intrude.

Unexpected risks arise every day and training plays a key role in mitigating them. Hackers are constantly devising new ways to access company information or hold it for ransom. The use of ransomware is expected to increase 350% this year, so being vigilant and backing up data has never been more important.

The number of shooting incidents in businesses and other settings is increasing at an alarming rate. Knowing what to look for and how to respond in these situations can literally be the difference between life and death.

For better or worse, new risks are changing our behavior — how observant we are in open spaces of our surroundings, what we post on social media, where and how we protect our personal information, what we open online and how we train our staffs. It really is the smallest things that can make the biggest difference in keeping people safe.

Author: Patricia L. Harman

Source: PropertyCasualty360

6 Essential Tips for Getting Through Any Nonprofit Crisis

Aug 17, 2018 | Informative

Is your nonprofit ready to be tonight’s breaking news?

You don’t even have to be guilty of something to become the daily news. Bad things happen even to worthy nonprofits.

During my nonprofit career, organizations I have worked for have experienced a client’s death; a product tampering that threatened the biggest fundraiser; an athletic scandal; and a mass shooting on campus.

We learned the hard way to be prepared or prepare to suffer more than necessary.

Here are six suggestions for better crisis management by your nonprofit.

01. Don’t Wait

Many organizations only get their crisis plans underway once a disaster has struck.

Instead, brainstorm possible scenarios or types of disasters that could happen and start planning for them.

Educate yourself about nonprofit crises and talk to those who weathered them. Invite a veteran of disasters to speak to your staff and your board. Assign your public relations staff to draft a crisis plan and give them a deadline.

Advocate for real emergency preparedness. Many people in nonprofits, especially small organizations, don’t think anything bad will ever happen. They don’t want to think about it. They don’t believe that they have the time to prepare.

And they might even resent staff who push on this topic. Speak up anyway. If that crisis happens, people will appreciate your forethought.

02. Realize That Crises Take Many Steps

Crises come in all flavors. Some are high profile. Others might be more low key. But, in a time of 24/7 news, thinking you can keep the situation out of the public eye is a fantasy. If nothing else, local media will likely be all over it. Have you built up good relationships with local media outlets?

Like a fire, quickly getting on top of a crisis can make a huge difference in the outcome.

Your crisis might be an accident involving a volunteer, the death of a client, embezzlement by your chief financial officer, a lawsuit by a former employee, or a hack attack that threatens the privacy of your donors and clients.

They all require different responses. Prepare for as many as you can imagine, and do your best to put plans in place to minimize the damage to your nonprofit’s reputation.

Even if something happens that you didn’t think of, your preparation for other types of emergencies will help. The planning may reveal gaps in security, insurance coverage, inadequate human resource policies, or the shortage of people with particular skills.

Practicing any emergency response is likely to make your organization better prepared for others.

03. Develop a Logistical Plan and a Communications Plan

A logistical plan has to do with getting everyone out of the building in case of an earthquake, texting staff and clients that a gunman has been spotted in the building, or handling a medical emergency.

Develop a risk management program to deal with the loss of life, property, and insurance issues. Identify point people who can go into action quickly, notify appropriate help, and manage evacuation plans.

A communications plan involves identifying spokespeople, assigning someone to gather the facts as they emerge, writing press releases, and locating a place to have a press conference.

04. Get Your Social Media House in Order

Social media can be a blessing during a crisis IF it you handle it well.

Almost all nonprofits use some level of social media. Decide now who will manage that media during an emergency situation. Set up a dashboard (here are nine to consider) where you can monitor all social media platforms and respond quickly.

Because of social media, there is little chance of controlling information in a way that used to be possible. So don’t try. But you can give useful information, fight rumors with fact, and express concern.

Don’t just let your social media pages sit there. Use them. One study found that nonprofits often do not respond to social media questions or complaints.

However, social media may be the best way to show the human face of your organization and shore up its reputation for being kind, sympathetic, polite, accurate, and a source of unbiased information.

05. Prepare to Speak

Every minute counts after a crisis. Don’t waste any of them. Silence is deadly. Get out with appropriate statements and messages immediately, even if it is only to say that you know about the situation, you’re working on it, and that few facts are known at the moment.

Then keep it up with updates as events develop. For many situations, you may have already prepared statements.

In all communications, be concerned, show concern, speak concern, and always tell the truth. Don’t be afraid to say, “We don’t know.” That is better than guessing. Add that you are working as quickly as possible to get all the facts.

Far more is lost by refusing to speak to the media than is risked by doing so. A vacuum of information breeds media hostility and public loss of confidence.

06. Provide Media Training

Media training will be your best friend during a crisis. Don’t risk a media meltdown.

Put together a media training program before disaster strikes. Train anyone who might need to be a spokesperson. That might be your board chair, your CEO and other key staff, such as a media relations person. Also, consider your top fundraiser, your volunteer coordinator and, where applicable, your security person or facilities manager.

Media training need not cost a lot if you have someone on your board who works in public relations or someone who is a member of the media. The key is to do it regularly so new people become trained, and others don’t grow stale.

Author: Joanne Fritz

Source: The Balance, Small Business

Risk Leadership: A Necessary Embrace for Nonprofit Leaders

Aug 3, 2018 | Informative

Generally, when we talk about risk management for nonprofits, there is a note of panic in the conversation, as we hold the image of organizations teetering with the uncertainties of government policies and funding, philanthropists changing the focus of their giving, and increasing demand for services. In fact, grantspace.org quoted the Alliance for Nonprofit Management as defining risk management as a discipline intended to identify and protect against any threat to an organization’s ability to deliver on its mission. It is a definition based on fear: fear of loss. A report covered by NPQ in 2016 represents another example of this approach.

In 2017, NPQ devoted an entire issue of its print journal to the subject of risk management in the nonprofit sector. The focus was on how to move from risk management to risk leadership, with an interview with David Renz providing focus for what that actually means. Not only do nonprofits live in a world of risk, but at times it is important to acknowledge that risk fully and even use it as a way to move forward.

A recent article in the Greenwich Sentinel by Michele Braun builds on this idea and proves some very simple how-to’s for nonprofit boards and leaders. Braun, director of the Institute for Managing Risk at the Manhattanville School of Business, argues that if nonprofits do not take any risks at all, they cannot grow, adapt, or respond to the needs of their clients. The question, instead, is how to be intentional about which risks to take on and how to avoid ones that could be detrimental to the organization’s survival.

Nonprofit leaders should ask a few key questions:

What risks do we face that can derail our mission?
What risks can we take that would help us accomplish our mission?
What processes do we have in place for assessing and managing risk?
Why haven’t we committed to be a risk-aware and risk-savvy organization?

Two easy steps to take, according to Braun, involve annually having a look at risk and your organization. A conversation among staff and representatives throughout all strata of the organization could lead to clearer understanding of what has changed internally and externally that might alter the risk landscape. Are there new threats or opportunities the organization should be aware of and act on? People from outside the organization should be included in this discussion, as they may see things from a different angle and set of experiences.

In addition, also on an annual basis, the organization’s insurance carrier should be asked to review coverage and services. Periodically, the organization should ask an insurance provider that is not their current carrier what they would propose as coverage. There may be something that the current provider is overlooking.

Inherent in what Braun is saying is that although we need to be aware of and prepared for risks, we need not always live in fear of them. A risk management policy can include more than simply how not to be devastated by a negative risk. It can also include ways to be aware of and take advantage of risks that will help us grow. By managing the process of taking a strategic risk, and with some forethought, your nonprofit can have the courage to do something new while minimizing the potential downside.

Source: Nonprofit Quarterly

Author: Rob Meiksins

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