Risk & Business

MacDonalds is being sued for the toys in their happy meals, as kids are "lured" to eat unhealthy cheeseburgers and fries. This obviously is a ridiculus law suit because parents can surely not buy the meals and choose to feed their children better. This case however does bring up a great conversation about enterprise risk managment. Let me discuss it here. Good ERM would have had the top brass at MacDonalds looking at the big picture. America is getting fatter and more unhealthy. MacDonalds has to know that their high sodium, high calorie meals are not helping the situation. A good ERM strategy would be to change their marketing and get rid of the toys. Maybe place some educational materials in the happy meals on how to eat healthy. Maybe they could add some sliced apples to the meals. Either way a holistic ERM view would have helped MacDonalds reduce the risk of a law suit. Now MacDonald's is probably laughing at the law suit, but they certainly are not laughing at the me

According to a recent study roughly 1 in 7 drivers are uninusred in the US. In some states this number is as high as 1 in 4. The insurance institute is blaming the economic downturn as the main reason. The problem with this scenario is how it affects future rates and costs. The accuaraies will have to raise rates to account for the uninsured drivers. This represents increased costs for consumers when buying insurance. In addition the frustration that insured concumers will have when in an accident with an uninsured driver. There is no easy answer to this problem. Trying to enforce the laws in the states on car insurance is so huge that cash strapped states just do not have the recources to make it happen. So I see the problem getting worse. The solution will be in "smart cars". Can you imagine the scenario when you can't start your car because you did not pay your premium?  Crazy you say? Watch out this may be sooner then you think.  Until next time be careful out there a

Japan's sunami was higher than the Cat modelers ever expected. The waves went over the sea wall like it was nothing. The insurance Cat models didn't see it coming. The catastrophe in Japan is showing insurance company execs that the Cat models that they buy into may not be the security blanket they hoped for. As a matter of fact the inventor of Cat models, Karen Clark, is now telling insurance company bosses not to depend so much on the accuracy of the models. Mother nature is still in charge and insurance companies will have to plan on paying out Cat's. The ability to predict accurately, charge appropriately, and underwrite effectively using Cat models is turning out to be precarious and maybe out of reach. Why? well as mother nature is showing us, the imaginable still happens in our world. until next time be careful out there and know your risks. K

The EEOC just expanded the definition of what is considered a disability under the ADA law. Business owners who employ people need to be aware of this as it increases the risk of violating the new rules. The term disability is now expanded to cover any "major life activity", "interacting with others", and nearly every body function. This unknown definition will certainly increase the lawsuits against employers as the courts determine individual cases and how they apply to the expanded ADA. Employers really need  to work through accomodations for employees to protect themselves. Also a good EPL policy is important as a risk transfer tool. Until next time be careful out there and know your risks. K

Enterprise Risk Management is a growing science and all to important for business owners. What use to be experience and observation, is now practiced with computer models and analytics. The day is here where risk can be evalutated with mathematical precision which allow business owners and boards to use risk to acheive goals. This is a big switch from earlier mindsets of risk avoidance and risk control. The development of ERM practices has created the need to more sophisticated risk analytics, which in turn has discovered how to use risk to accomplish the goals and objectives of businesses. Take for example strategic risk. Lets say that a business wants to go into a new product line. With the use of risk analytics, the business can be shown the statistical risk factors of success or failure. The business can make capital expenditures on these models. Though nothing is out there to guarantee success, these mathematical risk models can surely enhance the opportunity to succeed. ERM is he

The research is out, 1 out of every 7 agents/brokers will be sued in their careers. The main reasons are plaintiff attorneys like the ease of discovery an agency gives them and also the "deep pockets" of the agents E&O policies. The average judgement against agents however is relatively low, as it falls into the range of $14,000 to $16,000 per case. The reason for this is that agents do a good job of documentation. The agency manager platforms allow agents a great template of protection. So the mantra is to document, document, and document !!  Until next time be careful out there and know your risks. K

It is clearly evident, American workers bring more health issues to the workplace than ever before. As workers spend more and more time at their job, this trend will most likely continue. Recently , Pfizer launched a website called American Health Strategy Project,  to help employers deal with this trend. The site gives models on improving employe wellness at the job. I checked out the website and it really looks helpful. Risk managers are going to need tools like this to handle the risks associated with poor employee wellness. I see information brought by technology as the solution to helping employers deal with this issue. Until next time be careful out there and know your risks. K