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Risk Management


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    • 1. Risk Surrounds Us Colin D. Baird 10-24-2007
    • 2. Finding Hidden Profits Through The Risk Management Process Colin Baird 1113 West Avenue M-4, Suite C Palmdale, CA 93551 Direct Telephone: 661 486-2202 Fax: 661 281-4992 Cell: 661 332-0382 Email: [email_address] or [email_address]
    • 3. There Are Five Basic Steps To Risk Management Colin D. Baird [email_address]
    • 4. Colin D. Baird [email_address] Monitoring Examine and Evaluate The Results Of The Plans Implement The Desired Action and Plan Control and Finance The Risk Analyze and Measure The Risk Identify The Risk The Risk Management Process
    • 5. Identify The Risk
      • The process of “Identifying and Examining the Potential Sources of Losses Faced By The Organization.”
        • Process Based Evaluations
          • Step 1
            • “ C” Level Executive Meetings To Discuss Commitment To Desired Outcomes
          • Step 2
            • Facilities and Worksite Evaluations
            • Risk Checklist and Survey Audits Specific To SIC Classifications
            • Insurance Policy Analysis
            • Net Income/Financial Analysis
            • Compliance Review
            • Contract Review and Analysis
            • Policies and Procedures Review (Employment Audits Using Outside Counsel)
            • Computer Based Risk Modeling To Review Probable Sources and Losses Of Organization
          • Step 3
            • Comparison Of Client Losses Against Industry Losses
          • Step 4
            • Baseline Comparison Of Limits of Insurance Against Similar Sized Organizations
      Colin D. Baird [email_address]
    • 6. A Few Examples of Identifying The Risk
      • Checklists
      • Insurance Policy Analysis
      • Physical Inspections
      • Net Income/Financial Analysis
      Colin D. Baird [email_address]
    • 7. Logical Classifications Of Risk
      • Property
      • Human Resources
      • Liability
      • Net Income
      Colin D. Baird [email_address]
    • 8. Analyze and Measure The Risk
      • “ The Assessment Of The Potential Impact The Various Exposures Can Have On The Organization”
        • Review of potential exposures and the consequences to the organization
          • Retained Losses
            • Self Insured Retentions
            • Deductibles
          • Insured Losses
          • Uninsured or Unintended Losses
            • Unidentified, or previously not considered or evaluated
          • Benefits of Contractual Transfer of Loss Potential
            • Transfer of Risk Through Hold Harmless and Indemnification Language
          • Additional Insured Provisions
          • Subrogation Potential and Cost Recovery Methods
      Colin D. Baird [email_address]
    • 9. Control and Finance The Risk
      • Risk Control-
        • “ An Action To Minimize, At The Optimal Cost Losses That Strike The Organization.”
          • 6 Techniques Of Risk Control
            • Avoid
            • Prevent
            • Reduce (Both Before and After The Loss)
            • Segregation
            • Transfer-Either Contractual Transfer or Physical
            • Combination Of Techniques
      • Risk Financing-
        • “ The Acquisition Of Funds At The Least Possible Cost To Pay For The Losses That Strike The Organization.”
          • Retention-The Acquisition Of Funds From Within The Organization To Pay For Losses
          • Transfer-Contractual Or Other Arrangements Where Losses Are Financed From Outside The Organization
            • (A) Non Insurance
            • (B) A relatively Small Known Cost Substituted For A Potentially Larger Unknown Cost
      Colin D. Baird [email_address]
    • 10. Well, you’ve Identified The Risk , Analyzed and Measure The Risk, Controlled and Financed It, Now What? Colin D. Baird [email_address]
    • 11. Implement The Desired Action and Plan
      • Implementation
      • Commitment and Participation
        • Senior Management Must Support Plan and Implementation
        • Communication
          • Plan Is Communicated To HR, Management, Bargaining Unit (If Applicable)
        • Design and Structure
        • Training
        • Accountability
      Colin D. Baird [email_address]
    • 12. Monitoring, Examining, and Evaluating The Results Of The Plans
      • Indicators and Measures
        • Actual Losses versus Expected Losses
        • Experience Modifiers
      • Continuous Tracking
      • Regular Evaluations
      • Adjustments and Upgrades
      • Feedback
      Colin D. Baird [email_address]
    • 13. Our Markets
      • Aerospace and Defense
      • Construction
      • Manufacturing and Distribution
      • Private Family Offices
      Colin D. Baird [email_address]
    • 14. Recent Success Stories Colin D. Baird [email_address]
    • 15. Recent Success Stories
      • A Client Had Workers Compensation Losses Double The Industry Average. As a result his premiums had doubled and profits dwindled.
      • We reviewed and made adjustments to the clients loss and safety programs. This ultimately reduced losses to a more acceptable level.
      • We reviewed and implemented a formal process for managing ongoing losses. This process included a formal process for subrogating losses back to the responsible party for reimbursement. In turn this improved the clients actual losses which in turn reduced his net cost for insurance
      • We hired a Nurse Case Manager to better help manage new losses and properly identify First Aid cases thereby reducing reportable injuries to the client’s insurer.
      • Client’s 2005 Premium $600,000 (Ex Mod 179)
      • Client’s 2006 Premium $450,000 (Ex Mod 150)
      • Client’s 2007 Premium $250,000 (Ex Mod 95)
      Colin D. Baird [email_address]
    • 16. Case Study (The Typical Ticking Time Bomb)
      • Client had same broker for 21 years
        • 110M Distributor
          • Referred by CPA Firm
          • Upset with lack of risk management by current broker
          • Contemplating change of risk manager
          • No consistent risk audit review process for evaluating risk
        • Our review and audit demonstrated
          • Deductibles were too low
          • Client Dramatically Underinsured For Net Income and Property Values
          • Complete building remodel 1 year previously including seismic/earthquake retrofitting
          • No coverage for pollution indemnification assumed in lease agreement at 4 locations
          • No insurance certificate monitoring for product distributors
          • Lack of adequate controls over vendors insurance programs
      Colin D. Baird [email_address]
    • 17. Risk Management Results
      • Property limits increased from $47M to $69M
      • Net Income Limits Of Insurance Increased From $12M to $37M
      • General liability increased from $15M to $20M
      • Retained more risk through increased deductibles
      • Transferred pollution indemnification to current carrier at no charge to client
      • Transferred more risk to carrier on earthquake values (including loss of income) by $14M
      • Negotiated with E/Q company to use the seismic engineering report to demonstrate significant decrease in exposure of risk resulting in a substantial decrease in pricing $100,000
      • Installed insurance certificate compliance monitoring services
      • Implemented formal contract review process with customers, and distributors
      • Results
        • 2006-2007 Premium $825,000
        • 2007-2008 Premium $705,000
      Colin D. Baird [email_address]
    • 18. Case Study #2
      • Aerospace And Defense Manufacturer
      • 25M In Receipts
      • New CFO and Executive Team
      • Risk Manager Hired By Private Equity Group
      • CFO not aware of coverage's, or lack of them
      • Our referral source Investment Banker
      • No ongoing review process of risk
      Colin D. Baird [email_address]
    • 19. Additional Facts Case Study #2
      • No contract review
        • Lease of premises indicated building insurance was lessee’s responsibility
      • Inadequate limits of insurance for loss of income
      • No product liability for aerospace or defense parts
        • Client wanted coverage for specific parts
      • No coverage for international operations or lawsuits brought abroad
      • Workers Compensation Claims historical review showed solid claims performance
      Colin D. Baird [email_address]
    • 20. Risk Management Results #2
      • Properly identified limits of insurance deficiency in loss of income resulting in an increase in values from 2M to 10M
      • Properly identified lease terms and conditions to assure compliance with indemnification, and insurance provisions of lease
      • Added specific aircraft product liability and included worldwide coverage for defense, and compensatory damages
      • Changed work comp carriers to industry specific carrier
      • 2006-2007 Premiums $300,000
      • 2007-2007 Premiums $240,000
      Colin D. Baird [email_address]
    • 21. Our Best Clients
      • Referred By Senior Advisors and Current Customers
      • Revenues From $20M Up
      • Known or Unknown Problems With Risk
      • Looking to “Upgrade Advisors”
      • Not aware of current loss problems
      Colin D. Baird [email_address]
    • 22. Current Targets
      • Private Equity Groups
      • Plastics Manufacturers and Distributors
      • Machine Shops
      • Food Manufacturers and Distributors
      Colin D. Baird [email_address]
    • 23.
      • How Often Do You Assess Risk In Your Business?
      • What Did The Last Assessment Demonstrate?
      • Did The Assessment Highlight The Hidden Value In Managing Risk Differently?
      3 Lead In Questions For Your Clients Colin D. Baird [email_address]
    • 24. Audience Questions Colin D. Baird [email_address]