2017 RIMS

Feeling Unprepared to Deal With Risks

Damage to brand and reputation ranked as the top risk concern of risk managers throughout the world.
By: | April 25, 2017 • 3 min read

Geopolitical uncertainty, challenging demographics and a difficult economy are making it harder for risk managers to protect their organizations.

“Certainly there is a feeling and understanding that the risk environment is changing, and changing really fast,” said Rory Moloney, CEO of Aon Global Risk Consulting, during the RIMS 2017 conference.

Rory Moloney, CEO, Aon Global Risk Consulting

Aon’s “2017 Global Risk Management Survey,” he said, asked its 1,800 respondents, “How prepared are you?” and the results are “at its lowest point now since we started this in 2007.”

“They are sensitive to the volatility and feel less prepared,” Moloney said.

The survey found that the No. 1 global risk in 2017 was “damage to brand and reputation.” And that, too, is partly caused by the pace of change as well as the growth of 24/7 news channels and the use of social media.

“In the age of Twitter and viral videos, damage to reputation could occur because of an inappropriate tweet by an executive, or a video by an employee complaining about sexual harassment or discrimination,” according to the report.

Advertisement




Regardless of the difficulty faced by a company, whether it is a product recall, supply chain failure, fraudulent act or cyber event, “the worry is just that the amplification is out there and it happens so quickly,” he said

Nearly half (45 percent) of the respondents identified brand and reputation damage as their top risk concern,while only 51 percent believed they were prepared to deal with the challenge, according to the survey.

The top 10 risks, in order, are:

  • Damage to reputation/brand;
  • Economic slowdown/slow recovery;
  • Increasing competition;
  • Regulatory/legislative changes;
  • Cyber crime/hacking/viruses/malicious codes;
  • Failure to innovate/meet customer needs;
  • Failure to attract or retain top talent;
  • Business interruption;
  • Political risk/uncertainties; and
  • Third-party liability (including E&O).

Of the top 10 risks, half are uninsurable, while three are partially insurable, according to Aon. Only two (business interruption and third-party liability) are insurable.

Cyber risk moved up from nine in 2015 on the list to five this year – but it was No. 1 for risk managers in North America, Moloney said.

In the intervening years, the risk has expanded from disclosure of personally identifiable information from retail, health care or education organizations, to include fears of business interruption and disruption of production processors and controllers, Moloney said.

Readiness by risk managers to deal with cyber risk declined overall from 82 percent in 2015, to 79 percent in 2017, according to the report.

It is critical that business and policy leaders understand which disruptive technologies will matter to them, and prepare accordingly.

In addition, multinational companies need to prepare for new data protection rules that go into effect in the EU in May 2018. Failure to comply could result in penalties of up to 4 percent of worldwide earnings, he said.

As risk managers face geopolitical uncertainty, only 23 percent of them feel prepared to deal with the potential changes facing their organizations.

“Companies can’t control the geopolitical environment,” Moloney said.

They also can’t control the aging of the workforce, which continues to creep up. Organizations need to devote resources to attract, retain and develop employees, while continuing to grapple with a multitude of other pressing risks.

To be effective, risk managers need an integrated, holistic risk management strategy that looks “top down and bottom up” at all of their organizations’ exposures, Moloney said.

He noted that two new risks entered the survey respondents’ concerns for 2017: disruptive technologies/innovation, and major project failure.

Disruptive technologies, which includes 3D printing, the Internet of Things and ride-sharing companies, among many other innovations, ranked No. 20 on the 2017 risk management risks, and respondents forecast it to move up to No. 10 in 2020.

Advertisement




“It is critical that business and policy leaders understand which technologies will matter to them, and prepare accordingly,” according to the report.

Major project failure ranked No. 15 because of the potential to “undermine a company’s reputation and in many cases put a company on the brink of bankruptcy,” according to Aon.

“While major project failure is sometimes caused by external factors – such as regime change, government policy adjustment, terrorist attacks or a natural disaster – experts also attribute it to internal elements, such as failures related to market and strategies, organizational planning, leadership and governance, underestimation in analysis, quality, risk prediction, skills and competency, and teamwork and communications,” according to the report.

Additional stories from RIMS 2017:

Blockchain Pros and Cons

If barriers to implementation are brought down, blockchain offers potential for financial institutions.

Embrace the Internet of Things

Risk managers can use IoT for data analytics and other risk mitigation needs, but connected devices also offer a multitude of exposures.

Reviewing Medical Marijuana Claims

Liberty Mutual appears to be the first carrier to create a workflow process for evaluating medical marijuana expense reimbursement requests.

Cyber Threat Will Get More Difficult

Companies should focus on response, resiliency and recovery when it comes to cyber risks.

RIMS Conference Held in Birthplace of Insurance in US

Carriers continue their vital role of helping insureds mitigate risks and promote safety.

Resilience in Face of Cyber

New cyber model platforms will help insurers better manage aggregation risk within their books of business.

Anne Freedman is managing editor of Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

R&I Profile

Achieving Balance

XL Catlin’s Denise Balan stays calm and focused when faced with crisis.
By: | January 10, 2018 • 6 min read

In the high-stress scenario of kidnap or ransom, the first image that comes to mind isn’t necessarily a yoga mat — at least, not for most.

But Denise Balan, senior VP and head of U.S. kidnap & ransom, XL Catlin, who practices yoga every day, would swear by it.

Advertisement




“I looked at these opposing aspects of my life,” she said. “Yoga is about focus, balance, clarity of intent. In a moment of stress, how do you respond? The more clarity and calmness you maintain, the better positioned you are to provide assistance in moments of crisis.

“Nobody wants to be speaking to a frenetic person when either dealing with a dangerous situation or planning for prevention of a situation,” she added.

“There’s a poem by [Rudyard] Kipling on that,” added Balan’s colleague Ben Tucker. “What it boils down to is: If you can remain calm, you can manage through a crisis a lot better.”

Tucker, who works side by side with Balan as head of U.S. terrorism and political violence, XL Catlin, has seen how yoga influences his colleague.

“The way Denise interacts with stakeholders in this process — she is very professional and calm in the approach she takes.”

Yin and Yang

Sometimes seemingly opposite or contrary forces may actually be complementary and interconnected. In Balan’s life, yoga and K&R have become her yin and yang.

She entered the insurance world after earning a juris doctor degree and practicing law for a few years. The switch came, she said, when Balan realized she wasn’t enjoying her time as a commercial litigator.

Denise Balan, senior VP and head of U.S. kidnap & ransom, XL Catlin

In her new role, she was able to use her legal background to manage litigation at AIG, where her transition from law to insurance took place. She started her insurance career in the environmental sector.

In a chance meeting in 2007, Balan met with crisis management underwriters who told her about kidnap and ransom products.

She was hooked.

Because of her background in yoga, Balan liked the crisis management side of the job. Being able to bring the calmness and clearness of intent she practiced during yoga into assisting clients in planning for crisis management piqued her interest.

She then joined XL Catlin in July 2013, where she built the K&R team.

As she became more immersed in her field, Balan began to notice something: The principles she learned in yoga were the same principles ex-military and ex-law enforcement practiced when called to a K&R-related crisis.

She said, “They have a warrior mentality — focus, purpose, strength and logic — and I would say yoga is quite similar in discipline.”

“K&R responders have a warrior mentality — focus, purpose, strength and logic — and I would say yoga is quite similar in discipline.” — Denise Balan, senior VP and head of U.S. kidnap & ransom, XL Catlin

Many understand yoga to be, in itself, one type of meditation, but yoga actually encompasses a group of physical, mental and spiritual practices. Each is a discipline. Some forms of yoga focus on movement and breathing, others focus on posture and technique. Some yoga is meant to relax the mind and create a sense of calmness; other yoga types make participants sweat.

After having her second child and working full-time, Balan wanted to find something physical and relaxing for herself; a friend suggested yoga. During her first lesson, Balan said she was enamored with it.

“I felt like I’d done it all my life.”

She dove into the philosophy of yoga, adopting the practice into her daily routine. Every morning, whether Balan is in her Long Island home or on a business trip, she pulls out her yoga mat to practice.

“I always travel with my mat,” she said. “Daily practice is the simplest form of connection to routine to maintain my balance — physically and mentally.”

Advertisement




She said the strangest place she has ever practiced was in Lisbon. She was on a very narrow balcony with a bird feeder swarming with sparrows overhead.

After years of studying and practicing, Balan is considered a yogi — someone who is highly proficient in yoga. She attends annual retreats with her yoga group, where she is able to rejuvenate, ready to tackle any K&R event when she returns.

In 2016, Balan visited Tuscany, Italy, where she learned the practice of yoga nidra, a very deep form of meditation. It’s described as the “going-to-sleep stage” — a type of yoga that brings participants to a state of consciousness between waking and sleeping.

“It awakens a different part of your brain,” Balan commented. “Orally describing it doesn’t quite do it justice. One has to practice Nidra to fully understand the effect it has on your being.”

Keeping a level head during a crisis is key in their line of business, Tucker said. He can attest to the benefit of having a yogi on board.

“I’ve seen her run table-top exercises where there is this group of people in a room and they run an exercise, a simulation of a kidnap incident. Denise is very committed to what we’re doing,” said Tucker.

“She brings that energy. She doesn’t get flustered by much.”

Building a K&R Program

When Balan joined XL Catlin, she was tasked with creating the K&R team.

Balan during a retreat in Sicily, Italy, 2017

She spent time researching and analyzing what clients would want in their K&R coverage. What stuck out most to Balan was the fact that, in these situations, the decision to purchase kidnap and ransom cover is rarely made because of desire for reimbursement of money.

“I asked why people buy this type of coverage. The answer was for the security responders,” she said.

“These are the people who sit with the family. They’re similar to psychologists or priests,” Balan further explained. “Corporations can afford to pay ransom. They buy [K&R] because it gives them access to these trained and dedicated professionals who not only provide negotiation advice, but actually sit with a victim’s family, engaging deep levels of emotional investment.”

“I’ve learned to appreciate all moments in life — one at a time. The ability to think clearly and calmly guides my work, my practice and my personal life.” — Denise Balan, senior VP and head of U.S. kidnap & ransom, XL Catlin

Balan described these responders as people having total clarity of purpose, setting their intentions to resolve a crisis — a practice at the very heart of yoga. She knew XL Catlin’s new kidnap program would put stock in their responders.

“I’ve worked closely with the responders to better understand what they can do for our clientele. These are the people who run into danger — warrior hearts married to dedication to our clients’ best interests.”

But K&R is more than fast-paced crisis and quick thinking; Balan also spent a good deal of time writing the K&R form and getting the company’s resources in order. This was a huge task to tackle when creating the program from the ground up.

Advertisement




“A lot of my day-to-day is speaking with brokers and finding ways to enhance our product,” she said.

After a few months, she was able to hire the company’s first K&R underwriter. From there, the program has grown. It’s left her feeling professionally rewarded.

“People don’t often get that opportunity to build something up from scratch,” she said. “It’s been an amazing experience — rewarding and fun.”

“She brings groups of people together,” said Tucker. “She’s created a positive environment.”

Balan’s yogi nature extends beyond the office walls, too. Her pride and joy, she said, are her kids. And while it may seem like two large parts of her life are opposite in nature, Balan’s achieved balance through her passions.

“[Yoga] has given me the ability to see beyond only one aspect of any situation” she said. “I’ve learned to appreciate all moments in life — one at a time. The ability to think clearly and calmly guides my work, my practice and my personal life.” &

Autumn Heisler is a staff writer at Risk & Insurance. She can be reached at [email protected]