Cyber Risk

Keep the Dialogue Open

As cyber threats become more sophisticated, risk managers must understand and assess evolving exposures.
By: | August 3, 2016 • 7 min read

A shut-down, or even a partial disruption, is the stuff of nightmares for risk managers and C-suites. Business interruption (BI) and contingent business interruption (CBI) policies can help organizations weather those kind of crises, but the coverage is complex, and has only become more so since cyber exposures came to the fore.


In order to help minimize BI and CBI losses, risk managers must establish and maintain an open dialogue with C-suite executives on a continuous basis.

Open communication will give companies the agility to respond quickly if a business is shut down or production is halted by a cyber attack, determine the best way to assess income loss, and also to protect the company’s reputation.

Prior to a loss, that open dialogue will also help everyone reach a consensus about coverage needs and whether sufficient limits are in place.

Traditional property and BI policies will typically insure against a physical loss or damage to property, however many exclude cyber attacks, even if the cyber attack causes property damage.

As cyber threats become more sophisticated, risk managers and their companies need to better understand and assess these evolving exposures, and to devise an appropriate mitigation strategy and emergency response plan.

Understanding and Measuring the Claim

Al Gier, director of global risk management and insurance at General Motors, said that BI and CBI are often the most complex form of property losses when trying to quantify the actual loss.

“They require a significant marshaling of the risk management, supply chain, finance, marketing, purchasing and distribution functions, in order to support the claim,” he said. “Added to that is the work that people are already doing behind the scenes to bring their company back on line.”

He added that one way of assessing loss is by using pre-loss production schedules, sales and growth projections, and budgets.

Rick Roberts, president and director of risk management and employee benefits, Ensign-Bickford Industries

Rick Roberts, president and director of risk management and employee benefits, Ensign-Bickford Industries

Rick Roberts, president and director of risk management and employee benefits for Ensign-Bickford Industries and immediate past president of RIMS, said there is often a sizeable difference between a company’s loss estimate and the actual loss.

“There are two approaches to BI claims — the first is a top-down approach and the second is bottom-up,” he said.

“I prefer the bottom-up approach that measures lost income plus any continuing expenses as it’s easier to understand.”

Dan Holden, manager of corporate risk and insurance for Daimler Trucks North America, said that risk managers need to explain to the C-suite how BI or CBI coverage would be triggered, what it would cover and for how long.

That allows management to focus on potential events in order to mitigate against any revenue interruption, he said.

Robert Reeves, partner at EY’s Fraud Investigation and Dispute Services (FIDS) practice, said that should a loss occur, risk managers need to help senior management understand the claim, as well as the claims process and the potential range of the claim.

“[BI and CBI] require a significant marshaling of the risk management, supply chain, finance, marketing, purchasing and distribution functions, in order to support the claim.” — Al Gier, director of global risk management and insurance, General Motors

He added that when assessing a loss, it’s also important to take into account both sales and production.

“Sales is really focused on demand and production is focused on capacity,” he said. “So no matter what industry you are in, you have to look at both factors.”

Selecting the Right Policy


Dave Finnis, executive vice president and national property practice leader at Willis Towers Watson, said that most property insurance policies won’t provide coverage as standard in the event of a cyber attack unless there was evidence of physical damage.

“I am seeing a lot more instances where these kinds of occurrences are becoming a reality,” he said. “In the last year, a German power plant had a cyber attack and suffered physical damage when the hackers accessed one of their furnaces, but fortunately they were covered under their property policy.”

Reeves said that it is important to read the policy’s wording first as most cyber insurance will provide coverage for a BI claim, but won’t necessarily cover a CBI claim.

Josh Gold, a cyber insurance attorney at Anderson Kill’s New York office, said that BI or CBI coverage should provide for loss of business income at a minimum, covering both lost profits and continuing expenses.

He added that it was important to build in coverage for extra expenses, such as the cost of using other facilities while your operations are down, bringing consultants in, or moving your system to a new cloud platform.

Doug Backes, FM Global’s claims manager, said that it is also important to match the coverage to the loss.

“From our perspective, we have always approached data as property and it needs to be covered as such,” he said. “Whether data is damaged in a fire or as a result of a cyber attack, there needs to be cover for that.”

Impact on Reputation

Reeves said that an often-overlooked impact of a BI or CBI claim is on a company’s reputation with its customers, employees and shareholders.

“Once the physical loss has gone away, then you have got to make sure that you manage your reputation,” he said. “So you need to let your customers know what is happening, how long you are going to be down and what your mitigation strategy is.”

Al Gier, director of global risk management and insurance, General Motors

Al Gier, director of global risk management and insurance, General Motors

Citing the example of Target’s major data breach, which has cost the company $300 million to date, Gold said that the impact of a cyber attack often runs much deeper than the initial loss, and it can damage reputation in terms of customer privacy and payment details.

“From a loss mitigation 101 standpoint, you wouldn’t want to exacerbate the problem by being less than candid about what is going on,” he said.

“Of course, a lot of risk mitigation can be done before a breach occurs, to ensure that you have the appropriate plan and insurance policy in place.”

Gier said that the impact of a BI or CBI loss on a business’ reputation depended largely on the cause of the loss, as well as the company’s response time.

“Companies can do a lot to minimize the risk of BI or CBI losses on their reputation by maintaining ultimate sources of supply, keeping extra inventory and having a thorough understanding of the financial impact of BI in protecting the most valuable parts of the business,” he said.

Working in Partnership

Reeves said that risk managers need to explain to senior managers how their BI and CBI policies work and to identify key areas that need to be written into the coverage based on previous claims experience.

“The C-suite needs to make sure that those resources are available and the risk manager needs to make sure that everyone has realistic expectations about the time frame for the claims process.” — Jill Dalton, managing director, Aon Global Risk Consulting

He added that it was also important to help them understand the interdependencies between the different parts of their business in the supply chain.

Jill Dalton, managing director, Aon Global Risk Consulting

Jill Dalton, managing director, Aon Global Risk Consulting

“We had a client with a very small site in the south that got hit by a tornado,” he said.

Initially they thought it wouldn’t have much of a financial impact, but they soon realized that it was the only plant that produced a small component used in all of their products.

“They dodged a real bullet, because fortunately they were able to get alternative sourcing, otherwise they would have been facing a $1 billion loss,” Reeves said.

Jill Dalton, managing director of Aon Global Risk Consulting, said that C-suites and risk managers need to work in unison.

“The C-suite needs to make sure that those resources are available and the risk manager needs to make sure that everyone has realistic expectations about the time frame for the claims process,” she said.

Carlos Moran, director of claims at Aon Global Risk Consulting, added that businesses need to develop a contingency plan in order to maintain critical operations in the event of a loss.


“Risk managers have a very difficult job,” FM Global’s Backes said. “Sometimes it’s very difficult for them at times to get the attention and buy-in from the C-suite.

“But when they can do that successfully, they can build out greater resiliency and redundancy into the company’s practices and procedures.” &

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at riskletters[email protected]

More from Risk & Insurance

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Risk Management

The Profession

Janet Sheiner, VP of risk management and real estate at AMN Healthcare Services Inc., sees innovation as an answer to fast-evolving and emerging risks.
By: | March 5, 2018 • 4 min read

R&I: What was your first job?

As a kid, bagging groceries. My first job out of school, part-time temp secretary.

R&I: How did you come to work in risk management?

Risk management picks you; you don’t necessarily pick it. I came into it from a regulatory compliance angle. There’s a natural evolution because a lot of your compliance activities also have the effect of managing your risk.

R&I: What is the risk management community doing right?


There’s much benefit to grounding strategic planning in an ERM framework. That’s a great innovation in the industry, to have more emphasis on ERM. I also think that risk management thought leaders are casting themselves more as enablers of business, not deterrents, a move in the right direction.

R&I: What could the risk management community be doing a better job of?

Justified or not, risk management functions are often viewed as the “Department of No.” We’ve worked hard to cultivate a reputation as the “Department of Maybe,” so partners across the organization see us as business enablers. That reputation has meant entertaining some pretty crazy ideas, but our willingness to try and find a way to “yes” tempered with good risk management has made all the difference.

Janet Sheiner, VP, Risk Management & Real Estate, AMN Healthcare Services Inc.

R&I: What was the best location and year for the RIMS conference and why?

San Diego, of course!  America’s Finest City has the infrastructure, Convention Center, hotels, airport and public transportation — plus you can’t beat our great weather! The restaurant scene is great, not to mention those beautiful coastal views.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

The emergence of risk management as a distinct profession, with four-year degree programs and specific academic curriculum. Now I have people on my team who say their goal is to be a risk manager. I said before that risk management picks you, but we’re getting to a point where people pick it.

R&I: What emerging commercial risk most concerns you?


The commercial insurance market’s ability to innovate to meet customer demand. Businesses need to innovate to stay relevant, and the commercial market needs to innovate with us.  Carriers have to be willing to take on more risk and potentially take a loss to meet the unique and evolving risks companies are facing.

R&I: Of which insurance carrier do you have the highest opinion?

Beazley. They have been an outstanding partner to AMN. They are responsive, flexible and reasonable.  They have evolved with us. They have an appreciation for risk management practices we’ve organically woven into our business, and by extension, this makes them more comfortable with taking on new risks with us.

R&I: Are you optimistic or pessimistic about the U.S. health care industry and why?

I am very optimistic about the health care industry. We have an aging population with burgeoning health care needs, coupled with a decreasing supply of health care providers — that means we have to get smarter about how we manage health care. There’s a lot of opportunity for thought leaders to fill that gap.

R&I: Who is your mentor and why?

Professionally, AMN Healthcare General Counsel, Denise Jackson, has enabled me to do the best work I’ve ever done, and better than I thought I could do.  Personally, my husband Andrew, a second-grade teacher, who has a way of putting things into a human perspective.

R&I: What have you accomplished that you are proudest of?

In my early 20s, I set a goal for the “corner office.” I achieved that when I became vice president.  I received a ‘Values in Practice’ award for trust at AMN. The nomination came from team members I work with every day, and I was incredibly humbled and honored.

R&I: What is your favorite book or movie?

The noir genre, so anything by Raymond Chandler in books. For movies,  “Double Indemnity,” the 1944 Billy Wilder classic, with insurance at the heart of it!

R&I: What is your favorite drink?


Clean water. Check out for how to help people enjoy clean, safe water.

R&I: What’s the best restaurant at which you’ve eaten?

Liqun Roast Duck Restaurant in Beijing.

R&I: What is the most unusual/interesting place you have ever visited?

China. See favorite restaurant above. This restaurant had been open for 100 years in that location. It didn’t exactly have an “A” rating, and it was probably not a place most risk managers would go to.

R&I: What is the riskiest activity you ever engaged in?

Eating that duck at Liqun!

R&I: If the world has a modern hero, who is it and why?

Dr. Seuss who, in response to a 1954 report in Life magazine, worked to reduce illiteracy among school children by making children’s books more interesting. His work continues to educate and entertain children worldwide.

R&I: What do your friends and family think you do?

They’re not really sure!

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]