Risk Management

The Profession

Ray Van Eperen and his Kimberly-Clark team trained more than 6,000 of their colleagues in risk mitigation.
By: | February 22, 2016 • 7 min read

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R&I: What was your first job?

I delivered newspapers for the “Appleton Post-Crescent” for three years. I am an early morning person and my lifelong start in getting up early started with my newspaper delivery job. You will see me in the office many times at 4 – 4:30 a.m.

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

I was in Houston (with The Hartford) and my father came down for Thanksgiving and told me that Kimberly-Clark had an opening in risk management. I thought, “Why not try that?” and sure enough it turned out great. I thought it was a good transition to go from the claims arena to the world of risk.

R&I: What are some of the keys to doing risk management well?

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I tell people that you need certain skills. I call it blocking and tackling. Meaning you need to know how to manage claims and you need to know how to place coverage. No matter where we grow from a corporate perspective or a continuous improvement perspective, you still need those blocking and tackling skills. We’re doing a good job of that so I am real proud of seeing that continue on.

R&I: Where does risk management need to sharpen its game?

I think one area that we need to improve is quantifying risk appetite. Most companies are looking to determine what impact a risk could have on the business.

It is no longer just a property and casualty risk it’s an enterprise risk. It is difficult to quantify risk appetite. It’s very easy to work in ranges, we’re good at that.

We’re getting better at quantifying risk appetite, but I think it’s an opportunity for the whole industry.

R&I: How can people do a better job of quantifying risk appetite?

You need to understand your business. If you can do that, you will have a better picture over all. Bring in other people, legal, the business team, the HR team. Have that group sit and discuss risk appetite and try to move forward on quantifying it.

R&I: What resources are you using to expand your capabilities in enterprise risk management?

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A great example is our partnering with academic institutions.  At Kimberly-Clark, we partner with the University of Wisconsin, Madison.

R&I: How do you partner with the university?

I give educational presentations at least two times per year to the school of business there. Members of the university, professors and students, visit our annual risk management conference. We also bring in risk management students to spend a couple of days with the risk management department.

We’re getting better at quantifying risk appetite, but I think it’s an opportunity for the whole industry.

R&I: What’s the value of the RIMS conference for you?

I look at the risk management conferences as a great learning opportunity. At the most recent RIMS conference in New Orleans, for example, I had eight separate meetings with the CEO or president of a carrier. They allowed me to probe them on emerging risks. I love the fact that I had access to them and they’re all right there.

R&I: What emerging risks do you see?

We discussed emerging technology risks like driverless cars and drones, but as the risk manager for a manufacturer with operations around the world I think water shortages are also going to play a big part.

Another risk is social media. It just takes one person to post a video, or some other complaint about your company and it can cause you substantial reputational damage.

R&I: The reputational risks with social media are worrisome, are they not?

They really are and I need to see some strong insurance products. I am meeting next month with a carrier to look at some reputational coverage and see how that might apply.

R&I: Is there an emerging commercial risk that you think is most concerning?

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I don’t think it is emerging as much as it is problematic and I’m talking about political risk. Turn back the clock just a few years. All of a sudden Venezuela is in the news. Last year it was Russia. This year it’s Argentina. The world changes so frequently. That’s not an emerging risk but we have to determine how to manage that proactively. We have manufacturing operations in 37 countries and sell our products in more than 150.

R&I: Are there risk management tools that are very valuable to you?

I tell people the perfect tool is face-to-face collaboration. We get into the world of emails and texts, and the problem is if you don’t have the face-to-face tools, you can’t build your negotiation skill-set. You can’t read people, you don’t know how to respond to people.

As a result of the technology dependence, you see many new members of organizations not having that negotiation skill-set.

R&I: How happy are you with your carrier relationships?

I look at our carriers and our brokers and I can say we have a good rapport with them. My team members know all of our brokers, that’s obvious, and we know all of our underwriters.

I require the team to make sure that no matter if it’s a multi-year program, or a single year program, every year, at least once, you need to see that underwriter. Spend some time, tell them about where we are going, how the risks are being managed, sell the corporation.

And learn more about them. We have seen in the past, business results or senior management can change and it can have an impact on the company over all.

R&I: Is pricing the thing that’s most affected by those changes; terms or conditions?

The biggest changes and concerns are what lines they’re going to write. They might say they’re not that active in something and if they’re saying that, what they mean is they’re really not that competitive.

They really don’t want to negotiate much in the area of coverages. So you see more of a limited product. Then you go across the street and you see carrier “X” and they say I want to be in that business.

In order to leverage those differences you need to meet with the companies and understand them.

R&I: Are you optimistic about the U.S. economy or pessimistic?

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Optimistic. Kimberly-Clark’s stock price is at an all-time high. So that shows you what’s going on from a consumer perspective. But I mentioned it before. Political instability globally could impact us any day.

R&I: Do you or did you have a risk management or insurance mentor?

Every interaction is a chance to learn something. I have learned things from my executive assistant and my CEO and from everyone in between.

R&I: What in your career are you most proud of?

No question about it. The global risk management team drove a cultural change at Kimberly -Clark. We aggressively trained Kimberly-Clark employees to take smart risks. In the past four years we have educated more than 6,000 Kimberly-Clark employees live worldwide.

R&I: Your favorite movie?

“Taken” because Liam Neeson’s character and I have very similar skill-sets (laughs).

R&I: Do you have a favorite drink?

Stella Artois (the famous Belgian beer). My parents always told me work hard, play hard so when I get a break, I’ll grab a beer and relax.

R&I: You work for a global company. What’s the most interesting country you’ve visited?

The most interesting was Thailand. I was visiting a zoo there and was shocked at the number of risks. You’re standing in front of elephants and the only thing between you and the elephant is a two by four.

When I was there something grabbed my arm; it was a monkey. That’s a part of the world that has some opportunities for risk improvement.

R&I: Does the world have a modern hero and who is it?

It’s the men and women of this country who defend us. But we have a lot of heroes in this world and there is never just one.

R&I: What about your work do you find rewarding?

Our global risk management team maintains the freedom and the authority to make decisions and drive results. With that authority, you can find incredible value and satisfaction.

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

If you tell somebody you work in insurance they’re going to say, “Oh my God he’s trying to sell me a life insurance policy.”  But if you tell somebody about a lawsuit or some other risk that you are working on they will say that is a world that is pretty interesting.

How can you not enjoy tackling different challenges throughout your day?




Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Cyber Liability

Fresh Worries for Boards of Directors

New cyber security regulations increase exposure for directors and officers at financial institutions.
By: | June 1, 2017 • 6 min read

Boards of directors could face a fresh wave of directors and officers (D&O) claims following the introduction of tough new cybersecurity rules for financial institutions by The New York State Department of Financial Services (DFS).

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Prompted by recent high profile cyber attacks on JPMorgan Chase, Sony, Target, and others, the state regulations are the first of their kind and went into effect on March 1.

The new rules require banks, insurers and other financial institutions to establish an enterprise-wide cybersecurity program and adopt a written policy that must be reviewed by the board and approved by a senior officer annually.

The regulation also requires the more than 3,000 financial services firms operating in the state to appoint a chief information security officer to oversee the program, to report possible breaches within 72 hours, and to ensure that third-party vendors meet the new standards.

Companies will have until September 1 to comply with most of the new requirements, and beginning February 15, 2018, they will have to submit an annual certification of compliance.

The responsibility for cybersecurity will now fall squarely on the board and senior management actively overseeing the entity’s overall program. Some experts fear that the D&O insurance market is far from prepared to absorb this risk.

“The new rules could raise compliance risks for financial institutions and, in turn, premiums and loss potential for D&O insurance underwriters,” warned Fitch Ratings in a statement. “If management and directors of financial institutions that experience future cyber incidents are subsequently found to be noncompliant with the New York regulations, then they will be more exposed to litigation that would be covered under professional liability policies.”

D&O Challenge

Judy Selby, managing director in BDO Consulting’s technology advisory services practice, said that while many directors and officers rely on a CISO to deal with cybersecurity, under the new rules the buck stops with the board.

“The common refrain I hear from directors and officers is ‘we have a great IT guy or CIO,’ and while it’s important to have them in place, as the board, they are ultimately responsible for cybersecurity oversight,” she said.

William Kelly, senior vice president, underwriting, Argo Pro

William Kelly, senior vice president, underwriting at Argo Pro, said that unknown cyber threats, untested policy language and developing case laws would all make it more difficult for the D&O market to respond accurately to any such new claims.

“Insurers will need to account for the increased exposures presented by these new regulations and charge appropriately for such added exposure,” he said.

Going forward, said Larry Hamilton, partner at Mayer Brown, D&O underwriters also need to scrutinize a company’s compliance with the regulations.

“To the extent that this risk was not adequately taken into account in the first place in the underwriting of in-force D&O policies, there could be unanticipated additional exposure for the D&O insurers,” he said.

Michelle Lopilato, Hub International’s director of cyber and technology solutions, added that some carriers may offer more coverage, while others may pull back.

“How the markets react will evolve as we see how involved the department becomes in investigating and fining financial institutions for noncompliance and its result on the balance sheet and dividends,” she said.

Christopher Keegan, senior managing director at Beecher Carlson, said that by setting a benchmark, the new rules would make it easier for claimants to make a case that the company had been negligent.

“If stock prices drop, then this makes it easier for class action lawyers to make their cases in D&O situations,” he said. “As a result, D&O carriers may see an uptick in cases against their insureds and an easier path for plaintiffs to show that the company did not meet its duty of care.”

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One area that regulators and plaintiffs might seize upon is the certification compliance requirement, according to Rob Yellen, executive vice president, D&O and fiduciary liability product leader, FINEX at Willis Towers Watson.

“A mere inaccuracy in a certification could result in criminal enforcement, in which case it would then become a boardroom issue,” he said.

A big grey area, however, said Shiraz Saeed, national practice leader for cyber risk at Starr Companies, is determining if a violation is a cyber or management liability issue in the first place.

“The complication arises when a company only has D&O coverage, but it doesn’t have a cyber policy and then they have to try and push all the claims down the D&O route, irrespective of their nature,” he said.

“Insurers, on their part, will need to account for the increased exposures presented by these new regulations and charge appropriately for such added exposure.” — William Kelly, senior vice president, underwriting, Argo Pro

Jim McCue, managing director at Aon’s financial services group, said many small and mid-size businesses may struggle to comply with the new rules in time.

“It’s going to be a steep learning curve and a lot of work in terms of preparedness and the implementation of a highly detailed cyber security program, risk assessment and response plan, all by September 2017,” he said.

The new regulation also has the potential to impact third parties including accounting, law, IT and even maintenance and repair firms who have access to a company’s information systems and personal data, said Keegan.

“That can include everyone from IT vendors to the people who maintain the building’s air conditioning,” he said.

New Models

Others have followed New York’s lead, with similar regulations being considered across federal, state and non-governmental regulators.

The National Association of Insurance Commissioners’ Cyber-security Taskforce has proposed an insurance data security model law that establishes exclusive standards for data security and investigation, and notification of a breach of data security for insurance providers.

Once enacted, each state would be free to adopt the new law, however, “our main concern is if regulators in different states start to adopt different standards from each other,” said Alex Hageli, director, personal lines policy at the Property Casualty Insurers Association of America.

“It would only serve to make compliance harder, increase the cost of burden on companies, and at the end of the day it doesn’t really help anybody.”

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Richard Morris, partner at law firm Herrick, Feinstein LLP, said companies need to review their current cybersecurity program with their chief technology officer or IT provider.

“Companies should assess whether their current technology budget is adequate and consider what investments will be required in 2017 to keep up with regulatory and market expectations,” he said. “They should also review and assess the adequacy of insurance policies with respect to coverages, deductibles and other limitations.”

Adam Hamm, former NAIC chair and MD of Protiviti’s risk and compliance practice, added: “With New York’s new cyber regulation, this is a sea change from where we were a couple of years ago and it’s soon going to become the new norm for regulating cyber security.” &

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 [email protected]