Risk Insider: Nir Kossovsky

Protecting the Enterprise When the CEO Stumbles

By: | February 12, 2018 • 3 min read
Nir Kossovsky is the Chief Executive Officer of Steel City Re. He has been developing solutions for measuring, managing, monetizing, and transferring risks to intangible assets since 1997. He is also a published author, and can be reached at [email protected]

There are a wide variety of factors that lead stakeholders – investors, employees, customers, lenders, suppliers, regulators – to become enamored with a company. While much of it may rely on a cold, hard analysis of the industry, economic trends and financial performance, for some companies, especially small cap, early stage or rapidly growing companies, the CEOs’ personality can become a major factor. Stakeholders believe in the CEOs’ vision, personal charisma, leadership team and the culture they’ve built.

CEOs are also a major source of reputational risk and companies today are quick to jettison leaders for questionable ethical practices even from eponymous firms, or companies where CEOs become an outsized component of corporate reputation — like Uber.

As a result, when we analyze and underwrite reputational risk at companies, we consider a number of CEO-related questions:

  • What do stakeholders expect of the CEO?
  • Are there different expectations among different groups of stakeholders?  For example, a younger customer may give greater weight to social responsibility, while an older investor may give more weight to financial performance over time.
  • What are the consequences if stakeholders are disappointed?
  • What impact is there if CEO behavior is the source of risk?
  • What mechanisms, if any, is the board using to keep the CEO on track with strategy while the board is protecting the assets of the firm?

One of the crucial factors in situations like these is whether stakeholders believe that, ultimately, the company is bigger than the CEO and that its value is not dependent on his or her presence.  This calculation is partly psychological – can they separate the person from the company in their own minds? How much value does that individual add, above that of a replacement CEO?

Advertisement




Part of the calculation, however, is very tangible. How strong are the company’s underlying assets? How strong is the company’s leadership infrastructure — other C-level executives, division heads and so on — the people who run operations on a day to day basis?

In the case of Steve Wynn, for example, the answer involves both factors.  Yes, the Wynn name brought cache and added value to properties.  And since the company operates in a regulated industry, its licenses and approvals for projects currently underway now hang in the balance.

One of the crucial factors in situations like these is whether stakeholders believe that, ultimately, the company is bigger than the CEO and that its value is not dependent on his or her presence.  This calculation is partly psychological — can they separate the person from the company in their own minds?  How much value does that individual add, above that of a replacement CEO?

But those properties have a certain amount of intrinsic value — even if some organizations cancel conventions or visitors cancel reservations.

Critically important in all this is the board of directors.  Are they equipped to take quick, decisive action?  Will members of the board be viewed as partly culpable for any CEO-related scandal?  Will there be resignations or will the board remain stable and united?

When a crisis hits, does the board have a simple to understand and completely credible story to their stakeholders, validating their good governance practices and attesting to their prudent stewardship of the company? Whatever steps they have taken over the years to manage reputational risk, do they have third party warranties, in the form of insurance policies, that help them communicate that narrative persuasively in the court of public opinion and mitigate the usual post-crisis onslaught of litigators, regulators, and social media trolls?

Obviously, CEO reputation is always crucially important to any company. But when it is a core component of the corporate brand and enterprise value, boards need to consider additional protections against the individual downfalls that so often occur.

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

Mohegan Gaming’s director of risk management recognizes the value of the people around her in creating success.  
By: | February 20, 2018 • 4 min read

R&I: What was your first job?

I was a margin clerk in financial futures at Kidder Peabody & Company.

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

While I was at General Dynamics working in HR, the opportunity to transition to risk management was afforded to me. I was very fortunate that the risk manager at the time took a chance on me and taught me so very much. Coming from a manufacturing facility with multiple unions helped prepare me for any situation.

R&I: How has your experience in human resources helped your career in risk management? What do the positions have in common?

Advertisement




I believe my HR background has helped my risk management career immensely. Both areas are interrelated. People are fundamental to accomplishing goals and people can help or hinder those results. Human resources is tasked with bringing in and nurturing the right people, and risk management is tasked with keeping them safe.

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

Education, keeping up with industry trends and having resources available to better prepare organizations. There is always something new or a new way to view a situation.

Mary Lou Morrissette, corporate director of risk management, Mohegan Gaming & Entertainment

R&I: What kind of resources can risk managers bring to the table?

Data and analytics have come so far, and the systems out there are able to drill down into good quality information that can be used more effectively.

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

Within the community, we all understand the role of risk management, but getting organizations to understand the importance of considering risk during the strategic decision-making process as opposed to treating it like an after-thought can be a challenge. Risk should be involved in day-to-day operations — not just when a problem arises.

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

San Diego. The proximity to the city, community and culture was great.

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

The emergence of cyber security.

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

Advertisement




Catastrophic events, both natural and manmade, are becoming more of a norm of late. We need to look at analytics and the role they play in understanding these disasters and subsequent losses to help organizations prepare, manage and recover from these types of events.

R&I: What insurance carrier do you have the highest opinion of?

We have always valued relationships. We have a few long-standing partners that immediately come to mind. FM Global, Great American and Safety National have all been immensely important to our company and our growth.

R&I: How much business do you do direct versus going through a broker?

All through a broker.

R&I: Is the contingent commission controversy overblown?

If you have trust and faith in your broker and they have full disclosure, then yes, it is overblown. But I have seen the cost of hidden commissions and the effect on the bottom line.

R&I: Who is your mentor and why?

I had a mentor early on in my career in HR, Marie Haggerty. She instilled in me the mindset to speak up and be heard and not to shy away from an adverse opinion but to be strong in my convictions.

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

Being awarded FM Global’s Highly Protected Risk award in 2011. The award is granted when a location has no human element recommendations, no uncontrolled high-risk exposures and no other major loss exposures. Mohegan Sun has worked hand-in-hand with FM since 2000 on loss prevention recommendations and improvements. Our engineering team as well as our fire department have been instrumental in our ability to achieve this award. We have always tried to meet or exceed the advice we receive from FM’s engineers. This has made our property better protected as well as helped to keep our premium in line.

R&I: How many e-mails do you get in a day?

Advertisement




Too many!

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

I only read nonfiction and personal development books. Katie Couric’s “The Best Advice I Ever Got: Lessons from Extraordinary Lives” is one of my favorites.

R&I: What is your favorite drink?

Coffee and water.

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

The Pearl Harbor memorial. I love history and to stand over the Arizona was humbling.

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

Parasailing.

R&I: What about this work do you find the most fulfilling or rewarding?

That I can make a difference in either a safer workplace or on the bottom line, and that every day is different. I love the diversity of what I do and the constant change and ability to continue to grow and learn.

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

I definitely get the deer in the headlights look when I tell people what I do — I don’t think any of my family or friends truly understand it.




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