Risk Management

Risk Management by Design

Palo Alto-based The Risk Authority Stanford is incubating risk management solutions using design thinking; that means elevating end users into key roles in addressing health care risk exposures.
By: | January 9, 2017 • 7 min read

A health care risk management team based in Silicon Valley is using the latest technology to make patients, doctors and health care systems safer and more sustainable.

Using the concept of design thinking, veteran health care chief risk officer Jeff Driver and his team at The Risk Authority Stanford believe they can engage risk and mitigate it in a way that involves client participation and is client-specific.

Design thinking, briefly stated, involves enlisting the participation of end users to find and build the solution to a pain point.

Here’s Simon Mawer, The Risk Authority Stanford’s assistant vice president of risk management, on that topic in more detail.

“Design thinking is using the tools and mindsets of designers to address problems outside the traditional fields of design. It’s a process that elevates people—and more particularly, the end-users of a product, transaction, or system—as experts for understanding the frontline realities behind the hard data. Through a creative, collaborative and experimental process, design thinking helps us generate solutions that are effective, because they are uniquely shaped by and for the people and the context for which they are designed.”

Jeff Driver, CEO, The Risk Authority Stanford

In his decades-long experience as a health care risk manager, Driver, The Risk Authority Stanford’s CEO, said he repeatedly encountered situations where off-the-shelf risk analysis products with supposedly sterling resumes and recommendations failed.

“We know from 20 years or so of purchasing solutions that not all solutions really work,” Driver said.

“There are closets full of these solutions that have never taken off,” he said.

“Design thinking solutions are those solutions that emerge from the sharp end or where the problem originates,” he said.

“We use a team of risk managers and staff quality experts to look at the possibilities of designing a solution that is specific to that problem and that culture, rather than buying an off-the-shelf solution,” he said.

It’s on the beat of that word “culture” where a lot of health care risk managers will start nodding their heads.

All work cultures are complex. The degree to which interpersonal dynamics or workplace culture can affect performance in areas like operations and risk management cannot be underestimated.

One traditional communication snare in health care is between doctors and nurses. A veteran nurse might see a doctor making a mistake, but because of the hierarchies that can exist in a hospital, won’t say anything.

Overwork, staff on staff or patient on staff violence in workplace settings, or miscommunication due to simple language differences can all lead to disruption and distraction, with the end result that those the profession swears not to harm get harmed.

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Veronique Grenon, a vice president of analytics with The Risk Authority Stanford, talks about how analytics can drive understanding of cultures, to unearth the places where one member of a hospital team, or a patient, may have one view of a medical error or event, and another party may see things through an entirely different lens.

“I think analytics is like writing a story. But data reporting isn’t enough anymore. We are working on predictive and prescriptive analytics,” Grenon said.

“We need to know what to focus our risk management strategies on,” she said.

Let’s say a medical error occurs and is reported. Using analytics to understand who initiated a report in a given system can help a risk analyst’s valuable perspective on that report, compared to other reports produced about the same health system.

“Where did this initiate, did it initiate by a patient complaint? Or did it initiate from a nurse’s concern?”

And then analyzing the event based on who wrote the report.

“The new modeling techniques are there to help us with that. We use natural language processing, machine learning, sentiment analysis to uncover more of not just the hard facts but information about the patient and how they are feeling,” Grenon said.

Veronique Grenon, vice president of risk analytics, The Risk Authority Stanford

“We combine data sets, create common language, and analyze data from many sources,” she said.

Drawing on her background as an actuary, Grenon is using analytics to touch every piece of what The Risk Authority Stanford is doing, be it a new product for insurance underwriters who are trying to get a grasp of their health care clients risk exposures, or risk managers who are trying to get their hands on a tool that can help them understand, in a more intimate way, the risks within their own organizations.

“We are using risk analytics to understand where our hotspots are,” she said.

“Then we use design thinking, we want to uncover the true drivers of the issues we are seeing. And then we create solutions,” she said.

“Together they are very powerful and complement each other very well,” she said.

“I am really glad I am a part of this project,” she said. “I was skeptical at the start and now I love it.”

“The most exciting thing about the work that Vero(nique) and her colleagues are doing is that they are giving us an accurate, nuanced, and actionable running start into the most important issues driving liability risks,” said Mawer.

“We say the data provides a direction for investigation—and to really understand clinical risks you have to walk in the shoes of the people you are designing for: before you start going straight to solutions, you have to empathically understand the people and the systems in which they live and work, from their perspective,” Mawer added.

Innovence

Driver founded what was then known as Stanford Risk Consulting in 2009. By 2013, the group decided to shed its nonprofit status and enter the for-profit realm as The Risk Authority Stanford.

“Over time we accomplished that but we had this whole other side of our brain so we built this new product which we call ‘Innovence,’ said Driver. The name is a cross between “innovation” and “evidence”.

The software piece of the business is known as Innovence Pulse. One product, Innovence Pulse: Enterprise, is helping carriers look at the data from their insureds to understand what is driving losses at those insured entities.

A second software product, Innovence Pulse Risk Manager, was released this past fall. That product allows risk managers to essentially “shrink wrap” an analytics solution around their particular set of risks, allowing them to get their arms around disparate sets of data systems.

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The Risk Authority Stanford’s Grenon said that while some modules of Innovence Pulse are complete and some are still under construction, the team is, in a sense, always in process.

“We’re giving risk managers a tool to be proactive about what they are doing,” Grenon said.

“My personal objectives come into this as well,” she said.

“I don’t want to add a data entry burden to people. I want to be able to use what intelligence is available

History

Jeff Driver’s first job in health care risk management was at tiny Geauga Hospital in Chardon, in Ohio’s Amish country.

“Literally, the Amish would roll up in their buggies, take off their boots, leave them at the door and walk in with bags of cash,” Driver recalls.

From those humble beginnings at a 110-bed hospital in Ohio, Driver is using his Silicon Valley connections to shape the future of the health care risk management profession.

The Risk Authority, as it is known for short, not only consults in risk management for Stanford Health Care and Stanford Children’s Health, but works with health care clients and insurance carriers across the globe.

Due to confidentiality agreements, Driver can’t reveal the carriers or the hospitals that he is working with. Suffice to say that there are a number of them.

Driver’s career in health care began some years earlier than that risk management stint in Chardon, when he worked at the Cleveland Clinic as a respiratory therapist. Almost immediately, he was confronted with the issue of medical error.

It didn’t take long for him to decide that he wanted to study and help mitigate medical error(s) and their aftermath for a living.

“I was personally involved in medical errors,” Driver said. “I watched other people be involved in medical errors,” he said.

“It changed my vision of what I wanted to do. Rather than be a clinician I wanted to be a person that was involved in preventing those kinds of errors,” he said.

Following risk management positions at San Diego Children’s Hospital and at the Beth Israel Deaconess Medical Center in Boston, Driver took a position as the Chief Risk Officer at the Stanford University Medical Center in 2004.

The move to Stanford was fortuitous because it placed Driver in one of the leading medical facilities in the country. It also put him in Silicon Valley, in the company of hundreds of aspirational people who through a technology revolution, are reshaping commerce globally.

“Obviously we are heavily influenced by our geography,” said Driver.

“On the Stanford campus we are right in the middle of Silicon Valley,” he said.

“Hewlett Packard is right across from us. Google is right here. You mingle with these people and you can’t help but want to learn about what they are doing.”

Simon Mawer, assistant vice president of risk management, The Risk Authority Stanford

Like Driver, The Risk Authority’s Simon Mawer encountered the issue of medical error earlier in his career, became intrigued by its dynamics and was drawn to a career in health care risk management.

Mawer began his professional life as a litigator in Australia, working in the tort-liability field on cases involving personal injury, medical malpractice and aviation accidents, among other topics.

“Part of what I loved about that work was the sacred privilege of meeting people in their hour of greatest need, understanding their situation deeply, and advocating in close collaboration with them for the resolution they deserved,” Mawer said.

Mawer moved to California, and worked for a number of years in claims and litigation in-house for the Stanford University health system. That experience deepened his knowledge of the importance of empathy in understanding how patients view health care, and how wronged they can feel if they are injured as part of their medical treatment and their concerns not listened to.

“After spending hours and hours listening to the experiences of patients, nurses and physicians in the aftermath of medical errors and health care gone wrong, I developed a passion for getting on the other side of it, to see if I could be part of preventing the errors themselves, and solving the issues that forced patients to sue in order to get the support they needed,” he said.

“It made no sense to me that after a medical injury, patients should be further harmed by the claims handling process,” Mawer said.

It’s a classic and painful —some might say shameful— dilemma in health care risk management that injured parties traditionally felt shut out by the way claims are handled in the aftermath of medical error.

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Legal counsel might be given to the treating physician to not speak to the injured party. Getting any information about how the mistake happened, be it wrong-site surgery, the wrong medical dose given, or some other mistake, proved to be extremely difficult for most patients.

Many times, to get the information they needed, to get an apology, or to get the financial support they needed to heal, patients and/or their families did the only thing they thought they had available to them; they sued.

In the super-powered environment of Silicon Valley, Driver and his colleagues are marshalling analytics and the concept of design thinking to find a way to avoid that kind of outcome. &

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

More from Risk & Insurance

More from Risk & Insurance

Black Swan: Cloud Attack

Breaking Clouds

A combination of physical and cyber attacks on multiple data centers for cloud service providers causes economic havoc. Even the most well-prepared companies are thrown into paralyzing coverage confusion.
By: | July 27, 2017 • 10 min read

Scenario

By month 16 of the new presidential administration, the Sunshine Brigade is more than ready to act.

Stoked by their anger over rampant economic inequality, the mostly college-educated group of what might best be called upper-middle-class anarchists — many of them from California, Oregon and Washington State — put in motion the gears of a plan more than two years in the making.

Their logic, to them at least, is unimpeachable. Continued consolidation of economic power into the hands of fewer and fewer corporations is creating a world where the rich increasingly exploit and shut out the poor.

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The rise of the techno giants is accelerating this trend, according to the Sunshine Brigade’s de facto leader Emily Brookes, an All-American rugby player and a graduate of Reed College in Oregon.

With a new presidential administration seemingly bent on increasing the economic advantages of the rich with no end in sight, nothing to do then but break things up; and in so doing break the hold of this technology oligarchy.

As Emily Brookes so forcefully put in her instant messages to the other members of the brigade: Break the Cloud.

With more than 500 members, many of them with ample financial and technical resources, the Sunshine Brigade is very capable of delivering on its plan for a two-pronged attack.

It is also radicalized enough to justify the loss of some human life, even its own countrymen, to “save” — in its collective logic — the tens of millions of global citizens that are living as virtual slaves in this callous, exploitative global economy.

With websites and digitally connected services large and small down for days, irritation turns to fear.

The first wave in the attack is an attempt to infect and shut down the data centers for the top three cloud service providers. It takes months to set up this offensive.

Rather than rely on a phishing scam from outside the firewalls of the service providers, The Sunshine Brigade uses its social and business connections to place three members on each of the cloud provider’s payrolls. An infected link from someone you know, someone in the cubicle right next to you, seems like an unstoppable play.

It only partially works. Only one of the cloud service providers is harmed when an unsuspecting employee clicks on a link from their traitorous co-worker. The released malware manages to cripple a major cloud service provider for 12 hours.

With millions of users affected, the act creates substantial disruption and garners global headlines. Insured losses are around $1.5 billion. But this is just the beginning.

The morning after, the Sunshine Brigade unleashes a far more devastating and far more ruthless Round Two.

Using self-driving trucks, the Sunshine Brigade smashes into five data centers; three on the West Coast, and two in the Midwest. Fourteen employees of those cloud servers are killed and another 23 injured; some of them critically.

This time the Brigade gets what it wanted. The physical damage to the data centers is substantial enough that it significantly affects three of the top four cloud service providers for five days.

With websites and digitally connected services large and small down for days, irritation turns to fear.

Small and mid-sized banks, which host their applications on clouds, are shut down. Small business owners and consumer banking customers immediately feel the brunt. Retailers that depend on clouds to host their inventory and transaction information are also hit hard.

But really, the blow falls everywhere.

In the U.S., transportation, financial, health, government and other crucial services grind to a halt in many cases.

Not everyone is disrupted. Some of the larger corporations are sophisticated enough in their risk management, those that used back-up clouds and had steadfast business resiliency plans suffer minimal disruption.

Many small to mid-size companies, though, cannot operate. Their employees can’t get to work and when they can, they sit idly in front of blank computer screens connected to useless servers.

For the man on the street, this is hell.

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Long lines blossom at the likes of gas stations, banks and grocery stores. A population already on edge from a steady diet of social media provocation becomes even more inflamed.

By nightfall of Day Five, the three major cloud service providers are recovered, and digital “normalcy” begins to creep back. But for many small and medium-sized businesses, the recovery comes way too late.

Economic losses promise to register in the tens of billions. It’s not being too imaginative to think that losses could hit the $100 billion mark.

Two multinational insurers based in the U.S., three Lloyd’s syndicates and a Bermuda insurer signal to regulators that their aggregate cyber-related losses are so great that they will most likely become insolvent.

Emily Brookes and her cohorts were willing to kill more than a dozen people to promote their worldview. In their youthful naiveté, they could not know just how much suffering they would cause.

Observations

For some commercial insurance carriers, the aggregated losses from a prolonged disruption of cloud computing services could be catastrophic, or close to it.

“It’s on a par with any earthquake or hurricane or tornado,” said Scott Stransky, an associate vice president and principal scientist with the modeling firm AIR Worldwide.

AIR modeled the insured losses for the Fortune 1,000 were Amazon’s cloud service to go down for one day. They came up with a figure of $3 billion.

Now consider that most businesses in this country are small businesses, with not nearly the risk management sophistication of the Fortune 1000. Then consider a cloud interruption of five days or more.

Mark Greisiger, president, NetDiligence

“Almost any company you talk about today would rely to some extent on the cloud, either to host their website, to do invoicing, inventory, you name it — the cloud is being used across the board,” Stransky said.

“It’s a significant issue for insurers and one we think about a lot,” said Nick Economidis, an underwriter with specialty carrier Beazley.

“Should a cloud service provider go down, everybody who is working with that cloud service provider is impacted by that,” he said.

“Now, pretty much every software maker is on the cloud,” said Mark Greisiger, president of NetDiligence.

“In the old days, someone would come in and install software on your servers and come in annually for maintenance. That’s all gone bye-bye. Everybody who makes software is forcing you onto their private cloud,” Greisiger said.

The aggregation risk for carriers is complicated by the degree of transparency they have into which insured’s applications are hosted on which cloud provider.

Now here’s the even trickier part. Clouds outsource to other clouds.

“It’s almost becoming a spider’s web of interdependencies on who has access to what in terms of upstream and downstream providers,” Greisiger said.

Determining which of their insureds is hosted on which cloud, and in turn, where that cloud is outsourcing to other clouds can be very difficult for carriers to determine.

Even if a company is careful to diversify the risks they’re taking, they might not realize that a high percentage of insureds are even with the same cloud provider. They could be hit with devastating losses across their entire portfolio of business, said an executive with BDO consulting.

AIR’s Stransky said his company launched a product in April, ARC, which stands for Analytics of Risk from Cyber, which is designed to help carriers gain that much needed transparency.

Among insureds, surviving an event of this magnitude will depend not only on the sophistication of their risk management department, but on the company’s overall ability to negotiate contracts with vendors and suppliers that will indemnify the company in the case of a cloud outage of this duration.

It will also depend on organization’s understanding that there is no off-the-shelf solution that will prevent an event like this or make a company whole after it.

Shiraz Saeed, national practice leader, cyber, Starr Companies

Experts say contracts with cloud service providers, customers and suppliers must be structured so that a company is defended should it lose cloud access for as much as five days or more.

Best practices also include modeling just what your losses would look like in this area, and vetting your full portfolio of insurance policies to understand how each would respond.

One broker said buyers can’t be blamed if the complexities of the coverage issues at stake here are initially hard to grasp.

“It’s becoming a spider’s web of interdependencies on who has access to what.” —Mark Greisiger, president, NetDiligence

“I think it’s the broker’s job to inform the client of this exposure,” said Doug Friel, a vice president with JKJ Commercial Insurance, based in Newtown, Pa.

“You may have business interruption coverage for direct physical damage to your building. But have you ever thought about your business income if your IT structure goes down?” Friel said.

He said many buyers might not realize there is a difference.

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Large businesses should have the resources to demand from their cloud service providers that they be indemnified for the entirety of a cloud failure event. There will be a fee for that, but it will be well worth paying, Friel said.

“You have to push,” Friel said. “They are going to say, ‘Here is our standard contract, sign it.’ ”

Don’t settle for that, he said, although many do in ignorance, he added.

“Where possible, we would look for clients to negotiate their contracts. These business relationships should be mutually beneficial, even if one of these events occur,” said Shiraz Saeed, national practice leader, cyber, for the Starr Companies.

It’s a partnership, he said.

“It shouldn’t be a zero sum game on either side. I think there should be an understanding of what the potential loss might be and then designing a contract around that,” he said.

While cloud service providers are known for having high grade security systems, most average organizations don’t have the means for that. But no matter what a company’s resources, the first step is modeling where your digital assets are, and what you and your customers stand to lose if you lose access to them.

“Most insureds don’t seem to understand the amount of individual loss that you could be subject to,” said Jim Evans, leader of insurance advisory services at BDO Consulting. “Usually this stuff is measured in hours,” he said. “But what if a cloud provider is out for three or four days?” he said.

“Trying to quantify what you did lose in an event is hard enough. Trying to do a modeling exercise about what you could lose? It’s something that just doesn’t get done enough,” he said.

Once you have an understanding of what you own and what you stand to lose, the next step is prioritizing the protection of the assets you have. That means drilling into your contract with your cloud service providers to get the maximum indemnification.

It also means spreading your risk so that if at all possible, not all of your assets or your customers’ assets are housed by one cloud service provider. Cloud platforms can be public, private, or a hybrid of the two.

Understanding where your assets are in that architecture is crucial. Spending the money to insure that they are protected behind a diverse menu of firewalls is highly advisable.

Navigating the different iterations of business interruption coverage in property, cyber and kidnap and ransom policies is also important.

Make sure your broker can provide clarity on the different types of coverages and tailor them to your needs, experts said.

The concept of design thinking is really what’s in play here. Organizations have to work with vendors in every aspect of their operations to design a risk management system that can sustain this kind of hit.

“Build a better mousetrap to protect yourself,” said JKJ’s Friel.

“Depending on your service, you need to have the best and the brightest designing this stuff. Spread the risk.”

“Don’t be afraid to ask for more,” he said.

Postscript

In engineering an attack on the cloud, Emily Brookes and her cohorts accomplished the opposite of what they set out to do.

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Only the largest corporations with the most sophisticated risk management programs were able to survive the attempt to break the cloud with manageable losses.

Small businesses, the true backbone of the U.S. economy, suffered terribly. Entrepreneurs who put their life’s work into their business lost it in many cases.

Those on the lowest part of the economic scale, the working poor, lost their jobs and their ability to cover their rent and grocery bills. They joined the ranks of those subsidized by the government by the millions.  The attempt to break the cloud resulted in an even more polarized society. &

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