Risk Insider: Martin Frappolli

Cyber Risk is Not a Technology Problem

By: | May 5, 2015 • 2 min read
Martin J. Frappolli, CPCU, FIDM, AIC, is Senior Director of Knowledge Resources at The Institutes, and editor of the organization's new “Managing Cyber Risk” textbook. He can be reached at [email protected]

Cyber Risk: the possibility that computer data will be obtained by unauthorized parties who might use the data in a way that is harmful to the data’s owner.  What does that mean to risk managers, insurers and every organization?

This scary term may make us think that cyber is an IT issue. But we can do much better to see cyber threats within an enterprise risk management (ERM) framework.  Cyber threats — much like fire, flood and theft — are simply risks that we must manage.

Headlines emphasize cyber liability regarding compromised customer data. That is a legitimate risk, but third party liability cyber losses are less common than those following first party exposures. Following a breach, an organization faces fines, forensics, notifications and the repair or replacement of damaged data and systems.

The biggest threat may come from lost income due to business interruption.

In one case, criminals entered the premises of a large corporation and left USB memory sticks on restroom counters. The USB sticks were labeled “confidential salary information.”

Organizations can take an ERM approach to measure cyber exposures and find ways to mitigate risk. In that sense, cyber is not a tech issue — we can manage the risk just as we do with the better known traditional risks.

For fire, we build safe buildings, install sprinklers and fire extinguishers, and conduct fire drills. We do so before we transfer the risk by insurance. We should do the same with cyber risk.

Adopt good cyber hygiene to reduce cyber loss frequency and severity. Have a plan and have experts on speed dial. If you are scrambling to address the media in the wake of a cyber breach, it is like buying an extinguisher after the fire has started.

Many cyber incidents occur by employee misbehavior or through social engineering.

In one case, criminals entered the premises of a large corporation and left USB memory sticks on restroom counters. The USB sticks were labeled “confidential salary information.”  Naturally, employees inserted the USB drives into their own PCs. That allowed the launch of hidden programs that transmitted sensitive data to the criminal organization.

What is special about ERM? Traditional risk management focuses on managing safety and assuring financial recovery from losses generated by hazard risk.  A hazard is any condition that makes it more likely for a peril — such as fire, lightning, flood — to occur. Fire is a peril; using candles is a hazard that increases the chance of fire. Basic risk management addresses such hazards.

ERM builds on those fundamentals, but also considers loss exposures related to speculative (business) risk.  When you engage in electronic commerce, you encounter cyber risks by network connections. When your records contain sensitive customer data, you have a serious cyber risk to manage.

Organizations that prosper over time have mastered traditional risk management. Top shelf organizations also practice ERM.

One might argue that cyber risk — with its criminal element — falls under traditional risk management, but either way, organizations cannot afford to ignore this threat. Don’t leave cyber risk to your IT or legal staff; it’s a risk management issue.

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]