Risk Insider: Beaumont Vance

Hippopotamus Risk Management

By: | July 6, 2015 • 2 min read
Beaumont Vance is an executive risk manager. He has managed strategic risk for Fortune 100 firms for the past 15 years. His multidisciplinary approach weaves together such disparate fields as quant modeling, statistics, behavioral economics, biology and game theory into practical solutions and insights.
Topics: Risk Insider

The greatest failing of American risk management in the 20th century was the failure to import hippopotamuses into Louisiana.

Had we done that, we could have avoided World Wars I  and II.

But if nothing else, this failure provides a good example of the perils of the law of unintended consequences.

In the 1890’s, people became very concerned about overpopulation and the lack of new arable land. In 1898, Sir Willam Crookes, President of the British Academy of the Sciences, stated that the world was running out of land on which to grow food and that unless something was done quickly, there would be global starvation by 1930. The leading scientists of the time completely agreed with his Malthusian doomsday prediction.

By 1910, even the United States was suffering a food shortage. While in the past we simply expanded westward to increase farmland, by 1910 this was no longer an option. The land had become overgrazed and the number of cows available for meat production was declining by millions per year.

In March of 1910, Congress took action and proposed H.R. 23261 — a bill which would import hippos into the united states.

Creating a new source of fertilizer was a better risk mitigation strategy than an armada of free-range hippos moping through the bayous. However, when choosing a mitigation strategy, one has to be very careful of the unintended consequences.

From a risk management perspective, this made incredibly good sense. Louisiana had been overrun by an invasive species of water hyacinth from Japan that was clogging waterways. The aquatic hippos would eat the invasive flowers, and we would then eat the million tons a year of “lake cow bacon” (as the New York times euphemistically put it.) It was a win for everyone it seemed.

In Germany, scientist Fritz Haber was also working on increasing food production. In a completely hippo-free experiment, he figured out how to extract nitrogen from the air.

Nitrogen fertilizer production prior to Haber consisted of mining existing nitrogen deposits. But these were almost exhausted and so his breakthrough came just in the nick of time to save the world from starvation. From the moment he started production of nitrogen in 1910, agriculture was forever changed across the entire planet. And best of all, the main ingredient, air, is free!

With the benefit of hindsight, we now can see that creating a new source of fertilizer was a better risk mitigation strategy than an armada of free-range hippos moping through the bayous.

However, when choosing a mitigation strategy, one has to be very careful of the unintended consequences. Complex risks sometimes do not respond to simple solutions as we expect.

Haber’s nitrogen not only fed the multitudes, it provided enough food for a very large German army. And nitrogen, in addition to feeding soldiers, makes a wonderful explosive (as Timothy McVey demonstrated by blowing up the Oklahoma City federal building with a truckload of it.)

How could finding a way to feed the hungry possibly backfire? By the unforeseen outcomes — armies and bombing campaigns in both world wars.

Perhaps what we need, when addressing very large, complex risks such as overpopulation and global warming, is more hippopotamus risk management.

More from Risk & Insurance

More from Risk & Insurance

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]