Risk Insider: Nir Kossovsky

How Many Blows to the Head Can Wells Fargo Take?

By: | August 22, 2017 • 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]

Medical science — and the NFL — have now come to recognize that repeated blows to the head, like those commonly suffered by football players, lead to a form of brain damage known as Cumulative Traumatic Encephalopathy or CTE.  It took years to acknowledge despite mounting evidence, at least partly because addressing the issue would require significant action and a change in culture throughout the league.

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There are several parallels that can be drawn between the current reputational crisis at Wells Fargo and the CTE crisis faced by the NFL.

First, a scandal involving phony accounts, followed by CEO and board departures. Now another scandal involving charges for insurance on auto loans — this one on the watch of the company’s new leadership. It’s a general rule of thumb that corporate reputations recover from crises more easily than do the reputations of individuals, but still, how much pounding can one brand take?

Just as the NFL has tried to do a better job of protecting players, employing technology in an effort to produce better helmets and seeking to alter player behavior through penalties and fines, Wells Fargo has tried to correct course through the appointment of new leadership and the promise of greater transparency and accountability.  But just as the NFL’s early refusals to acknowledge the CTE problem damaged its credibility, Wells Fargo’s inability to execute on its course correction — even with new leadership in place — has put the bank in a very deep credibility and reputational hole.

Reputation is essentially a product of stakeholder expectations. A reputational crisis occurs when stakeholders are angry over a failure to meet those expectations.  Credibility, integrity and reliability are values that stakeholders in any organization normally believe they can take for granted.

The personal reputations of the individuals in leadership are far more fragile. When their reputations sink, they lose their executive positions, their board seats and their compensation.

After years of denials and foot dragging at the NFL over CTE, the burden of convincing the public that they are serious about addressing it has become far greater than it would have been if they’d taken more of a leadership role in solving the problem when it first became known.

That leadership would have meant adopting many of the practices they ultimately adopted — changing rules on tackling and hits, imposing penalties and fines for violating those rules and using technology to develop better helmets. Immediate action would have delivered a simple-to-understand and completely credible message to NFL’s stakeholders that they were serious about protecting the players, and the reputations of both the teams and the league. Delaying in the face of mounting evidence caused lasting damage to the league’s credibility and reputation.

As for banks such as Wells Fargo, such leadership would have been a combination of better governance and internal controls to mitigate unauthorized “contacts” and the use of insurance solutions that act as third-party warranties and form the basis for a defense for the bank’s leadership in the event of inadvertent “contact.”

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How would such insurances be structured? Just as medical science has allowed us to understand the nature of CTE better, new algorithms now allow us to predict and measure reputational damage at corporations. We now know that each new reputational crisis at Wells Fargo makes the hole much deeper and the climb-out much steeper. Repeated blows to its reputation will eventually cause its stock price to suffer the financial equivalent of dementia.

In all likelihood, Wells Fargo will power through this crisis as other large, well known corporate brands have done in similar situations. With strong leadership in place and the significant marketing and other resources they can deploy — if it avoids further missteps — the company can chart a course toward reputational recovery.

The personal reputations of the individuals in leadership are far more fragile.  When their reputations sink, they lose their executive positions, their board seats and their compensation.

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]