Turning Risk Inside Out
When executives at truck parts manufacturer Meritor decided to move the company from one that supplies light and heavy vehicle components to one that supplies heavy vehicle components only, they weren’t making life any easier for Todd Chirillo, the company’s treasury director who oversees risk management.
There were already a limited number of insurance carriers that were willing to put down a substantial primary layer to underwrite Meritor’s casualty program. And prices were hardening for manufacturers on their casualty programs.
Chirillo’s marching orders were to drive out risk and cost within the organization as it implemented its new business plan.
“The casualty markets were hardening and driving companies with our type of risk exposure to restructure programs and assume higher retentions,” Chirillo said.
He knew he had his work cut out for him.
“It appeared our business plan and the insurance marketplaces were moving in opposite directions,” Chirillo said.
Rather than panic, Chirillo stepped forward and turned risk management at the company upside down and inside out.
From a history where treasury was looked at as the sole resting place of risk management, Chirillo took risk management and walked it into the rest of the organization.
Chirillo worked with the business units to get them to understand that risk management and the various departments actually had the same goal: to produce a quality product at a lower cost.
To communicate that, Chirillo needed to defeat the impression that someone from corporate was arriving on the various units’ doorsteps to dictate action.
“I realized that corporate can sometimes be overbearing. I wanted to make this more of a partnership,” Chirillo said.
In talking to the different business units, Chirillo was better able to understand how they managed risk. He was also humbled to discover that some of his ideas, though alluring on paper, were not practical to implement in the field. Admitting that to those he was dialoguing with created some good currency.
“Then you can quickly get people to say, ‘They’re not just here to cram this down our throats,’ ” Chirillo said.
Once Chirillo better understood how risk was managed throughout his company, he could go back to treasury and advocate for higher retentions, something the company would have given scant attention to previously.
“We can withstand a higher retention because we have the confidence to take on that retention,” Chirillo said.
Another result was that Chirillo was able to keep his highly rated carriers and maintain a $50 million primary layer of coverage on his company’s casualty program, something that is unique to his sector.
Before his efforts, the best offer he was seeing was a $25 million layer.
And perhaps even more importantly than what the carriers are offering for coverage, Meritor is a company that is transformed in the way it conducts risk management.
“Our collaborative efforts with our business units have resulted in our discovery that our organization actually had a greater capacity to retain risk than previously understood,” Chirillo said.
“Treasury now acts as a central hub for risk and is viewed as a partner in risk management — not just the team that buys insurance and sends the costs to the business units,” Chirillo said.