The Reality of
Business Risk
Friday 14th October 2011
Surrey
Welcome and
Introduction
David Seall
Chairman IoD Surrey
Agenda
•
•
•
•
•
•
•
Major Loss
Crisis Management
Coffee and Refreshments
The Future
Risk – The Big Picture
The Current Political Landscape
Panel Q&A’s
Major Loss
To BI or not to BI The importance of Business
Interruption and Sum Insured
Neil Hardie
Major Loss Manager, Zurich Insurance
plc
Importance of BI and SI
Considerations
• Business Interruption
– Peril based cover to protect bottom line or additional expenses
– May be an individual cover or part of package based business
– More complex cover may indemnify against contingent risks
• Supply Chain disruption
• Loss of orders
• Denial of Access
• Sums Insured and Indemnity Periods
– Business is dynamic and sums insured must be regularly reviewed
– For BI, the Indemnity Period (how long the cover will run for) needs to be carefully
considered. Under estimation will result in severe difficulties
– Have lead times changed since the last review
– How has the economic environment affected the business
How important is BI cover?
Risk landscape is evolving
•
•
•
•
•
•
Had business considered the possible effects of the riots
What impact might the Olympics have on your risk profile
Have you considered location based risks
How might you be affected by outsource/contactor risks
Legislation landscape
When did you last review your Continuity Planning
–
–
–
–
–
Alteration to risk profile
Changes in personnel
New dependencies
Support structures
Communication
You own the problem
You own the solution
Crisis Management
Practical hints on handling
incidents and investigations
Helen Devery
Partner, Berrymans Lace Mawer LLP
It could be you?
Case Study 1






Automotive client
6 CID officers
2 HSE Inspectors
Call from FD
Fork lift truck and stillages
Prohibition Notice
What happens next?







Who attends?
Why?
What can (and do) they do?
What about employees/ witnesses?
When?
Where can they enter?
How do you keep control?
Practical Considerations






Prohibition Notices
Compulsory powers
Different Powers of each regulator
Claims from employees
Business continuity
Media interest
The company’s response






Practical steps?
We don’t understand the risks
Leave the regulators to it
Assume its all done properly
Volunteer incriminating evidence
Lose all management control
Case study 2







Construction site
Fall from height
Guard rail fails
6 CID officers
2 HSE Inspectors
Prohibition notices
Internal investigation
You will need







Work related deaths
Police & HSE powers
Privilege
Ostensible authority
A plan!
Control of contractors
Directors responsibilities
What are HSE/Police powers?
Privilege
Conflict



CDM and liability of third parties?
Small companies and contractors
Designers and clients?
Practical tips 1







Manage the injured party
Assert privilege
Statements from witnesses
Plan and practice response in advance
Training for the worst case scenario
Monitor the regulators’ investigation
Rapid response
Practical tips 2






Monitor the reports and accuracy
The press release
Business continuity
Early notification to insurers
Early legal advice
Protection of your employees/ claims
Remember





Take control and manage
It could be you
Document everything
Think it’s ‘when’ not ‘if’
Control of disclosure
The Future
What’s on the horizon?
Jim Wilkes
Casualty Underwriter, Zurich Insurance plc
Acronyms
•
•
•
•
•
P.E.B.K.A.C.
G-S.I.F.I
F.I.F.O.
I.F.A.
N.U.D.E.
Legal Requirements
• Represent circa 30% of bodily injury costs
• Multiplex
• Costs Reviews
• Ministry of Justice
• Jackson
Jackson Review Recommendations
To review the rules and principles governing
the costs of civil litigation and to make
recommendations in order to promote access
to justice at proportionate cost
Main Recommendations
•
Irrecoverability of success fees/ATE premiums
• Allowing contingency fees
• One way costs shifting
• Increase in general damages
• Extension of fixed costs regime
• Scrapping of referral fees
Lord Young Review
‘Common sense Common safety’
Mainly about compensation culture
Remove burdens – regulation review
Lofstedt Review
Legislative Pressure
•
Health and Safety Offences Act 2008
•
Regulatory Enforcement and Sanctions Act 2008
•
Coroners Rules 2008
•
Corporate Manslaughter 2008
•
Environmental Damage Regulations 2008
•
Regulatory Reform (Fire Safety) Order 2005
•
Product Recall (GPSO)
Fire Risks
• Regulatory Reform (Fire Safety) Order 2005
• Abolishes fire certificates
• All organisations to carry out fire risk assessments
• Official guidance
• Fines
Impact of Losses
• 5% net profit operation
• Needs £3.7m income to cover a claim of £187k
Risk management is a systematic way of
identifying and analysing potential risks
within an organisation and then
developing strategies to manage these risks
• Risk management should address all risks
surrounding the organisation’s past, present and future
• Objective is N.U.D.E
Risk Management
Strategies
• Avoid risk
• Accept some or all consequences of a risk
• Reduce negative effects of a risk
• Transfer risk to a third party
Corporate Governance
• Boards must consider nature and extent of
risks/likelihood of risks occurring, acceptable
level of risk and costs/benefits of risk control
mechanism
• Important that Boards put in place mechanisms
that give them confidence that risk issues are being
identified, monitored and addressed
• Boards must understand whether they have in place the
right culture and structure to manage liability risk as
effectively as possible
• Lloyds – Directors in the Dock
Corporate Governance
• HMG to reinstate OFR (narrative reporting)
• ‘Narrative reporting is non financial information to
give details of market position, strategy,
performance and future prospects, social and
environmental issues’
Rating Factors
• Business
• Claims Experience
• Risk Management information
Claims Defence
Requirements
•
•
•
•
•
•
•
•
•
•
Effective H&S policy
Documented Risk Assessments
Training Records
Effective SSOW and permits
Regular review of RA and SSOW
Documented monitoring of use of PPE
Effective physical controls in place
Effective disciplinary procedure
Effective documented accident investigation
Documented inspections and audits
Precedents
• Popplewell
• Baker & Quantum
The Well Organised Risk
• Adoption of management systems approach to
H&S
• Proactive Board involvement
• Managing H&S like quality/environmental issues
• OHSAS 18001 – like ISO 9001/14001
• Use of good practice
Advice
• IoD `Leading H&S at Work`
• IOSH website
• HSE website (specific topics)
• HSE 65 `Successful H&S Management`
Food Hygiene
Any establishment supplying food direct to consumers
Food retailers, Restaurants, Cafes, Takeaways
‘Scores on the doors’ rating system
Scores 0 – 5
Effective 01-10-2010
Provides information on hygiene standards (not quality) to
consumers Voluntary (initially)
Risk – The Big
Picture
Graeme Leach – Chief Economist
of the Institute of Directors
The Current
Political Landscape
The Right Honourable Charles
Clarke
Panel Q&A