Chelan David

Saturday, 26 May 2007 20:00

A calculated risk

Since the 1980s, leveraged financing has become more widespread in the middle market. By increasing the amount of debt relative to equity, companies can enhance the return on equity. Of course, there are significant risks, and not every business is well suited for this type of financing.

“Leverage can increase returns to equity, but it can also cut the other way if things don’t work as planned. The art is determining how much is too much and how much is just right,” says Edmund Ozorio, senior vice president of Comerica Bank’s Western Market.

Smart Business spoke with Ozorio about financial leverage, the risks involved and current market terms and conditions.

What is leveraged financing?

The generic term ‘leverage’ refers to the amount of debt relative to either the value of a company’s assets or its cash flow. Today, the term ‘leveraged financing’ is generally understood as debt financing in excess of the value of a company’s assets. This means that debt is replacing part of what is traditionally funded with equity.

Because debt is cheaper than equity, the average cost of capital is lowered and the return on equity goes up. Since nothing is free, this increased return comes with increased risk. The trick is to use the ‘Goldilocks’ amount: just enough to get the increased return on equity, but not so much that a minor downturn causes payment problems.

How can a company determine if it is a good candidate for leveraged financing?

The best candidates are businesses with reliable cash flow over a fairly broad spectrum of scenarios. While nobody can predict the future, banks look at likely projection scenarios and past performance under various economic conditions.

The best candidates have a strong market position and barriers to entry, meaning their products will continue to sell even in a moderate downturn and are difficult to displace by competitors. Branded products are common examples of this type of business. Other good candidates include businesses with low fixed operating costs.

Less attractive are businesses that are highly cyclical with high fixed costs, or those that consume large amounts of capital due to growth.

When is leveraged financing used?

Common uses center around changes in equity structure. The most frequent example is an acquisition, when a new owner borrows against the cash flow of the company in order to buy out the former owner.

Leveraged financing is also used to fund distributions to owners and equity holders for other outside investments. Over the past several years, banks have seen many business owners increase the leverage on their operating businesses to provide the equity for commercial real estate investments or to finance unrelated businesses that might not qualify for financing on their own.

What are some common mistakes, and how can they be avoided?

The most common mistake is taking on too much leverage relative to the level of reliable cash flow. In today’s fast-paced and highly competitive marketplace, businesses can be affected much easier and faster than ever before. The debt structure has to leave some buffer for drops in revenue and cash flow. This means one of two things: either less leverage or debt structured in such a way that there is some flexibility in repayment terms.

One of the best ways of achieving a fairly high level of leverage is a combination of bank debt and mezzanine, or subordinated, debt. The bank debt generally amortizes early and the subordinated debt later.

What terms and structures are commonly used?

Commercial banks will usually want keep the company's bank debt at three times cash flow or less. Subordinated debt lenders might provide an additional one to two times cash flow. There are extraordinary circumstances that might increase or decrease these levels by as much as 50 percent. Banks may also require that the amount of financing in excess of asset values amortizes more quickly than other debt.

On rare occasions when the business has a very strong model and cash flow but extremely limited hard assets, the analysis is based on the value of the intangibles and amortization is set accordingly.

The terms are a function of the risk involved. While premiums for leveraged financing have come down over the past few years, it remains more expensive than traditional financing. The spread over comparable rates for debt fully covered by assets will generally range from 1 percent to 4 percent. Fees might increase by a quarter to one-half. Some lenders will also take warrants instead of part of their fees, lessening the cash drain on the business.

EDMUND OZORIO is senior vice president of Comerica Bank’s Western Market. Reach him at or (619) 338-1512.

Saturday, 26 May 2007 20:00

Is it more than you think?

While nearly everyone has the occasional heartburn, if the burning sensation caused by acid in your esophagus persists, you could have GERD. The disease may be more common than you think.

Gastroesophageal reflux disease, commonly referred to as GERD, is a condition where the contents of the stomach come back up into the esophagus. The regurgitated liquid usually contains acid produced by the stomach. While your stomach is designed to handle the acid it produces, your esophagus is not.

“Between 10 percent and 15 percent of the population in the United States experiences GERD on a monthly basis,” says Dr. Mary Maish, assistant professor of surgery and surgical director of the UCLA Center for Esophageal Disorders.

Smart Business spoke with Maish about GERD, the symptoms associated with this disease and how it can be treated.

What causes GERD?

There are some known causes as well as many unknown causes. One thing that can cause GERD is a hiatal hernia, which is when part of your stomach pushes up into your chest. The esophagus extends from the neck through the chest and into the abdomen. In normal people, the stomach stays in the abdomen. For people with a hiatal hernia, the top portion of the stomach herniates, or pushes its way up into the chest, which is abnormal.

Another cause is that as we age our tissues tend to become more lax. The laxity in the diaphragmatic muscle does not provide the same sturdiness or strength that it needs to keep the stomach in the abdomen.

Also, patients that are very obese are more prone to GERD. Large amounts of fat put pressure on the stomach and can cause a hiatal hernia. Carbonated liquids, caffeine, alcohol, spicy foods and heavy fatty meals can also exacerbate reflux.

What are some of the symptoms associated with this affliction?

Heartburn occurs in about 80 percent of the patients with GERD. They may also have epigastric pain, chest pain, changes in their voice and respiratory symptoms such as recurrent bronchitis, recurrent pneumonia or a persistent cough. Other possible symptoms include ear, nose and throat issues like persistent dental caries, recurrent earaches, persistent sore throats and hoarseness. Gastrointestinal symptoms may include bloating, gassiness, nausea, vomiting and diarrhea.

How is GERD diagnosed?

There are a number of objective tests that can be used to diagnose GERD. A barium swallow allows us to not only look at how the esophagus is moving, but also helps us determine whether or not there is reflux of material from the stomach back up into the esophagus. Manometry testing consists of a small catheter placed in the nose, down the esophagus and into the stomach where it measures pressures along the esophagus. Most importantly, it measures the pressure of the lower esophageal sphincter that connects the esophagus to the stomach. If the pressure is low then we know that the patient is likely to be experiencing a lot more reflux than an average person who has normal pressure.

A pH probe test measures the total amount of acid that is dispensed over a 24-hour period of time. There are normal amounts of acid that come up from the stomach into the esophagus in every individual, but this test will measure how much acid, based on the pH, that someone is being exposed to. Finally, an endoscopy allows us to look at the lining of an esophagus and determine if there are any complications from GERD.

How is it treated?

Patients with mild GERD, or occasional reflux, are generally treated with acid inhibition medicine, or what we call proton pump inhibitors. These medicines include Prilosec, Nexium and Prevacid. It can also be treated intermittently with H2-blockers such as Pepcid, Tagamet and Zantac.

If complications persist, what surgery options are there?

If the symptoms are persistent and severe, or if there is any indication of complications from reflux then surgery can be considered. The type of surgery that we recommend is called a Nissen fundoplication. During this surgery the top part of the stomach is wrapped around the bottom part of the esophagus in order to create a new valve because the old valve is not working properly. The procedure is done laparoscopically with minimally invasive techniques and generally there is only a one- or two-day hospital stay.

DR. MARY MAISH is assistant professor of surgery and surgical director of the UCLA Center for Esophageal Disorders. Reach Esophageal Center Coordinator Rebecca Allegretto, RN, MBA, at or (310) 825-6167 or through the Web site

Wednesday, 25 April 2007 20:00

Trading up

Trade cycle financing refers to a variety of financing solutions targeted at importers and exporters. Every company has a unique sales cycle (purchasing, manufacturing, shipping, collection), with each stage placing different demands on a company’s finances.

This method of financing is ideal for seasonal inventory peaks, long inventory turnovers and offshore inventory. For example, a company may qualify to borrow up to 100 percent of the value of the imported goods and not repay the loan until the receivables are collected from the customer.

“An important consideration is how long the company has been in business. Ideally, it should have a minimum of two to three years of business experience,” explains Cassie Stiles, first vice president of international trade services for Comerica Bank. “Also, we’re looking for positive financial trends and a strong balance sheet.”

Smart Business spoke with Stiles about trade cycle financing, who it’s geared toward, and how a company can benefit from this type of financing.

What is trade cycle financing?

Trade cycle financing provides sales cycle financing to companies that are importing and/or exporting. For example, from an importer’s standpoint, raw materials need to be purchased, products must be manufactured and delivered and payment must be collected. For the exporter, there are pre-export working capital needs, transit time and payment collection.

Trade cycle financing takes a company through the entire sales cycle and enables it to obtain financing through the life of the transaction.

Who is this financing method geared toward?

Trade cycle financing is geared toward importers and/or exporters with a proven track record. It is not an appropriate financing mechanism for a start-up company. It is more suitable for a mature company — and by mature, I mean at least a couple of years in business. As far as the size of a business goes, this type of financing method is not usually practical for a very small company. Sales generally need to be more than $5 million for it to be cost-effective.

How can a company benefit from this type of financing?

My biggest concern when I’m talking to companies and trying to identify their needs — especially small and mediumsized companies — is that they don’t always recognize the length of their sales cycle. They tend to think that they just need to buy the merchandise. They forget about the collection cycle. This type of financing can smooth out a company’s cash flow requirements.

What payment mechanisms are available?

There are four basic payment mechanisms used internationally: cash in advance, open account, letters of credit and documentary collections.

All of these can be used in trade cycle financing. Factors that influence which method is used include where the supplier/buyer is located, the length of the relationship between the buyer and seller and the value of the merchandise.

What role does insurance play with trade cycle financing?

Exporters want to be able to extend open account terms to their foreign buyers. In many instances, a bank will not be able to finance these foreign receivables. Through an insurance policy from either Ex-Im Bank (Export-Import Bank of the United States) or the private insurance market, the commercial and political risk of these foreign receivables can be covered and the receivable can be financed.

For our importer clients, we are able to use an insurance policy to support their purchase order financing needs for up to 180 days. This enables them to import the raw materials to their facility (either in the U.S. or a foreign location), manufacture the product, sell the product, get paid for the product and then repay the bank.

The other type of insurance used in trade transactions is cargo insurance. This covers the merchandise from warehouse to warehouse.

CASSIE STILES is first vice president of international trade services for Comerica Bank. Reach her at (619) 338-1502 or

Wednesday, 25 April 2007 20:00

Venture debt

Venture debt is becoming an increasingly popular option for venture-capital-backed companies wishing to

stretch their equity investment dollars. Venture debt lenders, including some banks, provide a company with a loan and the borrower can then use the funds to build its business.

If used properly, it can be a boon for the company and shareholders alike. By leveraging capital provided by venture capitalists with venture debt provided by banks and other venture debt providers, a company can potentially enhance its valuation.

“Typically, venture debt is used for early-stage and emerging-growth companies that are backed by venture capitalists,” says Bonnie Kehe, senior vice president and regional managing director for Comerica Bank’s Technology & Life Sciences Division.

Smart Business spoke with Kehe about venture debt, how it is typically structured and why it has become so popular lately.

What is venture debt and how can a business use it?

Venture debt augments the equity raised by the venture capitalists and enhances potential return to the investors and management team by lowering the overall cost of capital. The funds can be used for equipment purchases or growth capital, enabling venture-backed companies to reserve equity dollars for a sales ramp, product development, clinical trials and so on. Quite often, venture debt can lengthen the time between equity rounds, thereby enhancing valuation.

Only several federally regulated commercial banks in the country provide this type of financing. There are also numerous non-regulated venture debt funds in the market today. In addition to providing venture debt facilities, commercial banks are able to provide working capital loans that can be used to finance asset growth. Typically, venture debt lenders do not provide working capital lines of credit.

How is venture debt typically structured?

It can vary, but venture debt facilities typically are structured as two- to five-year loans. There is normally a drawdown period ranging anywhere from 2 months to 18 months, in which a company can take the money down as it needs it while it pays interest only. At the expiration of the drawdown period, there is a monthly amortization of principal plus interest of between 24 months and 48 months. Pricing on these types of facilities depends upon several factors including the competitive environment and level of risk. The costs will typically include a percentage above prime, closing fees and a warrant kicker.

What do venture debt providers look for when deciding whether to lend to a company?

One of the most important underwriting criteria for a lender is the quality and makeup of the investors. Are they known to the venture debt provider?

If the venture debt lender knows the investors and is confident of investor support, this will often help dictate terms. Lenders must be confident that investors are not looking for third parties to shoulder the investment risk. We don’t want to fund a company that’s bumping along with nowhere to go; there needs to be a high potential for growth.

We look at how much cash the company currently has and how long it’s expected to last. How the debt will be repaid is another factor. Will it be through additional equity rounds or with future cash flow? The strength of a company’s management team, its ratio of debt to equity and where the money will be used are also important considerations.

What are the risks associated with this type of debt?

There are risks to the lender as well as the debtor. At the end of the day, it’s debt. Unlike equity, it must be paid back at some future point. If a company is burning more cash than it had originally projected, its ability to retire the debt becomes questionable.

The lender must be relatively confident that the borrower will be able to raise the necessary equity and/or generate sufficient cash flow to amortize the debt as structured.

How can these risks be minimized?

First and foremost, it is important to ensure that the company is adequately capitalized and that venture debt is being used for the right reasons. Also, it is important that the borrower is doing all the right things: the right management team is in place, the right investors are on board, and they are hitting their key milestones.

Why has venture debt become such a popular option with companies recently?

The availability of venture debt has skyrocketed in recent years due to the proliferation of venture debt funds/players in the market. This is due primarily to excess liquidity in the capital markets. Limited partners and investors with liquidity to invest have helped fuel the venture debt industry.

BONNIE KEHE is senior vice president and regional managing director for Comerica Bank’s Technology & Life Sciences Division. Reach her at or (714) 433-3266.

Wednesday, 25 April 2007 20:00

Offense can be the best defense

While all executives are well aware of the spiraling costs associated with employee health care, some companies have taken a reactive approach to the problem. Rather than establishing programs to keep their healthy employees healthy, they have focused the bulk of their attention on employees with existing health problems.

An effective health management plan, points out Stephen J. Peck, president of Kapnick Insurance Group (Benefits Division), takes a proactive approach. Not only can such a plan positively influence employees’ lifestyles while increasing productivity, but costs can be reduced as well. “If an employer offers a range of programs along with rewards that reinforce healthy behavior, employees remain healthy and the bottom line is improved,” Peck points out.

Smart Business spoke with Peck about health management, the importance of keeping healthy employees in the low-risk category and what types of savings can be realized from having a health management program in place.

What does health management consist of?

Simply put, health management is an effective tool for employers to control medical claims’ cost and utilization through building a healthy work force. A few years ago, we used the term wellness programs, but it’s so much more today. Health management addresses absenteeism, health and prescription drug claims, presenteeism, disability and life claims and workers’ compensation.

Why should employers invest in health management?

In light of the fact that workers spend a significant portion of their waking hours at work, employers are in a great position to positively influence lifestyle choices. Through positive lifestyle choices, an employer and employee can reduce health care claims, lower absenteeism and increase productivity. It really needs to be a two-way street, however, with both employers and employees actively engaged in the process.

How can a company most effectively deploy a health management strategy?

In the past, most programs concentrated almost exclusively on employees with existing chronic conditions with what were called disease management programs. I would deem this to be a reactive strategy. Recent studies have shown that there is a greater return by shifting focus to a proactive strategy of keeping your healthy employees healthy.

Let me illustrate it this way. Businesses value their existing customer base because maintaining loyalty is far less expensive than acquiring new customers. Similarly, low-risk employees, or healthy employees, who already have and maintain good health, can be viewed as an employer’s existing customers. These employees not only have lower health care costs, but they have higher performance and productivity. If an employer does not maintain a relatively low-cost awareness campaign and program, research indicates many of these low-risk employees — 2 percent to 4 percent annually — will inevitably join the higher risk, higher cost employees.

What type of savings and/or return of investment is typical with an effective health management program?

The numbers are very compelling. When an employee maintains his or her low-risk status, there is a potential savings of $350 per person per year compared to a savings of a $153 per person per year when an employee migrates from the high risk to the low risk. Additionally, the return on investment to establish and implement a health management program averages about $3.50:$1 in reduced health care costs, absenteeism and productivity.

What types of programs are there and how does one start a health management program?

Some of the programs that can be implemented include needs-and-interests surveys, health-risk appraisals, educational classes, communication campaigns, walking programs, incentive-based programs, newsletters, spousal meetings and fitness challenges. There has to be support and buy-in from the highest level of the company. Without that, most programs will not be successful. There is an overwhelming amount of information available to employers. More often than not, employers establish an internal wellness committee to help identify which programs are useful and to coordinate the responsibilities of managing these programs.

STEVE PECK is president of Kapnick Insurance Group (Benefits Division). Reach him at (888) 263-4656, ext. 1147 or Kapnick Insurance Group is a member of Assurex Global, an international network of insurance and employee benefit brokers.

Monday, 26 March 2007 20:00

The great balancing act

In an increasingly complex business world, the need to effectively balance risk is greater than ever. Myriad changes in the business environment, including advances in technology, globalization and the accelerated pace of conducting commerce, have all contributed to the growing number and complexity of risks.

Spurred by greater recognition of the numerous risks facing their organizations, many executives are turning to enterprise risk management (ERM). By identifying and assessing risks and then determining methods to control these risks, a company can gain a competitive advantage over its rivals, says Terry Campbell, managing director of the Global Risk Management Practice for Arthur J. Gallagher & Co.

“Companies that implement an effective enterprise risk management program will have a lower cost of risk than their peers, which will provide them an advantage in the cost of their products or services that leads to greater growth and profitability for these organizations,” says Campbell.

Smart Business spoke with Campbell about enterprise risk management, the benefits it can provide and how to go about implementing a program.

What is enterprise risk management?

While ERM has gained traction over the last several years, there is still significant confusion as to what ERM really is, how do you implement it within an organization and what the benefits are. These are questions faced every day by risk managers and brokers alike when asked if they should implement an enterprise risk management program. While ERM has become a buzzword within risk management and the activity level in this arena has increased, the question still remains among many risk management professionals: What is ERM? In the absence of a defined and consistent definition, ERM is a process that allows an organization to:

  • Effectively identify its significant risks

  • Assess each of these risks

  • Determine methods for managing and controlling these risks

  • Implement selected risk control techniques to manage the risks

  • Monitor ongoing controls and make necessary modifications as needed

How can a company benefit from having an enterprise risk management program in place?

An ERM program provides awareness to stakeholders within a company and provides a view of risk across the entire enterprise. It also allows a company to develop common language for evaluating risk as well as identify interdependencies within the organization. Finally, an ERM program enables you to aggregate the amount of risk within the enterprise and formalize the risk levels you are willing to assume. While ERM is not mandatory, competitive forces will drive organizations in this direction.

What are the hurdles associated with starting an enterprise risk management program?

The first hurdle is determining what the concept of an ERM program really means within your organization. When embarking on an ERM study, cross-functional cooperation is imperative. Fears arise in the form of peers evaluating the performance of your business unit without understanding the intricacies of your operation. This can also lead to the concern of ‘turf grabbing’ by individuals. The time required to go through the ERM process is significant and requires a commitment of time by key members of your organization. Sometimes, this investment is difficult to secure when the value to the enterprise at inception is undetermined and unquantified.

What does the ERM process consist of?

  • Understanding the risk appetite of your organization and its enterprise values

  • Evaluating the goals of the process and making sure they align with the mission of the enterprise

  • Identifying internal and external events that could impact your objectives

  • Conducting analyses on the events that have the greatest likelihood of impacting the enterprise

  • Determining the proper technique(s) for responding to risk whether that is avoidance, acceptance, reduction and/or sharing. Whatever action is undertaken it must align with the organizations tolerance to risk

  • Establishing and implementing policies and procedures to ensure that risk responses are effectively carried out

  • Effective communication should flow throughout (down/across/up) the enterprise.

TERRY CAMPBELL is the managing director of the Global Risk Management Practice for Arthur J. Gallagher & Co. Reach him at (818) 539-1383 or

Monday, 26 March 2007 20:00

A helping hand

Every company wants its employees to succeed. One way to guide employees toward their full potential is by using a practice called performance intervention.

Performance intervention is more than a fancy name for coaching, mentoring or formal performance appraisals, says Don St. Clair, vice president for enrollment management and marketing and adjunct faculty member of organizational leadership at Woodbury University. “Performance intervention suggests that when you see a possible performance problem, you’re going to immediately take action on it in a positive manner.”

Smart Business spoke with St. Clair about performance intervention, how it can best be utilized and what pitfalls to avoid.

What is performance intervention?

Performance intervention is the concept of identifying gaps or areas in employees’ performance that can be strengthened or improved. When employees have an area that they’re underperforming in, rather than taking punitive action, which can even include firing someone, you want to intervene. You want to take employees aside and tell them what areas they need to improve in and how you will help them meet these expectations.

How can a company best utilize performance intervention to improve employee productivity?

The first thing that should be done is to position performance intervention as a good thing, not a bad thing. The inclination in many organizations is that people not meeting expectations should be replaced. The fact is that employee turnover costs a lot of money. There is the cost of finding and recruiting employees, the cost of training employees, the lost productivity when a position is open and the lost productivity associated with somebody getting up to speed. It is important to recognize that dismissal should be the course of last resort.

Performance intervention can be utilized to identify the areas of employee productivity that aren’t where you’d like them to be. By identifying the areas of employee performance that could be improved and then by taking a proactive approach to help the employee become better, you’re going to increase productivity, reduce turnover and improve morale.

How should a company get started with performance intervention?

It starts with being able to identify exactly what it is that you expect from employees. I like to break it into two different categories: the characteristics that you would like an employee to have and the specific job outcomes that you would like the employee to achieve. The characteristics might be personal. For instance, maybe you have an employee who does a great job and is very competent, but doesn’t always dress well. This can be an issue with younger employees who have limited business experience and don’t understand that you don’t dress for work the same way you dress for a 9 a.m. physics class. Public speaking could be another personal characteristic. Maybe you have someone who is capable but doesn’t speak well publicly. Performance intervention would address these issues by coaching the employees on how to dress or how to appropriately speak in public.

On the other hand, you might want to address outcomes. For instance, there might be an employee who is not meeting sales targets. In this case, you would want to have a very specific outcome-oriented intervention to establish how he or she is doing the job, and how you can help him or her do better.

What are some pitfalls to avoid?

The number one thing is that employee interventions need to be positioned as a positive thing. The performance evaluation should be going on all the time, not just once a year. A number of years ago, Ken Blanchard wrote a book called the “The One Minute Manager.” This book is about catching people doing things right and doing things wrong and identifying them on the spot. If an employee is doing something really well, you should take a second out of your day to tell him or her what he or she did was really great. On the other hand, if you find someone doing something wrong, rather than making a note in a file and talking to him or her about it at their end-of-the-year performance evaluation, you should stop them right there and tell how he or she can approach the situation better.

Once in place, how should a system be evaluated?

If you’re doing good appraisals and intervening in performance problems timely and positively then you should have less turnover than you did before. The idea is that you don’t want to replace people. You want to get people into the organization, get them performing at a high level and keep them performing at a high level.

DON ST. CLAIR is vice president for enrollment management and marketing and adjunct faculty member of organizational leadership at Woodbury University. Reach him at

Monday, 26 March 2007 20:00

Get your bank’s attention

To prosper in an increasingly competitive marketplace, it is imperative to have a strong and dedicated banking partner that has the resources to help expand and grow your business. Ideally, the bank should feature advanced state-ofthe-art business systems and a structure that encourages involvement from senior personnel.

The blending of new technologies with an old-fashioned personalized touch is the hallmark of quality commercial banks in these modern times. A bank that doesn’t pay attention to your company’s individual needs — no matter how many bells and whistles it offers — probably isn’t worthy of receiving your deposits.

Of course, communication is a two-way street. To fully take advantage of a bank’s products and services, you will need to openly communicate your needs.

Forming a productive relationship with your commercial banker can pay huge dividends, says Joe Yurosek, senior vice president and regional group manager at Comerica Bank. “Establishing strong relationships with our clients helps us provide advisory-type services,” says Yurosek. “Once we’ve moved into a professional advisory role, we can anticipate our clients’ needs. Coming to our clients with new ideas provides them with more data to assess what they can and can’t do in the marketplace.”

Smart Business spoke with Yurosek about choosing a commercial bank, the importance of personal relationships and how a quality bank can help their client grow.

How should a company go about finding a good commercial bank?

The best way is to utilize existing, known relationships through referrals and references. This includes CPAs, attorneys and other business owners. Not only should you ask your contacts who they know, but you should ask specific questions. For example, How responsive is the bank to credit requests? How accessible are senior managers or decision-makers at the bank?

It is a combination of getting references from people you trust and asking the right questions that relate to your company.

What types of products should a quality bank bring to the table?

These days, pretty much all of the top-tier corporate banks provide full-service products. Some of the important ones include full corporate credit capabilities, cash management services, strong international capabilities and Internet-based cash management systems. Quality banks have invested heavily in developing state-of-theart software systems. Also, clients are looking for one point of contact, so they can use the relationship they develop for their private banking needs.

How important are personal relationships between a company and its bank?

They are very important. You want to build trust in any professional relationship. Speaking from the bank’s perspective, the more we know about the ultimate needs of our clients, the better we can provide an advisory role to our clients. This enables us to separate ourselves from other banks by becoming more proactive and less reactive.

What role does communication play in developing a positive working relationship?

You need good communication so that there are never any surprises for either the bank or for the client. Customers often want their bank to provide them with direction in their business investment decisions. The only way that both of us can know which direction we’re headed is open and frequent communication. This applies both when times are good and when they’re not so good.

How can a bank help a company develop and expand its presence internationally?

In terms of the global market, banks can help provide additional contacts overseas. We have banking contacts and a representative office in China, for example. Something as simple as providing a customer with contacts that are on the ground in a foreign country would help them assess whether they should be outsourcing production. Banks often have clients that they can introduce to other clients that have already produced products in a foreign country.

When it comes to helping customers expand, we are a wealth of information because we have significant contacts with customers and clients who have already done business overseas. Also, banks that have invested in people on the ground in foreign countries can provide customers with knowledge of the foreign local capabilities.

JOE YUROSEK is senior vice president and regional group manager at Comerica Bank. Reach him at (562) 590-2561 or

Monday, 26 March 2007 20:00

Workplace safety

Congress created the Department of Labor’s Occupational Safety & Health Administration (OSHA) under the Occupational Safety and Health Act, which was signed by President Nixon on Dec. 29, 1970. OSHA’s mission is to prevent work-related injuries, illnesses and deaths by enforcing rules, or standards, for work-place safety and health.

The agency recently released its top 10 list of most frequently cited standards in fiscal year 2006 (October 2005 through September 2006).

Companies can guard against accidents and OSHA citations by understanding the regulations that apply to them and implementing and managing programs to meet their needs, says Jim Kapnick, president of Kapnick Insurance Group. “Analyze the claims and incidents you’ve had, do walk-throughs and examine your operations. Then custom-tailor a program to those specific areas to maintain compliance,” he explains.

Smart Business spoke with Kapnick about OSHA standards, how to best identify and correct potential hazards and the importance of communicating safety standards to employees.

What were the most cited OSHA standards in 2006?

Falls have been a leading cause of occupational death for several years, so it is not surprising that scaffolding and fall protection were the top two most cited standards in FY 2006. OSHA standard 1926.451 requires employers to provide scaffolding at heights of 10 feet or more. OSHA standard 1926.501 protects construction workers working over 6 feet by providing rules for fall protection.

How do the cited standards vary by industry and company size?

OSHA cites the standards based on exposures. They prioritize the most significant exposures first because they want to provide the most impact for their inspections. For example, a steel forging operation is likely to get more attention than a restaurant, even though both have the potential for accidents.

The standards are based both on the industry and company size. A good example of this is construction. The construction industry represents about 4 percent of the work force nationally, but about 50 percent of workplace fatalities. The result is that there tends to be more inspection targeting construction and construction-related operations.

Targeting can be re-prioritized, however, which may affect smaller companies or less visible industries. In Michigan, there is a special-emphasis program on companies that apply spray-on truck bedliners, largely due to a worker inhalation fatality a couple of years ago. In this instance, these employers tend to be smaller mom-and-pop operations that otherwise might not have been targeted for inspections because of their size and their industry, but are now receiving enhanced focus.

How can a company best identify and correct potential hazards?

One of the best things that can be done is a formal safety program audit. This should be performed by an independent source; someone who can objectively look at what’s going on. It is easy not to see ‘the forest through the trees’ when you walk through your operations or review your program documentation.

Having a credentialed safety/loss control professional objectively examining the situation is often very helpful and can dramatically reduce your potential for fines and other losses.

How should an employer communicate with employees about safety standards?

The most important thing is that every new employee has a strong and well-documented orientation program that includes safety. Existing employees should be kept up to speed through ongoing refresher courses. As your organization evolves over time, you need to make sure that your employees are properly trained in safety issues, as their tasks or jobs change or are modified.

What resources are there for business owners about OSHA standards?

OSHA has valuable resources on its Web site ( and also provides classes and consultation. Michigan is one of 26 states that has its own state OSHA plan, called MIOSHA.

In addition to compliance inspections, MIOSHA provides a wide array of consultative and educational services. The MIOSHA Consultation, Education & Training Division (CET) puts on seminars throughout the state, provides free on-site nonpunitive mock inspections and has numerous resource materials. Recently, the organization put together a safety training awareness CD-ROM that you can receive free of charge by visiting the Web site at

JIM KAPNICK is president of Kapnick Insurance Group. Reach him at (888) 263-4656, x132 or Kapnick is a member of Assurex Global, an international network of insurance & employee benefit brokers.

Monday, 26 March 2007 20:00

Green up, America!

Green buildings offer companies the opportunity to maximize both economic and environmental performance. Potential economic benefits include reduced operating costs and improved employee productivity. Environmental advantages include resource conservation and improved air and water quality.

The term “green building” can be used to describe various aspects of a building, says Norm Bertke, managing director of asset services for CB Richard Ellis.

“Aspects of green buildings can include items such as the site that is chosen, the construction materials selected and the design of the asset’s infrastructure,” he explains.

Smart Business spoke with Bertke about green buildings, the financial benefits that can be achieved with them and how to get started in locating a suitable property.

Why are green buildings gaining popularity in the corporate world?

One reason green buildings are gaining popularity is simply the cost savings that can be associated with operating an efficient building. Efficient building systems result in lower consumption of utilities and, therefore, cost savings.

There is also data that suggests that because green buildings are often constructed to mitigate dust and other allergens in the indoor air and efficiently utilize natural light, the occupants are often healthier and happier than the occupants of non-green buildings. This leads to cost efficiencies for the occupants because of improved recruiting, reduced sick time and less turnover.

Finally, many corporations simply think that being green is the right thing to do and as long as it is at least cost-neutral, these corporations prefer to be green.

What are some of the financial benefits that can be realized from using a green building?

Green buildings often leverage the use of efficient systems to save on utilities. Variable-frequency drives offer an improved ability of the operator to control the heating and air-conditioning system. Flushless urinals mitigate the use of water. New light bulb technology allows the lights to burn more efficiently and last longer. Occupant sensors allow lights to turn off when the rooms are not in use. All of these items reduce utility consumption and lower costs.

However, the cost implications of lower turnover and reduced sick days can be much more significant. Many buildings operate at approximately $2 per square foot for utilities. It is reasonable to assume that it costs an employer $200 per square foot for personnel-related costs and that some sales professionals generate $20,000 per square foot occupied in revenue. If an employer can execute tactics via a green building to keep their employees on the job, the payback could be huge.

How do the costs of a green building compare to that of a traditional building?

This is a function of how green do you want to be and what kind of green? A certified building (one certified by the U.S. Green Building Council) can have almost no incremental cost if a green strategy is implemented from the conceptual phase. However, if the goal of being as green as possible is executed without factoring costs, the incremental costs can be significant. In other words, the technology exists, at a price, to build extremely efficient, environmentally friendly buildings, but there is a point of diminishing returns as it relates to a monetary payback.

How much can be saved on energy bills?

If an existing building is already efficient, sometimes there is little to no additional savings to realize. However, many buildings can achieve energy savings in the 10 percent to 30 percent range. In many cases, older buildings can be ‘recommissioned’ or set back to operate within their original design parameters to capture savings and the capital investment associated with new infrastructure investments is not necessary.

How has energy-saving technology improved over the past decade or so?

There have been technological improvements in the way HVAC systems operate. Variable frequency drives allow the operator to turn up or down the rate at which the systems run. Economizers allow building equipment to adjust their use of the environment by more efficiently using outside air to control interior temperatures. Lighting technology has also improved dramatically with the advent of low-mercury bulbs, electronic lighting ballasts and occupancy sensors that turn lights on and off automatically. In the realm of plumbing, low-flow, auto-flush valves and aerators allow building operators to decrease their use of water.

NORM BERTKE is managing director of asset services for CB Richard Ellis. Reach him at or (614) 430-5069.