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Gary Schaffer wakes up in France most days out of the year even though Inmedius Inc., a provider of enterprise software solutions, is based in Pittsburgh. The president and CEO of the global company likes being centrally located.

In the mornings he speaks with India and in the evenings he calls the West Coast and his daytime hours are busy contacting everywhere in between.

“Our largest challenge is having a moderately growing company and a company that is worldwide and the challenge is dealing with the virtualization of our work force,” Schaffer says. “How do you keep everybody communicating and in sync with each other when you have offices around the world?”

It’s a challenge that Schaffer and his 75 employees are always looking to solve and improve within the company.

Smart Business spoke to Schaffer about how he keeps his global business in sync.

Synchronize processes. The more highly distributed you are, the more business process driven you have to be. If we’re all in an office together and we’ve got a business challenge, we can just lean over the cubicle and say something to our colleague. If you’re on the other side of the world and something has to get done, you have to have an agreed upon process that you all agree beforehand is going to happen.

As a small business you don’t necessarily want all the overhead of huge business processes. As a distributed small business, you have to have those processes in place. That’s another challenge. How do you deal with a small business that has the needs of a large business business process?

The first thing you have to do before you put a new process in place is agree on the process. Then monitor the process and document the process in either a task list or check list.

Make sure someone owns it. What I’ve found over the years is that without direct ownership by somebody, not by a group of people but by somebody, these things do not work well. You need to be able to hold one person responsible and one person needs to be empowered to make sure the process works properly.

Promote strong employees. Inmedius is really a niche software services business, so we don’t have a big pool of competitors we can pull from or necessarily people who understand or know our domain before they come to our company. We are actively promoting people in our company into different roles to take up more management roles. We had somebody that was in a finance role and was just moved to the director of operations. That’s because someone that was in finance over the years will understand our business, understand our products, understand our services, and understand our customers.

You need to sit down and systematically do ‘what if’s.’ What if we move Bob, who is a great performer in production, into a sales assistant role? What would that look like? What advantage would that give us? What disadvantage would that give us?

Some of these may be very unnatural. When you talk about product innovation, one strategy is to take all your assets, all your products that you own and say, ‘What would it be if we mixed this product with this product? What would that give us?’ Unless you do that systematically, you’re never going to come to those conclusions. You have to do them with people and roles too. You have to line up all your people and line up all your roles and say, ‘What would that look like with this person in that role?

Find the right people. Personality profiling is a must. That’s how you know what the best way to manage that person is. You have to also get a very good understanding of what work environments people work best in. You have to go beyond just skills.

Those other areas are as important, or more important, than the skills. Somebody could be a fantastic programmer but not a team player and they are on a team programming project and that’s not going to work out.

Somebody may be a great programmer but doesn’t like interacting with customers. So we better make sure we get them in the right role because if the role is to lead the programming group and be contacted by customers, the person is going to fail. You have to look at whether they need a structured environment or an unstructured environment. Different parts of your business have different needs.

HOW TO REACH: Inmedius Inc., (412) 459-0310 or www.inmedius.com

Published in Pittsburgh

There are more than 17,000 environmental laws and regulations worldwide. How sure are you that your business operations are in compliance?

Environmental insurance has become a hot topic the last several years, mainly because even though most companies have environmental exposures, those risks are excluded from most liability and property policies, creating a major gap in coverage.

“An experienced, specialized broker can help you recognize exposures, understand the regulatory climate and provide solutions, whether it is insurance or other risk mitigation options to satisfy coverage needs or financial assurance requirements,” says Michael R. Szot, executive vice president, global practice leader, Environmental Service Group, Aon Risk Solutions.

Smart Business spoke with Szot, Gregory E. Schilz, managing director, Environmental Service Group, Aon Risk Solutions, and Dale Cira, director, Specialty Environmental, Aon Risk Solutions, about how to protect your company from environmental risk.

Why should businesses be concerned about environmental risk?

Many companies are unaware that they do not have proper protection against environmental risk, but virtually any company that owns or leases property has exposure to environmental risk. If a company transports potentially harmful materials, it has environmental exposure. An experienced environmental broker can point where exposure exists and whether companies have coverage for it in their current program. Companies may have some limited environmental coverage built into their current policies, but a broker can identify if they have a gap.

How can businesses assess whether they have a gap in their environmental coverage?

Companies may not  understand their environmental risk. The starting point is a coverage gap analysis, in which a broker reviews current policies to determine if their insurance program provides any environmental coverage. The answer generally depends on the company and the country in which the company operates, but usually, coverage for environmental exposures is limited, at best.

Next, the broker will make a site inspection and perform a policy review highlighting  where the company has exposures and its gaps in coverage to environmental risk. Then, the company will receive solution sets showing how to fill any gaps with an environmental insurance product or other mechanism.

In many cases, they may choose not to buy insurance; they may intentionally self-insure risk. But to not know the risk level would be a mistake for any organization.

What types of problems are covered with environmental insurance?

The biggest issue is pre-existing, unknown conditions. Whenever a business considers buying a property, whether it is an undeveloped or currently developed piece of land, there is always a question about the historical use of that property. Even an undeveloped piece of land with grass growing on top of it could have been used 30 years ago as a plating facility, with lead, zinc or toxic minerals in the ground. That is the single largest driver that causes businesses to consider environmental insurance — what they don’t know about a property they are buying.

How does environmental insurance handle new issues?

Typically, this coverage focuses on insuring unknown issues that may be associated with a site. But there are also insurance policies for situations in which you have existing contamination on a site and you are trying to cap the potential cost of that risk.

You may think the risk is a $5 million problem and you don’t want it to end up being a $30 million problem. By capping that cost, businesses know if a risk becomes a larger problem than anticipated, additional insurance can protect them from that worst-case scenario. Also, most pollution policies are written on a ‘claims-made’ basis — a claim has to be reported during the policy term. However, environmental insurance policies, if crafted correctly, can have full pre-existing coverage conditions applying, with no retroactive limitation. So if the policy is placed today, it covers everything that happened in the past but that you don’t know about yet.

Why is environmental insurance growing in popularity?

It is a very advantageous market for companies considering environmental insurance for the first time or renewing their coverage. Conditions are favorable primarily due to the fact that the market has grown. Three years ago, only a few major insurance carriers offered environmental products or coverage. Today, more than 20 active markets offer some form of pollution liability coverage.

Current events — the Gulf Oil Spill and the Japanese earthquake and tsunami — cause people to think about the environment. Those are dramatic events, but smaller issues happen every day. Awareness is augmented by public and government regulators and the number of laws in place — more than 17,000 worldwide — many of which are conflicting and very complex. Companies require individuals who are staying on top of those issues to advise them on their potential liability and how best to mitigate that liability.

The market is also growing in response to major regulatory changes in the European Union. The regulatory framework of the EU’s Environmental Liability Directive creates new liability — a ‘polluter pays’ model. It also requires financial assurance, which can usually be satisfied by insurance, bonds, surety, escrow accounts, trust funds or cash.

Assurance is voluntary, but several countries have committed to moving to compulsory financial security, and there is pressure for others to do so in the name of consistency.

For affected companies, specific pollution legal liability coverage is a solution. It can be modified  to match ELD requirements and exposure for environmental liability.

Michael R. Szot, CPCU, ARM, is executive vice president and global practice leader, Environmental Service Group, Aon Risk Solutions. Reach him at michael.szot@aon.com or (213) 630-3253. Gregory E. Schilz is managing director, Environmental Service Group with Aon Risk Solutions. Reach him at gregory.schilz@aon.com or (415) 486-7652. Dale Cira is director, Specialty Environmental, Aon Risk Solutions. Reach him at (314) 854-0724 or dale.cira@aon.com.

Published in St. Louis

There are more than 17,000 environmental laws and regulations worldwide. How sure are you that your business operations are in compliance?

Environmental insurance has become a hot topic the last several years, mainly because even though most companies have environmental exposures, those risks are excluded from most liability and property policies, creating a major gap in coverage.

“An experienced, specialized broker can help you recognize exposures, understand the regulatory climate and provide solutions, whether it is insurance or other risk mitigation options to satisfy coverage needs or financial assurance requirements,” says Michael R. Szot, executive vice president, global practice leader, Environmental Service Group, Aon Risk Solutions.

Smart Business spoke with Szot, Gregory E. Schilz, managing director, Environmental Service Group, Aon Risk Solutions, and Paul D. Maxwell, senior account executive, Aon Risk Solutions, about how to protect your company from environmental risk.

Why should businesses be concerned about environmental risk?

Many companies are unaware that they do not have proper protection against environmental risk, but virtually any company that owns or leases property has exposure to environmental risk. If a company transports potentially harmful materials, it has environmental exposure. An experienced environmental broker can point where exposure exists and whether companies have coverage for it in their current program. Companies may have some limited environmental coverage built into their current policies, but a broker can identify if they have a gap.

How can businesses assess whether they have a gap in their environmental coverage?

Companies may not  understand their environmental risk. The starting point is a coverage gap analysis, in which a broker reviews current policies to determine if their insurance program provides any environmental coverage. The answer generally depends on the company and the country in which the company operates, but usually, coverage for environmental exposures is limited, at best.

Next, the broker will make a site inspection and perform a policy review highlighting  where the company has exposures and its gaps in coverage to environmental risk. Then, the company will receive solution sets showing how to fill any gaps with an environmental insurance product or other mechanism.

In many cases, they may choose not to buy insurance; they may intentionally self-insure risk. But to not know the risk level would be a mistake for any organization.

What types of problems are covered with environmental insurance?

The biggest issue is pre-existing, unknown conditions. Whenever a business considers buying a property, whether it is an undeveloped or currently developed piece of land, there is always a question about the historical use of that property. Even an undeveloped piece of land with grass growing on top of it could have been used 30 years ago as a plating facility, with lead, zinc or toxic minerals in the ground. That is the single largest driver that causes businesses to consider environmental insurance — what they don’t know about a property they are buying.

How does environmental insurance handle new issues?

Typically, this coverage focuses on insuring unknown issues that may be associated with a site. But there are also insurance policies for situations in which you have existing contamination on a site and you are trying to cap the potential cost of that risk.

You may think the risk is a $5 million problem and you don’t want it to end up being a $30 million problem. By capping that cost, businesses know if a risk becomes a larger problem than anticipated, additional insurance can protect them from that worst-case scenario. Also, most pollution policies are written on a ‘claims-made’ basis — a claim has to be reported during the policy term. However, environmental insurance policies, if crafted correctly, can have full pre-existing coverage conditions applying, with no retroactive limitation. So if the policy is placed today, it covers everything that happened in the past but that you don’t know about yet.

Why is environmental insurance growing in popularity?

It is a very advantageous market for companies considering environmental insurance for the first time or renewing their coverage. Conditions are favorable primarily due to the fact that the market has grown. Three years ago, only a few major insurance carriers offered environmental products or coverage. Today, more than 20 active markets offer some form of pollution liability coverage.

Current events — the Gulf Oil Spill and the Japanese earthquake and tsunami — cause people to think about the environment. Those are dramatic events, but smaller issues happen every day. Awareness is augmented by public and government regulators and the number of laws in place — more than 17,000 worldwide — many of which are conflicting and very complex. Companies require individuals who are staying on top of those issues to advise them on their potential liability and how best to mitigate that liability.

The market is also growing in response to major regulatory changes in the European Union. The regulatory framework of the EU’s Environmental Liability Directive (ELD) creates new liability — a ‘polluter pays’ model. It also requires financial assurance, which can usually be satisfied by insurance, bonds, surety, escrow accounts, trust funds or cash.

Assurance is voluntary, but several countries have committed to moving to compulsory financial security, and there is pressure for others to do so in the name of consistency.

For affected companies, specific pollution legal liability coverage is a solution. It can be modified  to match ELD requirements and exposure for environmental liability.

Michael R. Szot, CPCU, ARM, is executive vice president and global practice leader, Environmental Service Group, Aon Risk Solutions. Reach him at michael.szot@aon.com or (213) 630-3253. Gregory E. Schilz is managing director, Environmental Service Group with Aon Risk Solutions. Reach him at gregory.schilz@aon.com or (415) 486-7652. Paul D. Maxwell is a senior account executive with Aon Risk Solutions. Reach him at (248) 936-5356 or paul.maxwell@aon.com.

Published in Detroit

There are more than 17,000 environmental laws and regulations worldwide. How sure are you that your business operations are in compliance?

Environmental insurance has become a hot topic the last several years, mainly because even though most companies have environmental exposures, those risks are excluded from most liability and property policies, creating a major gap in coverage.

“An experienced, specialized  broker can help you recognize exposures, understand the regulatory climate and provide solutions, whether it is insurance or other risk mitigation options to satisfy coverage needs or financial assurance requirements,” says Michael R. Szot, Executive Vice President, Global Practice Leader, Environmental Service Group, Aon Risk Solutions.

Smart Business spoke with Szot, Gregory E. Schilz, Managing Director, Environmental Service Group, Aon Risk Solutions, and Anne Sherwin, Vice President and Senior Account Executive, Aon Risk Solutions, about how to protect your company from environmental risk.

Why should businesses be concerned about environmental risk?

Many companies are unaware that they do not have proper protection against environmental risk, but virtually any company that owns or leases property has exposure to environmental risk. If a company transports potentially harmful materials, it has environmental exposure. An experienced environmental broker can point where exposure exists and whether companies have coverage for it in their current program. Companies may have some limited environmental coverage built into their current policies, but a broker can identify if they have a gap.

How can businesses assess whether they have a gap in their environmental coverage?

Companies may not  understand their environmental risk. The starting point is a coverage gap analysis, in which a broker reviews current policies to determine if their insurance program provides any environmental coverage. The answer generally depends on the company and the country in which the company operates, but usually, coverage for environmental exposures is limited, at best.

Next, the broker will make a site inspection and perform a policy review highlighting  where the company has exposures and its gaps in coverage to environmental risk. Then, the company will receive solution sets showing how to fill any gaps with an environmental insurance product or other mechanism.

In many cases, they may choose not to buy insurance; they may intentionally self-insure risk. But to not know the risk level would be a mistake for any organization.

What types of problems are covered with environmental insurance?

The biggest issue is pre-existing, unknown conditions. Whenever a business considers buying a property, whether it is an undeveloped or currently developed piece of land, there is always a question about the historical use of that property. Even an undeveloped piece of land with grass growing on top of it could have been used 30 years ago as a plating facility, with lead, zinc or toxic minerals in the ground. That is the single largest driver that causes businesses to consider environmental insurance — what they don’t know about a property they are buying.

How does environmental insurance handle new issues?

Typically, this coverage focuses on insuring unknown issues that may be associated with a site. But there are also insurance policies for situations in which you have existing contamination on a site and you are trying to cap the potential cost of that risk.

You may think the risk is a $5 million problem and you don’t want it to end up being a $30 million problem. By capping that cost, businesses know if a risk becomes a larger problem than anticipated, additional insurance can protect them from that worst-case scenario. Also, most pollution policies are written on a ‘claims-made’ basis — a claim has to be reported during the policy term. However, environmental insurance policies, if crafted correctly, can have full pre-existing coverage conditions applying, with no retroactive limitation. So if the policy is placed today, it covers everything that happened in the past but that you don’t know about yet.

Why is environmental insurance growing in popularity?

It is a very advantageous market for companies considering environmental insurance for the first time or renewing their coverage. Conditions are favorable primarily due to the fact that the market has grown. Three years ago, only a few major insurance carriers offered environmental products or coverage. Today, more than 20 active markets offer some form of pollution liability coverage.

Current events — the Gulf Oil Spill and the Japanese earthquake and tsunami — cause people to think about the environment. Those are dramatic events, but smaller issues happen every day. Awareness is augmented by public and government regulators and the number of laws in place — more than 17,000 worldwide — many of which are conflicting and very complex. Companies require individuals who are staying on top of those issues to advise them on their potential liability and how best to mitigate that liability.

The market is also growing in response to major regulatory changes in the European Union. The regulatory framework of the EU’s Environmental Liability Directive creates new liability — a ‘polluter pays’ model. It also requires financial assurance, which can usually be satisfied by insurance, bonds, surety, escrow accounts, trust funds or cash.

Assurance is voluntary, but several countries have committed to moving to compulsory financial security, and there is pressure for others to do so in the name of consistency.

For affected companies, specific pollution legal liability coverage is a solution. It can be modified  to match ELD requirements and exposure for environmental liability.

Michael R. Szot, CPCU, ARM, is Executive Vice President and Global Practice Leader, Environmental Service Group, Aon Risk Solutions. Reach him at michael.szot@aon.com or (213) 630-3253. Gregory E. Schilz is Managing Director, Environmental Service Group with Aon Risk Solutions. Reach him at gregory.schilz@aon.com or (415) 486-7652. Anne Sherwin is a Vice President and Senior Account Executive for Aon Risk Solutions. Reach her at anne.sherwin@aon.com or (412) 594-7534.

Published in Pittsburgh

There are more than 17,000 environmental laws and regulations worldwide. How sure are you that your business operations are in compliance?

Environmental insurance has become a hot topic the last several years, mainly because even though most companies have environmental exposures, those risks are excluded from most liability and property policies, creating a major gap in coverage.

“An experienced, specialized broker can help you recognize exposures, understand the regulatory climate and provide solutions, whether it is insurance or other risk mitigation options to satisfy coverage needs or financial assurance requirements,” says Michael R. Szot, executive vice president, global practice leader, Environmental Service Group, Aon Risk Solutions.

Smart Business spoke with Szot, Gregory E. Schilz, managing director, Environmental Service Group, Aon Risk Solutions, and Edward X. McNamara, a senior vice president at Aon Risk Solutions, about how to protect your company from environmental risk.

Why should businesses be concerned about environmental risk?

Many companies are unaware that they do not have proper protection against environmental risk, but virtually any company that owns or leases property has exposure to environmental risk. If a company transports potentially harmful materials, it has environmental exposure. An experienced environmental broker can point where exposure exists and whether companies have coverage for it in their current program. Companies may have some limited environmental coverage built into their current policies, but a broker can identify if they have a gap.

How can businesses assess whether they have a gap in their environmental coverage?

Companies may not  understand their environmental risk. The starting point is a coverage gap analysis, in which a broker reviews current policies to determine if their insurance program provides any environmental coverage. The answer generally depends on the company and the country in which the company operates, but usually, coverage for environmental exposures is limited, at best.

Next, the broker will make a site inspection and perform a policy review highlighting  where the company has exposures and its gaps in coverage to environmental risk. Then, the company will receive solution sets showing how to fill any gaps with an environmental insurance product or other mechanism.

In many cases, they may choose not to buy insurance; they may intentionally self-insure risk. But to not know the risk level would be a mistake for any organization.

What types of problems are covered with environmental insurance?

The biggest issue is pre-existing, unknown conditions. Whenever a business considers buying a property, whether it is an undeveloped or currently developed piece of land, there is always a question about the historical use of that property. Even an undeveloped piece of land with grass growing on top of it could have been used 30 years ago as a plating facility, with lead, zinc or toxic minerals in the ground. That is the single largest driver that causes businesses to consider environmental insurance — what they don’t know about a property they are buying.

How does environmental insurance handle new issues?

Typically, this coverage focuses on insuring unknown issues that may be associated with a site. But there are also insurance policies for situations in which you have existing contamination on a site and you are trying to cap the potential cost of that risk.

You may think the risk is a $5 million problem and you don’t want it to end up being a $30 million problem. By capping that cost, businesses know if a risk becomes a larger problem than anticipated, additional insurance can protect them from that worst-case scenario. Also, most pollution policies are written on a ‘claims-made’ basis — a claim has to be reported during the policy term. However, environmental insurance policies, if crafted correctly, can have full pre-existing coverage conditions applying, with no retroactive limitation. So if the policy is placed today, it covers everything that happened in the past but that you don’t know about yet.

Why is environmental insurance growing in popularity?

It is a very advantageous market for companies considering environmental insurance for the first time or renewing their coverage. Conditions are favorable primarily due to the fact that the market has grown. Three years ago, only a few major insurance carriers offered environmental products or coverage. Today, more than 20 active markets offer some form of pollution liability coverage.

Current events — the Gulf Oil Spill and the Japanese earthquake and tsunami — cause people to think about the environment. Those are dramatic events, but smaller issues happen every day. Awareness is augmented by public and government regulators and the number of laws in place — more than 17,000 worldwide — many of which are conflicting and very complex. Companies require individuals who are staying on top of those issues to advise them on their potential liability and how best to mitigate that liability.

The market is also growing in response to major regulatory changes in the European Union. The regulatory framework of the EU’s Environmental Liability Directive creates new liability — a ‘polluter pays’ model. It also requires financial assurance, which can usually be satisfied by insurance, bonds, surety, escrow accounts, trust funds or cash.

Assurance is voluntary, but several countries have committed to moving to compulsory financial security, and there is pressure for others to do so in the name of consistency.

For affected companies, specific pollution legal liability coverage is a solution. It can be modified  to match ELD requirements and exposure for environmental liability.

Michael R. Szot, CPCU, ARM, is executive vice president and global practice leader, Environmental Service Group, Aon Risk Solutions. Reach him at michael.szot@aon.com or (213) 630-3253. Gregory E. Schilz is managing director, Environmental Service Group with Aon Risk Solutions. Reach him at gregory.schilz@aon.com or (415) 486-7652. EDWARD X. MCNAMARA is a senior vice president at Aon Risk Solutions. Reach him at edward.mcnamara@aon.com or (216) 623-4146.

Published in Cleveland

Now more than ever, companies are under the microscope, as federal investigators are beefing up the enforcement of regulations.

For instance, although the anti-bribery and public company accounting statutes in the Foreign Corrupt Practices Act were established nearly 40 years ago, enforcement has exploded in recent years. In 2004, the U.S. Securities and Exchange Commission and the Department of Justice brought a combined five FCPA enforcement actions. That number rose to 33 in 2008 and 66 in 2009, as reported by Corporate Secretary, a news service for general counsel and governance professionals.

In addition to increased regulatory scrutiny, the recent passing of The Wall Street Reform and Consumer Protection Act (commonly referred to as the Dodd-Frank Act) is resulting in increased enforcement of a federal anti-bribery law, as reported by Compliance Week, a corporate governance news service.

Created with the intent of preventing another financial crisis, the new law contains financial incentives for whistle blowers to bypass internal corporate compliance protocols and go directly to authorities. The new legislation adds to the risk exposures associated with the decisions made by corporate directors and officers, especially as they act on issues of governance and executive compensation.

“A number of silver-bullet remedies — audits, policies in a box, even software — have been on the market well before the Sarbanes-Oxley Act, which declared specific awards for employees to notify government agencies of any tax fraud committed by their employers,” says Edward X. McNamara, a senior vice president at Aon Risk Solutions. “The conflict is that these solutions are mostly reactive or after the fact, doing little to directly avoid or prevent legal or ethical violations.”

Smart Business spoke with McNamara about the rise in enforcement actions and why establishing a culture of compliance is so important.

Why is an effective compliance program so vital?

Several studies reveal that employers with credible, proactive compliance programs that encourage employees to speak up are most effective at discouraging bad behaviors before they manifest into irreversible actions.

The Association of Certified Fraud Examiners studied 508 companies that had experienced occupational fraud and discovered companies that unearthed troubling activity were more likely to have learned of it from a coworker’s tip than from any internal or external audit. Moreover, organizations that had anonymous reporting systems in place suffered less than half the financial losses from fraud sustained by companies without such systems.

Building a culture of compliance empowers a company to easily mitigate risks and be vigilant about regulatory requirements. It fundamentally influences and shapes decisions made involving the attraction and retention of ethical people. The byproduct of such a culture is an operational framework that is effective, measurable and delivers long-term results.

What are the risks of false accusations?

Increased regulatory enforcement leads to increased claims. Even historically good companies that have invested considerable time and resources establishing robust compliance programs are at risk when incentives to serve as a whistle blower are so rich. Compounding this risk exposure is the requirement that a public company must disclose it is being investigated or has received a subpoena. Increasingly, these announcements are triggering hungry plaintiffs’ lawyers to file shareholder derivative lawsuits. Settlements in these cases are becoming larger and larger, resulting in unpredictable drops in a company’s stock price, which can unleash securities class action suits.

There’s no avoiding such risks, as directors and officers cannot diminish the complexity of the business, legal and regulatory environment in which they operate. A company’s ability to attract good, ethical corporate leaders is only complicated by the threat of unfounded legal action. Solutions do exist, as a great deal can be done to protect the personal assets of directors and officers through a combination of strong corporate governance, broad corporate indemnification and a risk transfer program that includes a customized D&O liability insurance program.

What should companies do going forward?

The days of a ‘see no evil; hear no evil; speak no evil’ approach to compliance are over, because what you don’t know can hurt you. As organizations move from a mentality of erratic compliance validation to one that uncovers and addresses risks head-on, several benefits can be realized: improved planning, cost savings from elimination of redundant programs, increased morale and the attraction of top talent.

Best of all, a culture of compliance allows an organization to invest greater quantities of managerial time and resources on business-critical functions, which can only improve bottom line performance.

Edward X. McNamara is a senior vice president at Aon Risk Solutions, a leading risk management and insurance brokerage firm. Reach him at edward.mcnamara@aon.com or (216) 623-4146.

Published in Cleveland
Saturday, 30 April 2011 20:01

How to insure entities in the public sector

The public sector provides a broad range of services, and insuring their risks can be challenging. Within a single entity, such as a state, city or county, there are prisons, airports, police, etc., and entities that provide zoning ordinances, maintain bridges, run golf courses, and oversee water and sewer utilities.

“Public entities have a very broad range of risks that need to be analyzed,” says William F. Becker, Executive Vice President and National Practice Leader — Public Sector, Aon Risk Solutions. “Many of these risks are unique, and trying to find a set of carriers who understand that and will still take on those risks can be challenging.”

Smart Business spoke with Becker, Steven P. Kahn, Managing Director of Aon Global Risk Consulting, and Scott Saunders, Vice President of Aon Risk Solutions, about insuring the public sector.

What is included in the public sector?

The traditional definition is any governmental entity, encompassing cities, states, counties, towns and special districts, along with authorities, commissions, school systems, utilities, transits and airports. Aon’s practice group also supports nonprofits, political organizations, Indian Country and higher education institutions, both public and private.

How are insurance needs different for public sector entities?

Public entities see some of the same issues as private entities, but there are certain risks in the public sector that are not seen in private organizations because they provide services that other organizations do not, such as prisons, fire and police, zoning and bridge maintenance. Pursuant to sovereign immunity laws, the public sector may have caps on the amounts for which they can be held liable, or immunity from suits. Also, there are some coverages required by statute. For instance, private companies need D&O insurance to cover their directors and officers, but a public entity covers their public officials instead of directors and officers. While their basic exposures and risk factors  are quite similar, the public entity-specific policies are worded specifically to insure these exposures.

How do caps and/or immunity from suits work for public entities?

In some states, there are caps on the amount of a claim against a governmental entity, capping its liability and reducing its costs. Many states have a per-claimant and per-occurrence cap. The cap differs by state and some states, such as California, have no caps. The caps would not apply to a claim in federal court if an entity is sued for discrimination, for example, and the caps do not apply to claims in other states.

Other states may have full immunity from certain suits, e.g., Michigan municipalities are immune from suits subject to certain exceptions, such as losses arising out of highways and sidewalks, motor vehicles and building maintenance, etc.

What issues may arise if public entities are not insured properly?

Government entities have a very limited ability to obtain funds from other sources. A large award could cause them to cut programs, impose a special tax assessment, or, in some cases, to declare bankruptcy, if allowed. This recently occurred in Boise County, Idaho, due to a zoning claim the county lost in court.  The county issued a permit but wouldn’t let the developer move forward. The developer took the county to court and it lost a $4 million judgment. The county was not insured and it declared bankruptcy.

How can organizations best understand their risks and ensure they have the proper insurance?

A thorough and creative process is necessary to identify and measure exposure to risks of accidental loss. This is done by inspections, interviews, analysis of budgets and financial reports, analysis of past claims data, review of major contracts and knowledge of operations. The organization needs a knowledgeable partner to help it place the best available coverage at reasonable terms.

How can these entities determine exposures?

To complete a thorough analysis of their exposures, public entities should set up inspections, conduct interviews with department heads, walk through the facilities, look at budgets, financial reports, past claims data and contracts to understand what operations are being performed that fall under different units of local government.

Employees working in the governmental entity know the operations but are often unaware of the risk or insurance implications.

Why do public entities need professional help?

Risk professionals can look at insurance policy agreements and exclusions to make sure that nothing is left uninsured — or if something is left uninsured by design, the professional can ensure that everyone understands that the entity will retain the risk.

Some claims, like auto accidents, are straightforward, but other types can be subtle. For example, if the public entity denies a zoning permit to someone and is sued as a result, will it be covered? Will employment practices claims be covered if employees are terminated  inappropriately?

In another example, if an airport, overseen by the city council, purchases coverage for bodily injury or property damage from the aviation insurance market, it should carry errors and omissions insurance for its oversight of the airport. The public entity may purchase E&O insurance from the carrier that is providing its general liability, but that carrier may not cover anything at the airport. Only someone well versed in insurance policies would recognize the gap between policies. If the airport policy doesn’t cover E&O and the general liability policy covers E&O but excludes the airport, there is uninsured exposure.

These more subtle exposures are the ones for which the public entity will need help from a knowledgeable partner.

William F. Becker is Executive Vice President, National Practice Leader – Public Sector, Aon Risk Solutions. Reach him at bill.becker@aon.com. STEVEN P. KAHN, CPCU, ARM, is Managing Director of Aon Global Risk Consulting. Reach him at (949) 608-6418 or steven.kahn@aon.com. Scott Saunders is a Vice President with Aon Risk Solutions. Reach him at (412) 594-7583 or scott.n.saunders@aon.com.

Aon will be a sponsor and exhibitor at PRIMA 2011 June 5-8 in Portland, Ore. For more information visit Primacentral.org.

Published in Pittsburgh

Upcoming health care reforms will require employers to monitor and report so much information that staying compliant will require a lot of time and effort.

“There are already many laws and rules that exist today affecting employers who offer health insurance benefits to their employees. The Patient Protection and Affordable Care Act, popularly referred to as the health care reform law, will impose many more responsibilities, including many new reporting requirements,” says Alicia Saporito, partner, Millennium Corporate Solutions. “That’s why it is so important to partner with a broker or consultant that not only understands how your business is affected by the health care reform law but also how to use existing technology to help you stay on top of the rules and minimize your liability for failure to comply with many of the thousands of laws you are required to follow today and in the future.”

Smart Business spoke with Saporito about how technology can make compliance easier.

What do businesses need to know about new initiatives and requirements?

The new initiative is going to require that companies track and document much more information than they ever had to in the past. In addition, employers will have to report much more information about their health plan to the federal government. For example, employers must document it when they offer medical insurance to qualified dependents up to age 26 and that the employee had a full 30 days to make the election. Employers must also provide notice to employees that lifetime limits under medical insurance plans are no longer legal. Employers will have to provide a uniform explanation of coverage to their employees and they will have to provide notice to the employee 60 days in advance of any change in the benefit plan. A new reporting requirement will mandate that all employers report the value of the employee benefits on the W-2 of each employee. Noncompliant employers would be subject to hefty fines.

How can technology assist employers in complying with existing rules and requirements?

COBRA requires that employers provide timely notice to eligible participants of their rights and contains many important notices and timelines. HIPAA requires health plans offered by employers to document certain business processes and rules. This law also requires you to provide information about benefits availability to eligible participants of the plan on a uniform basis.

Technology can help you provide historical proof that you offered benefits to eligible participants and document the reasons employees waived their right to participate under the health and welfare benefit plan. A good system will track all transactions and approvals and show a timestamp to provide an audit trail. You can track COBRA notices and prove how quickly required notices were issued. By using an automated system, employees will be notified well within the guidelines and this will minimize employer liability for failure to provide timely and accurate notices.

Using a technology tool will ensure that benefits deductions are fed to payroll correctly. When done manually, incorrect deductions may be sent to payroll and, instead of taking advantage of having their employees help pay for the cost of insurance, employers are then paying the full cost or, in some cases, overpaying the incorrect cost.

How can leveraging technology increase efficiency in the administration of benefit plans?

Employers are responsible for timely and accurate reporting of new enrollments and terminations to their benefit plan administrators or insurance companies. If there is a delay when an employee becomes eligible for coverage and is actually added into the insurance company’s system, this could present a challenge not only to the employee but also the company’s HR department. If the employee experiences an urgent need to see a provider or in obtaining a required medication, the HR department will spend a lot of time helping the employee receive the medical attention they need while they wait for coverage verification from the insurance company. Even worse, from a risk management standpoint, if HR forgets to send the paperwork on a timely basis the insurance company can deny coverage altogether. The employer may be liable for the coverage promised to the employee. There is another employer liability if a deduction is taken from the employee’s pay while there was no coverage in place.

Employers who rely on manual reporting of changes in coverage to the insurance company may end up overpaying for their benefit plans. For example, if a company terminates someone’s employment, it has to terminate the coverage on a timely basis to avoid paying unnecessary premium for that individual. When you streamline the process by making it automatic with an electronic component, it makes it a lot more foolproof.

Where should an employer start with the compliance and technology evaluation process?

Employers should begin by performing an audit of their current practices and business process as they relate to the health and welfare benefit plans and evaluate them against the requirements set forth by state and federal law. Also, review all the information provided to employees. There should be practices in place to track and document all of this.

It is important to correct any deficiencies before they are discovered either by an employee complaint or through a Department of Labor audit. The federal government uses random audits to ensure that employers are complying with their various obligations under their health and welfare benefit plans. It’s important for employers to demonstrate they have the required documentation, systems and tools in place and that the information is stored in a secure manner as to protect the information as required under existing laws. A good employee benefit broker/consultant who is familiar with the laws as well as the technology available to employers to assist with compliance is a valuable resource.

Alicia Saporito is a partner and senior vice president in the Employee Benefit Plan Risk Management division of Millennium Corporate Solutions. Reach her at (949) 679-7117 or asaporito@mcsins.com.

Published in Los Angeles
Saturday, 30 April 2011 20:01

How to prepare your company for disaster

The catastrophes in Japan have caused many companies to take a hard look at the terms and conditions of the coverages they have in place.

Many policies exclude earthquake, flood and nuclear damage from coverage, says Shane Moran, vice president of ECBM Insurance Brokers and Consultants. However, there are other factors that make a company susceptible to contingent losses.

“It’s really a matter of evaluating your business model and identifying whether you are dependent upon a small number of vendors or suppliers to produce your product or service,” Moran says. “If so, you definitely have an exposure.”

Smart Business spoke with Moran about how to prepare your business for unexpected events.

How will the tsunami and earthquake in Japan change the way companies consider their coverage?

The tragedy will force companies to take a hard look at their business model, the key relationships they have and their risk management program in general.

Contingent business income is a property form, so you could expect to see earthquake, flood and nuclear exclusions on many forms. If you are a larger company with that type of exposure, you would want to negotiate with the carrier to write the coverage for your exposure. So you may be able to get an insurance carrier to provide some type of coverage for losses from an earthquake or flood, but probably not for a nuclear event.

The second area that companies are looking to reassess is the limits of coverage that they have chosen on their business income coverage. The magnitude of that destruction was so large that it will take a lot of those manufacturers a lot of time to get back up and running. That will force the buyers of those products to go elsewhere to find companies that can meet their needs, and that process is time consuming. Can a replacement meet quantity and quality expectations? You are not going to be able to pick up the phone, call a company down the street and immediately process an order for 10,000 widgets.

If you have a piece of equipment that takes nine months to build and you have one component you can’t get, the ripple effect can cause problems for your business for a long time.

How do unforeseen events affect losses for small and larger companies?

Whether you are a small or large company, you still need a well-thought-out contingency plan. It’s essential for any business to survive an unforeseen event.

If your business relies on a small number of key component suppliers, or depends on only a few customers, or if you only use one or two vendors for your product — then you have a very large business-contingent income exposure. That is going to apply whether you are a small, family-run company or large, international organization. For example, take the iPad 2 launch. Because so many of that product’s key components are made in Japan, shortages have created delays, which have cost that company because it can’t get its product into people’s hands.

Events like the disaster in Japan give us the opportunity to evaluate how our own contingency plans would respond and look at it from a fresh perspective. The key is to develop a plan that can be implemented whether you are a small or large company.

How do you begin to develop a well-thought-out contingency plan?

First, identify those key relationships with suppliers, vendors and manufacturers. Are you dependent upon just one or two of those to make your product?

Second, develop a plan that you would implement in the event that one of those companies shut down. How does that affect your business? What type of monetary loss would you suffer? Can you find a secondary vendor to replace that one? In that scenario, large companies do have an advantage because they are able to spread their risk over a larger spectrum than a smaller company can.

Then, the plan needs to be constantly monitored. As the business environment you are operating in changes, your contingency plan constantly needs to be evaluated and updated. You need to review annually, at a minimum.

If you are getting raw components from a country and the political climate there changes, you immediately need to evaluate how that will affect your business model. You need to be able to potentially outsource that stream of income to another, stable environment.

What else can businesses do to protect themselves from contingent losses?

You need to evaluate your company to see if you have that exposure. If you have identified that you have a problem, transfer that risk to an insurance carrier by purchasing coverage.

If a company’s spread of risk is small and it is not dependent on one particular supplier, and could easily move its business to another firm, it doesn’t have the same level of exposure as a company that gets a key component from only one company.

How can companies limit that exposure to contingent losses?

First, find another supplier. If you can’t, then you need to transfer that risk through purchasing insurance coverage.

Then, it becomes important to look at the terms and conditions of the policies. You may need to manuscript the coverage to fit your needs.

Finally, identify the limit of coverage you need. Make a business decision based on the cost of that coverage, whether you insure it or self-insure it.

Shane Moran is a vice president at ECBM Insurance Brokers and Consultants. Reach him at (610) 668-7100, ext. 1237, or smoran@ecbm.com.

Published in Philadelphia

Rob Meck likes to push people to see how they respond. When he arrived at Premiere Credit of North America LLC, that’s exactly what he set out to do.

“I came on board in July 2009 and was cast with the challenge of transitioning a mature, but small entrepreneurial accounts receivable management firm into a leading national accounts receivable management firm with the ability to grow both immediately and rapidly,” Meck says.

He began meeting with company leaders to gauge who could work well under the pressure of pursuing growth.

“Too many managers, especially during the turmoil we were going through, and it’s such a huge transition, automatically retreated and didn’t want to take a lot of risk,” says Meck, the 400-employee company’s president and CEO.

He wanted people who could step out of their comfort zone and grow with the business. So he engaged them in strategic projects that contained a certain element of risk and working side by side and made an assessment of their abilities.

“I try to be a mentor with all of them and one of the things I do with them is try to roll up my sleeves with them and work on projects,” Meck says. “I really had to pick who the keepers were, and we had a lot of people we wanted to maintain. We put those people in specific areas that we really wanted to build on, strong people that had loyalty to the company and adherence to our values. We also recognized there were a lot of people who weren’t going to stay.”

Testing people doesn’t have to be throwing them in the deep end to see if they can swim. Work with them closely to discover their talents and abilities. Make it clear that mistakes are OK, as long they are made in the pursuit of progress.

“Reaffirm with them that the failure of you trying something and taking that risk isn’t career ending,” Meck says. “You can learn from that mistake. You’re not going to get punished for trying something that was an educated risk. … In a competitive world, if you don’t take some risk, you’re never going to be the top-ranked performer in your industry.”

The fear of taking risks is what holds back many entrepreneurial businesses.

“A lot of them struggle with the fact that building the infrastructure is a fairly significant expense of non-revenue generating, nonprofit making individuals,” Meck says. “If you’re going to invest into it and do it right, it costs money and it could affect earnings.”

Meck was willing to take some of those risks and he found other leaders who also thrived under pressure. But there were some who didn’t fit his mold and that led to his move to bring more than 30 new managers from 20 competing companies to Premiere Credit.

“Bad turnover is when you lose one of your top performing, most compliant, loyal and dedicated employees,” Meck says. “Good turnover is when you lose some of your lower performing people who don’t buy into your values. We knew that if we did not adhere tightly to our core values and have everyone buy into them, the company would not be as strong as it could be.”

The ability to make those tough decisions and take a few chances along the way is often the difference between a company that grows and one that plateaus.

“A lot of entrepreneurs really have loyalty to the people who made them successful,” Meck says. “It’s hard to keep them on the payroll and hire someone else who has that higher skill set and still maintain your financial business model.”

Meck is confident the steps taken thus far have Premiere on a path to growth.

“Our performance on every one of our clients has improved dramatically in the last year with people buying in to our new cultural values,” Meck says.

Catch your breath

Rob Meck moved quickly to make changes at Premiere Credit of North America LLC. So quickly, in fact, that he had to institute daily wrap-up meetings to keep track of it all.

“I was afraid we were losing track of all that we were doing,” says Meck, president and CEO at the 400-employee accounts receivable management firm. “So I set up executive debriefs at 5:30 every night for the top four executives for what was hopefully 15 or 30 minutes max. It was just a brain dump of everything that happened today.”

Maybe you don’t need a meeting every day. But Meck says it’s crucial that you make sure everybody is running forward at the same pace.

“As fast as we were moving, within a day, we could have had two executives taking different projects that were in opposition to each other,” Meck says. “It also served as a team-building exercise. It was a great way to end the day so that we all knew we were on each other’s team.”

Even though the pace has slowed a bit, the meetings continue.

“It helps communication,” Meck says. “It’s such an important part of the communication every day with our senior management team.”

HOW TO REACH: Premiere Credit of North America LLC, (888) 403-1637 or www.premierecredit.com

Published in Indianapolis