While few, if any, organizations saw the coronavirus pandemic and all of its death and disruption coming, some were better positioned to deal with it than others.
According to risk expert Jim Wetekamp, some organizations were better prepared to respond by virtue of the way they think about resilience and risk, their familiarity with planning for a progression of activities during the course of a year, and their risk tolerance. They also were organizations that had sufficient resources and decision making skills.
“So even if it was a uniform surprise to all of us, different folks had their data, their knowledge, and some of their decisions still in their hand to be played where they could respond in a different way,” Wetekamp said.
Wetekamp is chief executive officer of Riskonnect, an integrated risk management technology and information company that helps organizations facilitate the managing of risks. Riskonnect works with the insurance industry and with complex organizations — ones that have multiple locations, customers, third parties and assets— that are looking to put in place enterprise risk strategies, compliance and controls.
Wetekamp discussed risk management in the time of a pandemic, hurricanes, quarantines and recession in an interview with Wells Media’s Andy Simpson.
The organizations that Wetekamp has witnessed responding well in these risky times had other things in common. They had lots of risk information, from inside and outside their organizations, available to them. And they had it in one place.
“It’s really looking at those different areas of compliance, strategic, operational, and financial risk, and knowing that all of it is a piece of the puzzle to the organization’s ability to perform and serve its customers and protect its employees. The more of that you can have in a single place to look at early warning indicators, to correlate an impact on one part of the business to another as it relates to risks, the better off you are,” he said.
Wetekamp said the responses among Riskonnect clients have been happening in waves, beginning nine months ago.
“If you go all the way back to December, you would have seen our large global manufacturing clients already talking about COVID as it was emerging because of the disruption to large sources of supply, particularly in China,” he recalled. “And so you saw it as a third party risk problem, supply chain, resiliency problem, or supply chain continuity issue.”
“Then as it progressed into the early spring, you started to see it hitting anything linking to travel, hospitality, tourism, et cetera, as we started to go into various stages of lockdown. So transportation industries, as it relates to airlines, hotels, anything dealing with movement of people in particular. ”
Among Riskonnect’s clients are healthcare organizations that were in the middle of the worst of the pandemic.
“We started to see our healthcare segments starting to get overwhelmed with operational activities related to risks, setting up temporary ERs or workstations worrying about sources of supply for things like ventilators and masks, et cetera.”
Those risks reared up in different locations as weeks and months went on, he noted.
Now the focus of many organizations has shifted to the economy.
“[T]he constant is that now a lot of folks are dealing with is the economic disruption that’s come from the sustained, slowdown in the business, eroding consumer demand, high unemployment. Those kinds of things.”
He likened the current situation to putting a tornado or hurricane on top of an economic issue like 2008, and then stretching it out over a six to nine month period. “This how we’re seeing that rolling across our customers.”
How some of these organizations responded actually surprised Wetekamp.
“The surprise was where risk as a function ended up falling in the triage and response process for major organizations. What was interesting to see was how quickly organizations could start to bring stakeholders together, where you had the folks on one side at risk that worried about insurance and transfer of risk and premiums and exposures operating on a financial basis were very, very quickly integrated with sales, logistics, operations, HR, and corporate strategy.”
This gave these organizations the ability and opportunity to “play a quarterback role because the ability to respond for the organization is very much a question of risk.”
February to June was a “very intense period” helping these organizations “pivot their technology” to help answer critical questions so they could make decisions for the second half of the year.
This “surprise” suggests that events prior to the pandemic were more isolated in their impact, whereas this pandemic has been pervasive.
“I think the size and the depth obviously associated with something you call a pandemic has just a much different impact on the total business. And so it very, very quickly pushes risk and corporate strategy to go together,” he said.
While some organizations are progressing towards an integrated risk mindset, not all have caught on. Wetekamp advises that an integrated approach is important because decisions around policy changes are being made day in and day out:
“Do we travel? Don’t we travel? Are we back in the office, not back in the office? Are we letting customers in, not letting customers in?
These decisions are taking “the employee handbook and putting it on the table to talk about how that impacts your ability to serve your customers and serve your market and what that means for the risks that the organization’s taking on. That has to be an integrated discussion.”
The risks related to hurricanes, as opposed to those from a pandemic, may be more familiar to organizations. But now some organizations are facing the possibility of two crises at once, a pandemic and hurricane season. What happens when the two collide?
Wetekamp said organizations facing multiple threats have to reset their baselines that maybe were in play for a hurricane so they could now deal with the pandemic. This includes dealing with the effect on resources of a collision of two crises.
“If you think about the typical process of preparing and thinking about risk scenarios and looking at the probability of an event and the impact of the event, an element of that has to do with the resources you have available to mitigate and respond. In the COVID environment, they are obviously depleted because you are mitigating and responding to an event right now, and you have been since January, February, March,” he explains.
“So by now, the folks that have familiarity with climate impacts, they’ve been through a flood before, they’ve had a hurricane in the past, they know where their locations are located. They have those scenarios already developed because they’ve been through it before. They have already gone through and reset the baseline of what they’re prepared to withstand in the event of one of these anomalies or one-off events.”
The organizations need to consider how that changes their mitigation or response plan. “Should they be looking at vendors in a different location or different proximities? Should they be focusing on an alternative business line? Should they be planning financially on a greater amount of revenue loss than they typically do because they can’t respond as quickly? That work’s happening. They’ve just basically had to remodel the impact of that event under a new baseline,” he said.
When in the middle of responding to a crisis like a pandemic, the goals or priorities of an organization change from trying to mitigate the damage and prevent harm now, to trying to position the organization for the future, post-crisis.
“[I]t’s a little bit of a tricky time today because it does rather feel like the pandemic is maybe going through a W rather than a V or a U in terms of recovery. But we definitely have felt a shift in the tenor of discussion with our customers. We’ve been having periodic advisory board meetings with our customers in different round tables and around table or discussion in June or late May was all about response, just triage of the situation. How are we handling if we had to all go work remote, or continuity of supply and just basically keeping the business running.
“And as we’ve proceeded through the summer, it’s been this next phase of what is the new normal look like for us and defining a horizon line on new normal, because I think there’s a pre vaccine and a post vaccine, new normal in different pieces. But what does new normal look like? And how do we use where we are right now to start to build different muscles that we didn’t know we needed to be stronger as we climb out of this? That’s where more of the discussion is now is on recovery and re-acceleration than it is on triage and damage control,” the Riskonnect executive said.
This is a time when some organizations are learning about their insurance, what’s working and what’s not. This risk management process raises questions and unearths information they can take to their insurance brokers when restructuring their insurance programs going forward.
“This has been a tremendous period of time to identify blind spots. Where did you think you were protected versus where you’re not? As you took the plan off the shelf, if you will, and you put it into practice, what did work and didn’t work about applying that plan? And that gives you particularly on the insurance side, as you go back into renewals and looking at if what the next phase looks like for protecting the organization,” Wetekamp said.
Thus, heading into insurance renewals, organizations may have questions for their insurance brokers:
“I think there’ll be a lot more consideration for different lines of coverage, niche coverages. I think there’ll be a lot more analysis on the definition of what business continuity is because I think there’s been a lot of discussion on that and then how to map that against those critical business services. Because I think also the past six months has probably eliminated some lines of business from a consumer standpoint or some internal business services that were more critical than they thought they were or more risk than they thought they were that probably weren’t covered the way they wanted them to be.”
Wetekamp thinks “most organizations are going to emerge more resilient from this process, or those that are more resilient are going to claim a better position in their relative marketplace than those that are not.”
“It all comes down to whether or not they’re stepping back and looking at that recovery and new normal and deciding to make changes about how they operate or not.
The linking of risk and corporate strategy “benefits employees and benefits customers and organizations. I think it benefits the long-term resiliency of the organization to perform its business mission. That’s going to be a positive progression as it relates to the risk management space and organizations in large.”
The blind spots represent a challenge to the insurance industry to see if it can offer better protection.
“They’re interesting roles. It relates to transfer of risk, but then also from a trend standpoint, the things that are impacting overall risk, I think in terms of increased digitalization and how that is accelerating and tying in more risks across the organization. What’s our role, what’s brokerage’s role, what’s the company’s role in the increasing sophistication of analytics? A lot of change in terms of policy regulation happening right now. Just these different pieces, I think are all drawing to the same area of breaking down silos, bringing stakeholders together and automating more processes,” he said.
‘Again, it’s not a one person, one solution thing. It takes a lot of different parts of the value chain working together, which is why we partner on that broker side as well, in terms of insurers carriers, their third party administrators, the insurers themselves, regulatory bodies, content providers, as it relates to those regulatory bodies and how all of that information is kept in sync.”
The key is whether there is a good plan organizationally to find that fragmentation. “Where are the silos and how do we organizationally get people to break down those lines and build those connections without getting too far in the weeds and without reinventing the wheel?”
Then it will take “good old fashioned change management” to actually help organizations move forward.
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