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Katie Siegel

Katie Siegel is a staff writer at Risk & Insurance®. She can be reached at ksiegel@lrp.com.

Higher Education

University Risk Managers Share Concerns

Higher education risk managers are focusing on ERM, as well as cyber security and compliance risks.
By: | October 1, 2014 • 5 min read
University

Higher education risk managers converged on Louisville, Ky., last week for the annual conference of the University Risk Management and Insurance Association, where several themes emerged as key areas of focus.

“ERM seemed to be the biggest theme, but there was a enough variety in the sessions to cover all the basics,” said Mark Logel, director, administrative services & risk management at the University of Evansville and a first-time conference attendee.

ERM Implementation

More than six in 10 (61 percent) survey respondents said they have not conducted an enterprise risk management process at their institution in the past two years, or don’t know if such work was done, according to data shown during one session, “Managing Risk Intelligently: A New Normal.”

And yet, nearly three-fourths (73 percent) said they are more focused on institutional risk now than five years ago, and 63 percent reported having more full board discussions about institutional risk.

Paradoxically, only 39 percent of respondents said they were getting enough information about their exposures, down from 43 percent in 2008.

However, according to Gary Langsdale, university risk officer at Pennsylvania State University (PSU) and a session speaker, these statistics are not as negative as they appear. Such conflicting opinions may demonstrate that institutions are growing more aware of the complex web of risks they face and therefore asking for more information, not necessarily receiving less.

“There’s an impetus for thinking more holistically about risk,” said Andre LeDuc, executive director, enterprise risk services at the University of Oregon. “It’s a continual struggle to promote a risk-aware culture.”

Such a culture needs to be built from the top down, with buy-in from board members and more communication between academic and student affairs offices. The publicity surrounding the Sandusky scandal at PSU revealed a need for greater board involvement, Langsdale said.

But, he noted, there is a limit.

“Board members should have their noses in but fingers out,” he said, meaning the board’s role is to be informed but not overly involved in risk management.

Langsdale identified ways risk managers can help set the culture for a true ERM effort:

• Look for leadership opportunities.

• Break down organizational silos.

• Understand the analytical tools and methodologies available.

• Elicit views from across the organization.

“Establishing ERM is an evolution,” LeDuc said. “Check back in two or three years to see what works and what doesn’t. Every institution is unique. … We have to take lessons learned back to our home institutions and help the thematic thread spread.”

Strategic Risk

Changing demographics and enrollment challenges, lack of funding and regulatory compliance are three major strategic risks faced by universities.

According to Christine Eick, executive director, risk management and safety at Auburn University, some schools saw hundreds of millions of dollars’ worth of cuts in government funding during the recession.

That is compounded, Langsdale said, by a lack of funding on students’ end as well. As costs rise, fewer students and their families are able to contribute much from their own pockets.

“We have to make choices about which programs to support,” he said.

Many attendees acknowledged that funding for sports programs, while ultimately accounting for a very small percentage of a school’s overall budget, should be the first to take cuts because of their high visibility.

Enrollment has also fallen as demographics shift. There are simply fewer 18-year-olds in the prospective student pool now than there were a decade or more ago, which increases competition among schools vying to keep classrooms full.

“One help has been recruiting returning military members,” Eick said, “who often come with the support of government funding” and have incentives to obtain a degree as they re-enter the mainstream workforce.

Compliance has also risen as a priority, especially with adherence to Title IX and the handling of sexual assault cases coming under tighter scrutiny.

Along with the increased risk, however, comes the benefit of putting “risk managers at the right tables,” said LeDuc, as universities need to discuss such risks among different offices and with board members.

Cyber Security

Like any other organization that collects personally identifiable information, higher education institutions are more concerned with cyber threats.

“Data, data, data. Are we fully aware of our exposures?” LeDuc asked, picking out cyber security as a risk to watch related to students’ personal and financial records, as well as the potential for theft of intellectual property, especially at research institutions.

“Cyber is an increasing threat,” Eick agreed. “There has to be a shift in culture that mandates security training for all faculty to be completed by a certain date. Schools should be employing more privacy officers and CIOs to handle those challenges.”

Universities may have a higher exposure for data breach, Langsdale said, because networks are “designed to be open” to allow access for prospective and current students, alumni, faculty, and researchers from other facilities.

“You need to be on top of your cloud providers and know where your servers are located,” he said. “There should be no deemed export of information.”

Study Abroad

Along with the increase in study abroad programs comes the increased need for colleges and universities to do more to ensure the safety of students in such programs, including keeping track of their whereabouts and the conditions of the countries they visit.

Until recently, schools have had limited ways to track and communicate with students abroad, and have kept limited records of incidents. Both nonprofit organizations and businesses offer resources to help risk managers expand their efforts.

One way to conduct due diligence is through site visits, which “are not terribly expensive,” according to Eick, but which usually are only done by larger, better-funded schools.

In addition to scoping out the conditions of hosting school and the surrounding communities, site visits allow risk managers an opportunity to analyze local coverage and ensure that the right policies are in place. Language barriers can result in improper coverage.

Katie Siegel is a staff writer at Risk & Insurance®. She can be reached at ksiegel@lrp.com.
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Business Travel Risk

Risky Territory

As business travel increases, risk managers need intelligence and communication systems to keep employees safe.
By: | October 1, 2014 • 10 min read
10102014_01_cover_story_lead

In mid-August, Boart Longyear Co., a global mineral exploration company, removed nine employees from Liberia after the Ebola virus broke out in a nearby village.

“Our customer shut down operations, and we’re evacuating,” said Rob Osha, global director of risk management at the company in August.

“There’s a lot of talk about closing borders and not letting air travelers out, so we’re working right now to make sure our crews leave Liberia.”

Video: The Ebola crisis continues to worsen, with a “best case” estimate of 500,00 dead by end of January 2015.

It’s not just deadly diseases that worry risk managers.

“A few years ago,” said Jan Randolph, director of sovereign risk at IHS Country Risk, “I was stuck in Qatar, due to go to Bahrain to visit some banks. This is when Bahrain had quite a lot of demonstrations and rioting going on.

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“We checked our website, and there was a UK travel government advisory that advised all UK nationals not to travel to Bahrain. That means if we went, our insurance cover was potentially not valid.

“In practice, it probably would have been okay, but that advisory made it a no go,” he said.

As economies become more interconnected, businesses expand globally and more employees are sent abroad, scenarios like Osha’s and Randolph’s may become the norm. Yet too many risk managers may be unaware of the risks involved with global travel or take the proper steps to ensure employees’ safety.

Growth of International Travel

According to the Global Business Travel Association, U.S. spending on international travel may jump as much as 6.6 percent, to $289.8 billion in 2014, while total person trip volume is expected to increase 1.7 percent, to 461 million trips for the year.

Charlie LeBlanc, vice president of security services, UnitedHealthcare International

Charlie LeBlanc, vice president of security services, UnitedHealthcare International

“In this world that is smaller and more mobile, emergency evacuations happen more often than they did 10 years ago,” said Charlie LeBlanc, vice president of security services at UnitedHealthcare International (formerly FrontierMEDEX).

“That also has a lot to do with the fact that the world, politically, is much more volatile than in the last 20 or 30 years. We have to be able to react quickly.”

Steve Kellner, global head of intelligence and risk assessment for Verizon International Security Group, said: “I saw a news article recently that said there are only 11 countries not at war. The same article also said roughly only 60 percent of companies monitor their employees’ travel. It’s a big world, and a lot to keep up with.”

Kellner’s team monitors 15,000 to 18,000 employee trips per year.

Many smaller businesses or nonprofit organizations don’t have the budget for a security department that can educate their travelers [about security risks], so they depend on others, Kellner said. Problems can easily arise with “the little things that you don’t plan on.”

“Mining and oil and gas people have this buttoned up pretty tight,” Osha said. “They work in some of the most remote, tricky areas of the world.

“But there are a lot of companies that send a lot of business travelers that don’t necessarily work in the field. Even if you’re just traveling for a business meeting, things can change on a dime,” he said.

Pre-Travel Risk Mitigation

Travel preparation should begin before a flight is even booked.

“For very high risk countries, it’s a no go unless you get approval from the executive committee,” Osha said.

“I would do research on the security environment where they’re going, what I think the relative risk is and what the mitigations might be. Is the trip business-critical? Do we need to put that person at risk? Are there other ways to mitigate or not?”

“The most important asset you can have is information intelligence,” Randolph said.

“You need to know if the risk level is green or yellow or red, or if a developing scenario could reach a flash point.”

Video: The families of expat employees may be more at risk than the employees themselves.

Bob Gill, vice president of global security for Quintiles, a consulting firm for the life sciences industry, said his team develops risk profiles for every country they visit or may visit in the future.

“We cover security and safety, health and medical situations, medical infrastructure, regulatory issues, human rights issues, economic sanctions, bribery and corruption. Those are the key areas,” he said.

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Even when companies give the green light, travelers should receive safety and awareness training tailored to the area they’re visiting.

“We have to look at risk from a variety of angles,” LeBlanc said.

“We look from the perspective of, when do our travelers start to feel uncomfortable? What are their risk tolerances?”

Political stability, crime, and cultural differences should all factor into a risk assessment, he said.

“As companies and economies are growing, their workforces are going to countries they didn’t go to five years ago,” LeBlanc said.

“That means a lot of novice travelers. For some, it may be their first international trip. And it’s not to London; it’s to Bangkok.”

Pre-travel training should cover basic “Safety 101” principles — like moving in groups and not opening the hotel door if no visitors are expected — but it should also include general background information on the destination country.

Travelers should know everything from what weather to expect, to what behaviors are acceptable in different cultures, to what inoculations they may need. Gender-specific training may also be necessary; women face greater risk in certain places, LeBlanc said.

“We have a traveler tracking system that is tied into our corporate reservation system,” Kellner said.

“When employees book travel, my group is alerted two weeks to 30 days ahead of time. We meet with them, whether they’re a naïve traveler or a group that goes constantly.”

At Verizon International Security Group, the company organizes a “meet and greet” program through its local offices to pick up incoming travelers or arrange transportation for them. Boart Longyear coordinates with their customers to see if they can provide transportation.

Traveler Tracking

Some risk management and security departments utilize traveler tracking software to centralize employees’ flight and hotel reservations, so they always know who is in what part of the world.

Being able to locate people anywhere in the world in real time allows risk managers to focus their attention and resources where they’re needed. Ensuring safe travel on the ground requires coordinated efforts and constant communication.

additional photo for webFor example, if 18 out of 20 employees are accounted for in a region hit by an earthquake, more time and energy can be devoted to tracking down the last two, instead of everyone in the group. If no employees are in the area, then attention can be focused elsewhere, to the next evolving crisis.

Travel assistance companies like UnitedHealthcare International (UHI), iJET and Europ Assistance offer software programs that not only track where employees are, but can push out automatic communications notifying them of potential threats in the area — like earthquake or tsunami warnings — or reminding them to check in.

Typically updated at least once per hour, the systems provide real-time data that is so crucial to crisis response.

“In the really risky countries, we establish check calls,” Osha said, “where an employee checks in every few hours to our outsourced security company’s operations team.

“In some places in Africa, they actually hire military to follow their company convoy,” he said, “or we see if they can fly point-to-point to cut out some of the risk of traveling on the ground.”

The advent of advanced cell phone technology has made the job of employee monitoring and communication much easier.

“As little as 10 years ago,” LeBlanc said, “I’d be carrying four or five different cell phones depending on what country I was going to. Now I just need one. That kind of power is extremely beneficial; risk managers need to be able to account for their people in a very short period of time.”

Call centers that operate 24 hours a day — also manned by third party travel assistance providers — help ensure that employees can always reach someone if they run into trouble.

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“Communication is your lifeline in many cases,” Randolph said. “You have to think, as an employee, what would you expect from your company? Who would you want to contact in an emergency?”

Boart Longyear’s crisis hotline, provided by iJET, routes employees’ calls to the appropriate department, whether it’s a medical emergency, security issue or internal problem. More often than not, though, simple text messages or emails suffice to keep everyone connected.

“The best part of working for a telecommunications company,” Kellner of Verizon said, “is that most of our travelers go with a global phone. We can always text or call them to check on them and make sure they’re safe.”

Crisis Response

Sometimes, no amount of intelligence can prevent simmering tensions from bubbling over, and no amount of monitoring can keep employees away from a natural disaster. Travel risk management should include policies and plans for when companies need to pull their people out of harm’s way quickly.

The most common reason for evacuations is a medical issue, rather than violence or political unrest. Travelers, rather than their employers, usually make the call as to whether they will abandon their travel due to a health issue.

“In medical situations, there tends to be a wider circle of hesitance to go,” LeBlanc said. Potential for violence doesn’t seem to stop travel as surely.

The Ebola outbreak in West Africa, for example, posed a relatively small risk to Western travelers but still sparked a worldwide scare. Flying out of the affected countries of Liberia, Nigeria, Ghana and Sierra Leone became more challenging as other countries were unwilling to take on the risk of accepting any visitors from those areas.

Luckily, governments rarely set strict travel restrictions in such situations, so while evacuations can get tricky when a pandemic hits, it is still possible to leave the country.

Nita Madhav, analyst and researcher, AIR Worldwide

Nita Madhav, analyst and researcher, AIR Worldwide

“In today’s world, economies are so interconnected that complete isolation isn’t feasible,” said Nita Madhav, analyst and researcher at catastrophe modeling firm AIR Worldwide.

“The best way for companies to mitigate is to stay aware of the global situation and which countries may be at risk for circulating diseases, and make sure that employees are up to date on vaccines,” she said.

Madhav identified the Middle East and Brazil as up-and-coming markets for air travel, which could make them riskier from a health perspective as business travel picks up.

Political and social tensions also pose an evacuation threat, though those risks are more rare than a medical threat.

Maintaining intelligence and proactively removing employees from potentially dangerous areas allows employers to avoid last-ditch evacuations. Government advisories, data from third party security firms, input from local employees and even social media trends help to paint a picture of emerging threats and areas to watch.

Still, things can change in an instant.

“We had to evacuate our expatriate staff out of Mali when they had a coup,” Osha said. “You do have to watch country elections, because violence and protests could follow.”

“In Libya,” Randolph of IHS Country Risk said, “they’re having a drawn-out civil war, and oil and gas companies have been involved in drawing out their staff, leaving behind only key personnel.

“You have to maintain your asset and your security as well as you can, but otherwise de-operationalize. You have a duty of care,” he said.

The Trickiest Risk

Natural disasters pose the trickiest travel risks to mitigate and often require the immediate, emergency response that risk managers try to avoid. Once tracking systems identify who’s in danger, it’s up to crisis management teams to get them to safety.

“You really need the right people in the room that are experienced with the global operations of their company,” said LeBlanc of UHI.

“They need the authority to make decisions quickly, whether they’re legal, financial, or human resource related. And they have to work well as a team.”

When UHI trains its clients on crisis management, it typically spends half a day on team-building alone, and keeps the core team limited to about 10 people.

Rapidly growing companies will face challenges learning how to manage increased travel to all parts of the world, but the realities of travel risk cannot be ignored. The consequences of shrugging off safe travel preparations are too great.

“Colleagues I work with have a keen sense of how travel has changed since 9/11,” Gill of Quintiles said.

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“That was the issue that brought travel security and safety to the forefront.”

But others say more progress is needed.

“I’ve given travel risk presentations at RIMS for a few years now,” Osha said, “and I’m shocked by the people who approach me after the sessions — large, brand name companies — saying their programs aren’t robust enough.

“It makes me think that there are a lot more companies out there that need to start working on this than you may expect.”

Katie Siegel is a staff writer at Risk & Insurance®. She can be reached at ksiegel@lrp.com.
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Emerging Risk

Mobile Kitchens Serving Up Big Risks

A recent food truck explosion highlights need for tighter safety protocols.
By: | October 1, 2014 • 4 min read
Photo by George Garrigues

La Parrillada Chapina, one of about 200 food trucks operating in the Philadelphia area, was conducting business as usual on the evening of July 3 when its kitchen turned into an accidental bomb.

Fire from the truck’s cooking grills ignited fumes leaking from a 4-foot propane tank used to power its equipment. The resulting explosion engulfed the entire truck and sent flames shooting across the street and the tank soaring into a nearby backyard.

Eleven people were injured, some critically, including the owner and her daughter as well as several passers-by.

Video: Watch the incredible video from Philadelphia that shows a food truck exploding into a ball of flames.

“Propane is a particularly volatile material,” said Jeff Hallman, vice president, Restaurant Programs of America. “It tends not to disperse into vapor in the same way that gasoline does. Rather, it tends to collect in the lowest lying area and has an extremely low flashpoint, meaning that the smallest spark will ignite it.”

The incident revealed a gap in safety procedures and inspection regarding such tanks.

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Philadelphia health inspectors ensure food trucks’ compliance with health codes, while the Department of Licenses and Inspections issues the necessary commercial business licenses, according to the Philadelphia Inquirer. But no one has clear jurisdiction over inspection of the propane tanks.

“I am not sure what, if any, regulations and inspection protocols are in place for propane powered mobile cooking facilities,” Hallman said. (Hallman is a Risk Insider, whose initial article talks about how an over-reliance on modeling is diminishing the art of underwriting.)

The rapidly rising number of food trucks across the nation only increases the likelihood of tragedy and the need for tighter safety procedures.

La Parrillada Chapina is one of about 200 food trucks operating in the Philadelphia area, up from a mere 12 just three years ago. These mobile restaurants aren’t just doling out hot dogs and cheesesteaks.

They’ve become popular for providing unique cultural dining experiences, cooking up the type of specialty items with quality ingredients usually sought by foodies in niche cafes, all from kitchens the size of closets.

Duane DeBruyne, a spokesman for the Federal Motor Carrier Safety Administration, told the Inquirer that “street-side food trucks are exempt from federal regulations concerning propane if the tanks are under 220 pounds, or 440 pounds per vehicle.” La Parrillada Chapina had two 100-pound tanks.

A similar explosion occurred in New York City in 2011, when a food truck burst into flame after a car accident. In 2012, a food truck exploded at the Canadian National Exhibition, causing $30,000 in damages but no injuries. Just last year, a propane leak sparked the explosion of a food truck at a high school football game in Fresno, Calif.

No deaths have occurred from these accidents, but the force of these explosions certainly makes that a possibility.

“Accidents like this can actually help to further safety regulations to protect the public and food truck operators,” said Denny Christner, principal of Bay Risk Insurance Brokers and its wholly-owned affiliate, Insure My Food Truck. (See his profile as one of the 2014 Power Broker® winners here.)

“It’s also a good time for food truck owners to closely look at their insurance coverage to protect them personally, to protect their business and to protect their employees,” he said.

Christner outlined a combination of general liability, commercial auto and workers’ comp coverage to cover losses in the event of an explosion. General liability would cover third-party injury and property damage, usually up to a limit of $1 million, he said, after which an umbrella policy would kick in. Commercial auto would cover the truck itself as well as its kitchen modifications and equipment.

Workers’ comp would cover first-party injury — an important piece that owners may not consider since many food trucks are family-run.

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“Many food truck owners think they are exempt because they hire family, but this is not the case unless the family members are owners of the business,” Christner said. “It is very rare that we see food trucks offering health insurance to their staff. All on-the-job injuries would need to be covered by workers’ compensation insurance.”

According to Christner, most gourmet food trucks carry general liability policies because the venues they serve usually require at least $1 million of coverage per occurrence. They also carry auto liability because they know they need it to protect their business. However, “because it’s hard to make a decent profit in this business, we find that many food trucks may carry low limits to keep their insurance costs down.”

“It would be a good time,” he said, “for food truck owners to ask their agent or broker, ‘How would my current coverage respond to a loss like the explosion that just occurred?’ and ‘What can I do to increase coverage or add protection should my current coverage not be sufficient?’ ”

(Photo by George Garrigues)

Katie Siegel is a staff writer at Risk & Insurance®. She can be reached at ksiegel@lrp.com.
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