6 Emerging Supply Chain Risks You Should Know
The Wolf of RIMS
RIMS just concluded in Denver, and I had a few observations.
It was cold, very cold. Given that the Spencer/Gallagher Golf Tournament is always a part of RIMS, why isn’t the conference held in cities with much better weather? Who could forget Chicago a few years ago, where the golf tournament lasted three holes because of the snow and those who chose Cubs opening day didn’t fare much better. I know we can never really guarantee the weather but we might want to increase the chances of a good climate for a great meeting. Eighteen holes of golf in the sun beats three holes in the cold any day.
And then there was the keynote speaker – Jordan Belfort, the author of “The Wolf of Wall Street.” I actually couldn’t believe RIMS would pick him to speak at our convention. Let’s see, his redeeming values were abusing drugs, denigrating women and maybe worst of all stealing money from at least 1,500 people. Nobody should have money stolen from them, but Belfort concentrated mostly on the weak and vulnerable, retirees or people just getting by. Nice guy, our motivational speaker.
So I was thinking, is this the best our industry could do for a keynote speaker? Was there a lesson RIMS wanted to teach, like “Greed is Bad”?
Of course, people deserve a second chance, so I did a little research after I learned Belfort was the keynote speaker. Nancy Dillon from the Daily News wrote, “according to Federal prosecutors, Belfort failed to live up to the restitution requirement of his 2003 sentencing agreement. The agreement requires him to pay 50 percent of his income towards the 1,500 clients he defrauded.” The Federal government filed a complaint since Belfort had an income of $1,767,203 in 2013 from his book/movie rights and another $24k from speaking engagements like the one at RIMS. Yet, According to Ben Child of the guardian.com he has only paid back $11.6 million of the $110.4 million he was ordered to pay as restitution.
For more details of just how rotten Belfort is, read this NY Times article by Joel M.Cohen who prosecuted the case.
So I was thinking, is this the best our industry could do for a keynote speaker? Was there a lesson RIMS wanted to teach, like “Greed is Bad”? Most of us saw Michael Douglas in Wall Street, some lived it. Couldn’t we as an industry have done better?
In the last year, I saw some great conference speakers such as Garrison Wynn, author of “The Real Truth About Success” as well as Lt. Col. Rob Waldman, a highly decorated fighter pilot, author and businessman and wonderful motivational speaker. And we got a guy who stole money from people and has yet to pay it back. Belfort would be a solid choice if we we motivating crooks, however I like to think a bit more highly of our community
Maybe Albert Einstein said it best when he said “the value of a man should be seen in what he gives and not in what he is able to receive.”
There are plenty of good, decent people who give back to society – why don’t we stick with them as our guest speakers!
Read all of Joe Boren’s Risk Insider contributions.
From Drones to Defects: Planning for Construction’s Top Challenges
The construction industry is firing on all cylinders. New projects spring up every day, but not all go according to plan.
Three out of every four construction projects fail to finish on time. Every party involved – owners, designers, contractors and subcontractors – expects perfection, with the final product delivered on schedule and on budget. Those expectations leave little room for uncertainty, so even a small hiccup can have ripple effects that disrupt a project for everyone.
“There’s often a big disconnect on the front end of project planning,” said Doug Cauti, Senior Vice President, National Insurance, Chief Underwriting Officer, Construction, Liberty Mutual.
Proactive risk mitigation is also important to manage emerging challenges facing the construction industry ‒ drone regulations are evolving, commercial auto losses are rising, and so is uncertainty about which party might be held responsible for a construction defect. Without the proper planning, these issues can easily be overlooked and result in major losses and project disruption.
Liberty Mutual’s Doug Cauti discusses key challenges facing the construction market.
“Key risk management strategies have to be aligned among all parties from the beginning to minimize these uncertainties.”
Before construction begins, there are actions that project owners, designers and contractors can take to address these challenges and better protect their projects and businesses:
Drones can be useful tools on construction sites, providing an extra set of “eyes” for large commercial projects or tall buildings. They provide a real time aerial glimpse of works in progress, giving supervisors an added perspective to spot potential flaws, assess safety hazards, and check on workers. But many challenges remain in the safe — and legal — operation of drones.
Liberty Mutual’s interactive infographic highlights risks related to managing drones at construction sites, and also includes a pre-planning drone use guide and a pre-flight checklist that includes making sure to review the latest drone regulations.
How construction buyers can manage the insurance implications of using drones in their operations.
General contractors and project owners need to stay up to speed on FAA regulations, which changed in August, 2016.
“For one thing, operators need to have the drone in sight at all times,” Cauti said.
“And you need to make sure any operators are appropriately licensed and trained, that the drones are regularly maintained, and that the machines don’t impede on others’ safety and privacy.”
Clear flight paths and work zone boundaries can minimize the risk of a drone striking another property, or worse, a person. Operators should also know how to conduct an emergency landing if the drone suddenly loses power. It’s also important to consider how you are going to manage and use drone footage. Advertising liability can be a concern if third party images are captured and released. Know who is in charge of the data collected, who has access to it, and how you are going to protect it.
“If the contractor owns the drone, it takes on more liability. The contractor should review its insurance policies to make sure the coverage will respond to that risk,” Cauti said.
“As an insurance carrier, we may have a role to play in those proactive discussions. We are uniquely positioned to help project stakeholders see their risks and work to minimize them.”
— Doug Cauti, Senior Vice President, National Insurance, Chief Underwriting Officer, Construction, Liberty Mutual Insurance
Contractors and project owners can protect themselves through enhancements to their commercial general liability policies or through separate aviation policies, he said.
If a general contractor leases a drone through a third party, “they bear the responsibility of making sure the vendor is fully insured,” Cauti said. Vendors should have “non-owned” aviation coverage with limits suitable to handle the size of the risk.
Commercial auto losses challenge many business sectors, and construction is no exception.
More vehicles on the road and more miles driven, combined with fewer experienced commercial drivers, are driving up the frequency of accidents. On construction sites in particular, congestion created by closed roads, piles of materials and roving heavy machinery may lead to work zone accidents. Rising medical costs and repair and replacement costs of high-tech vehicles increase claim severity.
“I don’t see this trend reversing any time soon,” Cauti said.
Mitigating commercial auto losses begins with driver hiring practices.
“Pay attention to who you put behind the wheel,” Cauti said.
“Motor vehicle reports (MVRs) and driving history can alert employers to previous accidents or tickets. But there also needs to be regular communication with the drivers you do hire, and clear protocols in place that define expectations of how the job should be performed,” he added.
Ways construction buyers can manage rising commercial auto loss costs and better protect their fleets and employees.
Those protocols include requiring the use of seat belts, prohibiting cell phone use while behind the wheel, mandating scheduled breaks, outlining maintenance procedures, defining if company vehicles can be used for personal use, and establishing crash report procedures that delineate who to contact and what information to collect in the event of an accident.
Contractors can also monitor fleet performance through telematics systems. These on-board systems can track unsafe driving behaviors like hard braking, sharp turns, and speeding. But the data is only as good as the person analyzing it. Contractors and project owners should partner with an insurer who can use fleet telematics data effectively to pinpoint common causes of accidents and recommend specific risk mitigation strategies.
Liberty Mutual’s Managing Vital Driving Performance is one tool that leverages insureds existing telematics data to identify unsafe driving behaviors and accident patterns.
“Our risk control consultants can drill deeper into the data and interview drivers to identify patterns and find out the root causes of bad driving behaviors in the first place,” Cauti said.
For example, a post-accident interview with a driver could reveal that he had been skipping breaks and spending too many hours on the road, leading to fatigue and inattentive driving.
Identifying those connections enables consultants to make specific risk mitigation recommendations, such as adjusting drivers’ schedules and workloads to reduce overtime, or adjusting dispatch protocols so employers can ensure drivers aren’t working too many shifts in a short period of time.
Another uncertainty project owners, designers and contractors have to face is how insurance coverage will apply should a project end up in a dispute. “The struggle is around the definition of ‘faulty workmanship’ and who is responsible for the defect. Is it in the design or the build?” Cauti said.
“There can be a lot of finger pointing involved. This reinforces the need for contractors to have a systematic quality assurance (QA) program that adheres to best practices, and for every party to have a role in it.”
Elements of a QA program could include testing of construction materials, conducting regular walk-throughs and obtaining approvals from the owner at key phases, and final sign-off by the owner at the project’s completion.
How construction defects and the current legal climate are affecting projects.
Construction defect claims can affect a business’s reputation, profits, and ability to maintain insurance coverage. That’s why it’s so important to be vigilant about avoiding construction defects, whether you’re a designer, developer, owner or general contractor.
Ultimately, though, these risks should be addressed before ground is broken. Discussing these challenges and collaborating on loss prevention strategies up front reduces the likelihood that any “hiccups” will throw off project timelines or increase costs for the various stakeholders.
Pre-planning discussions also offer the opportunity for these parties to take advantage of carrier partners’ risk control services.
“As an insurance carrier, we may have a role to play in those proactive discussions,” Cauti said.
“We are uniquely positioned to help project stakeholders see their risks and work to minimize them.”
To learn more about Liberty Mutual’s solutions for the construction industry, visit https://business.libertymutualgroup.com/business-insurance/industries/construction-insurance-coverage.
 Managing Uncertainty and Expectations in Building Design and Construction SmartMarket Report
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.