Waging War & the Sheathed Sword
Continuing with the application of Sun Tzu* phrases and tactics to develop strategies for implementing ERM programs…
MAKE ERM, NOT WAR
These two chapters in Sun Tzu’s Art of War are about knowing who is with you and who is against you. War amongst friends? The implementation of your program is the war and the best place to pick your first battle (implementing change) is with those who are for you and who want what the program will deliver.
The Importance of Knowledge, Wisdom, and Understanding
A theme that is imbedded in virtually every other theme of the Art of War, especially in regard to knowing self and opposition, is the importance of knowledge, wisdom, and understanding.
These are borne from asking questions and listening. When implementing ERM, it is critical to spend time meeting with people in the organization, but not talking about ERM. Rather, focus on listening to their issues and problems. Inquire, listen and acknowledge, but don’t solve. Walk away and study the issues before returning with a plan as to how an ERM program can be a tool for the owner of the risk.
Who will we engage with first? Can we identify a quick win?
These are the first questions to ask and answer when choosing your first battle. Even if you have a mandate from the Board to implement ERM, you will still face resistance. You need to be able to evidence value and to do that you need to deliver results in a timely fashion. Choose to implement ERM activities with those who have indicated an interest and to which the activity will deliver measurable results.
Example: Complete a risk registry with an ERM approach that can be part of a business plan used to support a budget request for a department. An ERM risk registry does not have to “boil the ocean”; it can be completed down at even a project level. This approach can yield a quick win that you can communicate to others to gain further support.
Who will be against us? What will they do/say and how will we counter?
Prior to even starting your first battle (implementation), brainstorm with others on who might be against you and what they will say. A productive way to do this is to prepare and publish a Q&A document. Think of all the questions and challenges that those who might not embrace the program will make and develop responses. This exercise will benefit your program several ways:
- It will punch holes in your program and prompt you to make needed improvements.
- It will win over doubters by evidencing that the program is sound and has value.
- For those that may never buy-in, it will evidence that you are a worthy opponent and possibly not worth their time (they can move onto weaker opponents).
Key Takeaway: Listen and learn from others before you ask them to participate in your ERM program. Know who, where and what to first implement. Prepare for those who will be resistant.
Remember — it’s not Risk Management, it’s Change Management!* Sun Tzu was a Chinese military general, strategist and philosopher who lived in the Spring and Autumn Period of ancient China. _____________________________________________ Grace in the Workplace: How to gracefully bring together traditional risk management and change management techniques, and enterprise risk management concepts. Read more of Grace’s series.
Workers’ Comp – Feeding the Heroin Dragon
CNN recently ran an article on a grandmother addicted to heroin. In what almost seems cliché these days, her heroin use started as a prescription drug addiction. This could have just as easily been the result of treatment for a workers’ comp injury.
Our nation spends billions fighting the “war on drugs,” militarizing the police, incarcerating people, and devastating lives, while the highly-regulated medical and pharmacy industry are free to dispense essentially the same substances. Consider that most inmates are jailed for non-violent crimes, and most of those are drug-related. The cost to society in money and disruption is astounding.
Prescription drugs account for more overdose deaths than all street drugs combined. Moreover, our healthcare system has basically become a primary feeder to the illegal drug market.
This is a health issue and a moral issue – not a criminal issue – and we need to fix our health system.
When you start doing some back-of-the-napkin math, you realize that the workers’ compensation system’s potential contribution to the heroin problem in America is staggering.
As workers’ compensation professionals, it’s critical we understand our impact on society. Every time we help prevent an addiction, we impact not just one person’s life, not just an insurance carrier or an employer and their employees, but the children and families of these potential addicts. We also impact the public’s price tag in emergency room visits, government treatment programs, drug-related accidents, etc.
Consider this. A WCRI study found that about 55–85 percent of injured workers were prescribed opioids. Of the roughly 3.6 million new injuries that occur each year, this equates to 1,980,000 to 3,060,000 potential addicts the workers’ comp industry is creating annually.
Now factor in that 75 percent of heroin users indicate that their “first opiate of abuse” was through prescription drugs, according to a recent JAMA study. Taking it one step past the patients themselves, you uncover that the family medicine cabinet has become a breeding ground for the heroin addictions of our youth.
When you start doing some back-of-the-napkin math, you realize that the workers’ compensation system’s potential contribution to the heroin problem in America is staggering. Bottom line, we need to take ownership – our industry is creating addicts who are creating a massive recurring demand for heroin and other illegal substances.
While I applaud the Drug Enforcement Administration’s recent reclassification of hydrocodone as a Schedule II medication with heightened restrictions, one has to wonder – will this simply drive users to illicit drugs, like heroin, faster? Some addiction experts think so.
Anyone in our industry that’s been involved with addiction weaning programs knows how hard it is to get patients off “the dragon.” The reality is that providers continue to prescribe opioids way too often and for way too long, rather than as a short-term or last resort option. This is a battle that needs to be waged from the front lines.
The key is to make sure we have the systems and processes in place to prevent addiction in the first place. We in the workers’ compensation industry are uniquely positioned to fight this battle and change people’s lives for the better.
Read more of Jason Beans’ Risk Insider articles
A New Dawn in Civil Construction Underwriting
Pennsylvania school children know the tunnels on the Pennsylvania Turnpike by name — Blue Mountain, Kittatinny, Tuscarora, and Allegheny.
San Francisco owes much of its allure to the Golden Gate Bridge. The Delaware Memorial Bridge commemorates our fallen soldiers.
Our public sector infrastructure is much more than its function as a path for trucks and automobiles. It is part of our national and regional identity.
Yet it’s widely known that much of our infrastructure is inadequate. Given the number of structures designated as substandard, the task ahead is substantial.
The Civil Construction projects that can meet these challenges, however, carry a unique set of risks compared to other forms of construction.
“The bottom line is that there is always risk in a Civil Construction project. If the parties involved don’t understand what risk they carry, then the chances are there are going to be some problems, and the insurers would ideally like to understand the potential for these problems in advance.”
– Paul Hampshire, Vice President – Civil Construction, LIU
The good news is that recent developments in construction standards and risk management techniques provide a solid foundation for the type and risk allocation of Civil Construction projects they are underwriting. Carriers need to be able to adequately assess the client and design and construction teams that are involved.
For Builder’s Risk Programs, a successful approach prioritizes a focus on four key factors. These factors are looked at not only during the underwriting phase of the project but also in the all-important site construction phase, under the umbrella of a Risk Management Program, or RMP.
Four key factors
Four key factors that LIU focuses on in underwriting and providing risk management services on a Civil Construction project include:
1. Resource knowledge and experience: When creating a coverage plan, carriers work to understand who is delivering the project and how well suited key staff members are to addressing the project’s technical and management challenges. Research has shown that the knowledge and experience of those key players, combined with their ability to communicate effectively, is a big factor in the project’s success.
“We look to understand who is delivering a project, their expertise and experience in delivering projects of similar technical complexity in similar working conditions, even down to looking at the resumés of people in key positions,” said Paul Hampshire, Houston-based Vice President with Liberty International Underwriters.
2. Ground conditions and water: Soil and rock composition, the influence of ground and surface water, and foundation stability are key additional considerations in the construction of bridges, tunnels, and transit systems. If a suitable level of relevant ground (geotechnical) investigation and study has not been undertaken, or the results of such work not clearly interpreted, then it’s a red flag to underwriters, who would then question whether the project risk profile has been adequately evaluated and risks clearly and transparently allocated via suitable contract conditions.
“As we all know, ground is very rarely a homogenous element within Civil Construction projects,” LIU’s Hampshire said.
“It tends to vary from any proposed geotechnical baseline specification with the consequential potential for changes in behavior during construction. We need to understand who has assessed the condition of the ground, its behavior and design parameters when compared with a particular method of construction, and all importantly, who has been allocated the ground risk in a project and the upfront mechanisms for contractual ground risk sharing, if applicable,” he said.
Knowing how much water is associated with the in-situ ground conditions as well as the intensity, distribution and adequate accommodation (both in the temporary as well as in the permanent project configurations) of rainfall for a site location and topography are also key. Tunneling projects, for example, can be hampered by the presence of too much or unforeseen quantities of groundwater.
“In major tunneling infrastructure projects, the influence of in-situ groundwater pressures and /or water inflows is a major factor when considering the choice of excavation method and sequence as well as tunnel lining design requirements,” LIU’s Hampshire said.
According to a recent article in Risk & Insurance, tunneling under a body of water is one of the most challenging risk engineering feats. Adequate drainage layouts and their installation sequence for highway projects and, in particular, the protection of sub-grade works are also important. “But under all circumstances, we need to understand how the water conditions have been evaluated,” Hampshire said.
3. Technical Challenges: This risk factor encompasses the assessment of the technical novelty or prototypical nature of the project (or more often, specific elements of it) and how well the previously demonstrated experience of both the design and construction teams aligns with the project’s technical requirements and the form of contract determined for the project. The client can choose the team, but savvy underwriters will conduct their own assessment to see how well-suited the team is to technical demands of the project.
4. Evaluation of Time and Cost: With limited information generally provided, we need to be able to verify as best as possible the adequacy of both the time and cost elements of the project. Our belief is simply that projects that are insufficient in either one or both of these elements potentially pose an increased risk, as the construction consortium tries to compensate for these deficiencies during construction.
Small diameter Tunnel Boring Machine designed for mixed ground conditions and water pressures in excess of 2.5 bar.
In the 1990s and early years of this millennium, a series of high-profile tunnel failures across the globe resulted in major losses for Civil Construction underwriters and their insureds.
In the early 2000s, both the tunnel and insurance industries worked together to create new standards for high-risk tunneling projects.
A Code of Practice for the Risk Management of Tunnel Works (TCoP) is increasingly relied on by project managers and underwriters to define the best practices in tunnel construction projects. This process ideally starts at project inception (conceptual design stage or equivalent) and continues to the hand-over of the completed project.
LIU’s Hampshire said alongside TCoP, the project-specific Geotechnical Baseline Report and its interpretation and reference within the project contract conditions gives the underwriter greater clarity as to who recognizes and carries the ground risk and how it’s allocated.
“The bottom line is that there is always risk in a Civil Construction project,” Hampshire said. “Is the risk transparently allocated or is it buried? If the parties involved don’t understand what risk they carry, then the chances are there are going to be some problems, and the insurers would ideally like to understand the potential for these problems in advance,” Hampshire said.
Paul Hampshire can be reached at Paul.Hampshire@libertyiu.com.
To learn more about how Liberty International Underwriters can help you conduct a Civil Construction risk assessment before your next project, contact your broker.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty International Underwriters. The editorial staff of Risk & Insurance had no role in its preparation.