Risk Insider: Martin Frappolli

Five Essential Cyber Risk Facts

By: | January 14, 2015 • 2 min read
Martin J. Frappolli, CPCU, FIDM, AIC, is Senior Director of Knowledge Resources at The Institutes, and editor of the organization's new “Managing Cyber Risk” textbook. He can be reached at frappolli@TheInstitutes.org.

As businesses struggle with embarrassing data breaches, this new normal is spurring better information protection. Costly intrusions have a long-lasting effect, from customer impact to insurance claims and lawsuit exposure.

Insurance professionals need pragmatic context to prepare insureds to handle a data breach — a roadmap to understanding and mitigating cyber risk exposures.

Start with these five facts:

1. Hackers attack for any reason or no reason.

Organizations fail to manage cyber risk because they believe their data simply isn’t worth stealing. Common vandalism is a frequent reason for a cyber attack. Hackers might penetrate a company’s digital defenses solely for a thrill or ego boost.

You don’t need to have lucrative information to be a target; the only prerequisite is having data in the first place.

2. Internal users can be the weakest link.

The Hollywood version of hacking is a computer whiz sitting in a dark room, furiously typing sophisticated codes. In reality, there’s a much easier way: Ask for the passwords.

A well-known method of data theft is impersonating someone within the company who needs confidential information.

Social engineering ploys can be deceptively simple, such as contacting an employee and claiming to be from IT, then soliciting a user’s account information. Or, call the help desk, claiming to be an executive, and exploit the representative’s good nature to gain system access.

Thieves attack the weakest link; sometimes that’s not the computer, but the person sitting at it.

3. Small businesses aren’t safe.

The public is aware of breaches at big companies like Sony and Target. While attacks on smaller businesses won’t generate headlines, they can potentially be more devastating, because smaller organizations are less able to recover.

It doesn’t take a multinational crime syndicate to steal data. It can be as simple as a disgruntled employee sharing access codes online or leaking sensitive emails.

For a small business, the reputational loss from betraying customer trust can be ruinous. While smaller businesses might not be the biggest targets, they are often the most vulnerable.

4. You don’t have a choice.

Legislators reacted to expanding cyber thefts with regulations requiring organizations to better protect customer data containing personal indentifying information (PII). Congress, state legislatures, and agencies like the SEC have promulgated guidelines on how to protect PII.

Companies should not wait for the various bodies to agree on one standard — they should already be doing everything possible to manage information securely.

5. Cyber risk management is everything.

Cyber risk is not a computer issue only, or merely a customer data concern. Its impact must be evaluated from an enterprise risk management perspective. Like anything that threatens an organization’s long-term viability, cyber risk must be managed.

While a number of cyber risk policies are available, there are many non-transfer strategies for managing cyber threats.

While cyber risk is changing constantly, insurance professionals need a pragmatic perspective to cope effectively. Those who take the time to study this field will better protect their organizations and themselves while earning trust from their clients and managers.

Read all of Martin Frappolli’s Risk Insider contributions.

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Risk Insider: Tony Boobier

Struggling With Stress

By: | January 12, 2015 • 2 min read
Tony Boobier holds a WW Executive role at IBM, focusing on solutions for Risk and Finance, and was previously IBM Insurance Analytics leader for EMEA. He can be reached at boobier@uk.ibm.com.

Stress is an invisible illness. Untreated, it eats away like a cancer at our health and well-being, with one in five in the U.S. reporting extreme stress, and accounting for one in four workforce absences in the U.K.

Precise estimates are difficult to come by, but it’s suggested that 90 million workdays are lost each year due to stress-related issues. According to the American Physiological Association, the top three causes of stress are money, work and the economy — all inter-related.

As we struggle to cope at a personal level, at best we become grouchy; at worst we lay awake at night, eat badly, or damage our relationships.

For many, admitting to stress is seen as a weakness.  But we treat this illness like an old friend. We develop coping mechanisms, even discuss the benefit of stress in our lives which makes us more competitive, gives us “an edge,” and accept that stress is just part of an increasingly performance-orientated workplace.

We say that stress isn’t about the job or the workplace, it’s all about the individual. In other words, we accept that stress is ‘our’ fault, not the employers.

I don’t buy that thinking. Employers owe a duty of care to their staff, which extends to their employees’ mental health. They can’t sit back and react, they need to be proactive and be up to speed with the latest in occupational health.

Stress may be temporary or permanent, and employment-induced stress may be difficult to prove with certainty — but increasing workforce analytics may start to give valuable clues.

The absence of physical conditions often make the case difficult to prove and foreseeability is often a consideration. But it’s clear that the law on liability for stress at work is continuing to mature and as more recent cases are beginning to show, this is a developing area and one which we are likely to need to contend with in the future.

Isolation and Insecurity

For the teleworker, the problem of stress can become acute. Teleworkers are as equally affected as office workers by politics, deadlines, lack of guidance or training, or sometimes bullying — perhaps more so.

They often feel they must give more to be recognized, whilst at the same time personal contact with their work colleagues other than by telephone is often reduced.

What looks like an easier life with more personal flexibility can in fact be one of isolation, insecurity and lack of personal contact. I’d argue that homeworking creates an increased environment for work-related anxiety.

It’s a potentially growing problem, which is set to rise as mobile technology improves and the difficulties of commuting increase. Employers think teleworkers are 30 percent more effective — and we are all increasingly likely to be forced into that avenue.

Failure to have adequate processes in place not only leave the employers open to claims for stress-related illness, but also exposes their insurers, who may lack any sort of reliable data, records or consistent approaches.

For homeworkers, “out of sight” shouldn’t mean “out of mind.”

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Sponsored: Liberty International Underwriters

From Coast to Coast

Planning the Left Coast Lifter's complex voyage demands a specialized team of professionals.
By: | January 7, 2015 • 5 min read

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The 3,920-ton Left Coast Lifter, originally built by Fluor Construction to help build the new Bay Bridge in San Francisco, will be integral in rebuilding the Tappan Zee Bridge by 2018.

The Lifter and the Statue of Liberty

When he got the news, Scot Burford could see it as clearly as if somebody handed him an 8 by 11 color photograph.

On January 30,  the Left Coast Lifter, a massive crane originally built by Fluor Construction to help build the new Bay Bridge in San Francisco, steamed past the Statue of Liberty. Excited observers, who saw the crane entering New York Harbor, dubbed it the “The Hudson River Hoister,” honoring its new role in rebuilding the Tappan Zee Bridge over the Hudson River.

Powered by two stout-hearted tug boats, the Lauren Foss and the Iver Foss, it took more than five weeks for the huge crane to complete the 6,000 mile ocean journey from San Francisco to New York via the Panama Canal.

Scot took a deep breath and reflected on all the work needed to plan every aspect of the crane’s complicated journey.

A risk engineer at Liberty International Underwriters (LIU), Burford worked with a specialized team of marine insurance and risk management professionals which included John Phillips, LIU’s Hull Product Line Leader, Sean Dollahon, an LIU Marine underwriter, and Rick Falcinelli, LIU’s Marine Risk Engineering Manager, to complete a detailed analysis of the crane’s proposed route. Based on a multitude of factors, the LIU team confirmed the safety of the route, produced clear guidelines for the tug captains that included weather restrictions, predetermined ports of refuge in the case of bad weather as well as specifying the ballast conditions and rigging of tow gear on the tugs.

Of equal importance, the deep expertise and extensive experience of the LIU team ensured that the most knowledgeable local surveyors and tugboat captains with the best safety records were selected for the project. After all, the most careful of plans will only be as effective as the people who execute them.

The tremendous size of the Left Coast Lifter presented some unique challenges in preparing for its voyage.

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The original intention was to dry tow the crane by loading and securing it on a semi-submersible vessel. However, the lack of an American-flagged vessel that could accommodate the Left Coast Lifter created many logistical complexities and it was decided that the crane would be towed on its own barge.

At first, the LIU team was concerned since the barge was not intended for ocean travel and therefore lacked towing skegs and other structural components typically found on oceangoing barges.

But a detailed review of the plan with the client and contractors gave the LIU team confidence. In this instance, the sheer weight and size of the crane provided sufficient stability, and with the addition of a second tug on the barge’s stern, the LIU team, with its knowledge of barges and tugs, was confident the configuration was seaworthy and the barge would travel in a straight line. The team approved the plan and the crane began its successful voyage.

As impressive as the crane and its voyage were, it was just one piece in hundreds that needed to be underwritten and put in place for the Tappan Zee Bridge project to come off.

Time-Sensitive Quote

SponsoredContent_LIUThe rebuilding of the Tappan Zee Bridge, due to be completed in 2018, is the largest bridge construction project in the modern history of New York. The bridge is 3.1 miles long and will cost more than $3 billion to construct. The twin-span, cable-stayed bridge will be anchored to four mid-river towers.

When veteran contractors American Bridge, Fluor Corp., Granite Construction Northeast and Traylor Bros. formed a joint venture and won the contract to rebuild the Tappan Zee, one of the first things the consortium needed to do was find an insurance partner with the right coverages and technical expertise.

The Marsh broker, Ali Rizvi, Senior Vice President, working with the consortium, was well known to the LIU underwriting and engineering teams. In addition, Burford and the broker had worked on many projects in the past and had a strong relationship. These existing relationships were vital in facilitating efficient communication and data gathering, particularly given the scope and complexity of a project like the Tappan Zee.

And the scope of the project was indeed immense – more than 200 vessels, coming from all over the United States, would be moving construction equipment up the Hudson River.

An integrated team of LIU underwriters and risk engineers (including Burford, Phillips, Dollahon and Falcinelli) got to work evaluating the risk and the proper controls that the project required. Given the global scope of the project, the team’s ability to tap into their tight-knit global network of fellow LIU marine underwriters and engineers with deep industry relationships and expertise was invaluable.

In addition to the large number of vessels, the underwriting process was further complicated by many aspects of the project still being finalized.

“Because the consortium had just won this account, they were still working on contracts and contractors to finalize the deal and were unsure as to where most of the equipment and materials would be coming from,” Burford said.

Despite the massive size of the project and large number of stakeholders, LIU quickly turned around a quote involving three lines of marine coverage, Marine Liability, Project Cargo and Marine Hull & Machinery.

How could LIU produce such a complicated quote in a short period of time? It comes down to integrating risk engineers into the underwriting process, possessing deep industry experience on a global scale and having strong relationships that facilitate communication and trust.

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Photo Credit: New York State Thruway Authority

When completed in 2018, the Tappan Zee will be eight lanes, with four emergency pullover lanes. Commuters sailing across it in their sedans and SUVs might appreciate the view of the Hudson, but they might never grasp the complexity of insuring three marine lines, covering the movements of hundreds of marine vessels carrying very expensive cargo.

Not to mention ferrying a 3,920-ton crane from coast to coast without a hitch.

But that’s what insurance does, in its quiet profundity.

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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.




LIU is part of the Global Specialty Division of Liberty Mutual Insurance.
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