Workplace Safety

Working Proactively to Prevent Violence

Employees and employers must learn to spot the red flags that signal a situation on the brink of turning violent.
By: | January 29, 2016 • 3 min read
Spent Bullet Casings

Decreased productivity, a change in work habits, excessive tardiness, and frequently missed deadlines may be indications of an employee on the verge of committing violence, says an expert.

Many companies miss the warning signs because people at all levels are unaware of the red flags and/or don’t know what to do if they see them.

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Often, there is an accumulation of events leading up to a violent incident. Employers and employees must be able to connect the dots in order to mitigate a potential tragedy.

“What I usually find is that employees may see a sign on its own, something that they may view as inappropriate behavior, but on its own it is not a significant issue,” said Carol Frederickson, CEO of Violence Free, a violence-prevention consulting firm.

“Individually, these incidents may seem unimportant, but collectively they may paint a picture of something much more serious.”

Frederickson, who spent 15 years in law enforcement, says problems such as financial pressures, health concerns, family turmoil, and mental illness can lead someone on a downward spiral toward violence.

She will outline the warning signs and discuss ways employers can proactively address violence during the American Society of Safety Engineers’ SeminarFest on Feb. 11.

“I think people in general are in denial that it could happen to them or at their workplace,” she said.

“In our minds, the two places that we are the safest are in our homes and our work, so we just believe that this could not happen, that no one we work with could possibly do this. We may ignore some of the warning signs because we think ‘it happens someplace else, not here.’”

Warning Signs

A change in personality is one of the warning signs, Frederickson explains. A person who has been outgoing becomes quiet and withdrawn, even defensive and possibly displays unjustified anger.

“Often, however, people chalk these issues up to someone having a bad day or a bad week, which only pushes the boundaries of aggressive behavior further, sometimes to the point where the potentially violent person ‘holds all the power and controls the office.’”

“Every place of employment, no matter the size, needs to have a workplace violence policy that is easily understood and has clear reporting policies.” — Carol Frederickson, CEO, Violence Free.

Someone who obsesses about a topic and talks about it constantly may also be at risk of violence. But such behaviors are typically not reported and the company cannot intercede in time.

“Every place of employment, no matter the size, needs to have a workplace violence policy that is easily understood and has clear reporting policies,” Frederickson says. She recommends employers include the following in their violence-prevention policies:

    • Create a threat assessment or crisis team that includes representatives of human resources, security, facility management, risk management, unions, operations, communications and in-house legal counsel. The group should meet when there is a threat of violence or when the company has a high-risk termination.
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  • Conduct a gap analysis to identify vulnerabilities. These will typically reveal several concerns such as whether employees who drive company vehicles know how to handle a road rage incident or whether there has been special training for workers who travel.
  • Employee training is critical so people know what they are expected to do. “The procedures about when to call, whom to call, and related steps must be very clear,” she says.

Getting top-level executives involved is critical and typically comes down to money. When executives see money being used for investigations, legal fees, or something similar, they may ask why action was not taken before.

“That’s why any program developed must include 60 to 90 minutes of dedicated training for these executives,” Frederickson says. “This leads to a much better result throughout the organization.”

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at riskletters@lrp.com.
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Inadequate Risk Management

Risk Focus on Brazil

Brazil offers risk management and compliance challenges for U.S. companies.
By: | January 25, 2016 • 7 min read
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In 2015, two high-profile cases in Latin America’s largest economy highlighted some of the biggest risks faced by American companies — as well as the risk management and compliance shortcomings of the business community in Brazil.

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The development of risk management in Brazil is below average even by Latin American standards, which are not that high to begin with, according to a study commissioned by RIMS and Marsh.

Aggravating the potential exposures is the inadequacy of insurance coverage, especially for environmental liability.

“In Brazil, for cultural reasons, companies do not have the habit of purchasing environmental insurance.” — Alexandre Jardim, head of P&C, Aon, Brazil

In addition, bribery and corruption are widespread in Brazil, leading to potential prosecution risk in the United States under the Foreign Corrupt Practices Act (FCPA).

Environmental Disaster

The Nov. 5 bursting of a waste dam owned by Samarco, a mining ore producer, spilled millions of tons of industrial mud in a river, killing at least 17 people and causing what is believed to be Brazil’s largest environmental disaster ever.

The environmental and human tragedy associated with the Samarco dam revealed a lack of efficient crisis and risk management plans by a company that had been seen as a standard-setter in mining practices.

It also illustrated the extent to which shareholders are exposed to environmental and civil liability in the country.

The causes of the accident are still under investigation, but experts have pointed to a number of apparent flaws that could have increased the possibility of accidents at the Fundão dam, which burst in early November.

Robert Kochen, CEO, GeoCompany

Robert Kochen, CEO, GeoCompany

“All the information that has been in the news indicate that risk management systems failed to prevent a large scale disaster,” said Robert Kochen, CEO of GeoCompany, an engineering consultancy.

If his view is confirmed by the investigation, the case throws into question the risk management practices of the entire mining sector in Brazil, as Fundão was seen as one of the safest among several hundred dams currently in the country.

“There is no doubt that Samarco was negligent and skipped its responsibilities,” said Sandra Cureau, a deputy federal attorney, who is heading the official investigation into the disaster.

The company was particularly criticized for not having an emergency plan in place to warn neighboring communities about accidents.

One area of the nearby town of Mariana was completely devastated by the mud spill, and in addition to the 17 dead, two people are still missing, and hundreds of families lost their homes.

The mud spillage polluted more than 400 miles of the Rio Doce riverbed, reaching a natural reserve in the Atlantic Ocean, according to IBAMA, Brazil’s environmental agency.

Samarco’s executives said that its emergency plans and risk management processes met regulatory demands, but prosecutors and the media have expressed doubt.

The breaking of the Fundão dam caused a torrent of mud that flooded the Bento Rodrigues district of Mariana, Minas Gerais, Brazil. Photo by Senado Federal

The breaking of the Fundão dam caused a torrent of mud that flooded the Bento Rodrigues district of Mariana, Minas Gerais, Brazil. Photo by Senado Federal

Samarco is co-owned by Australia’s BHP Billiton and Brazil’s Vale, and both mining giants risk having to pay billions of dollars in fines to the government and compensation to the victims of the accident.

In addition, their shares were heavily hit after the tragedy.

Vale has been criticized by the local media about its handling of the accident, especially after it emerged that the company used the Fundão dam to deposit some of its own industrial waste.

Vale and BHP Billiton have denied any liability for the disaster, but they may face up to $5.3 billion in fines and indemnifications for both environmental and civil liabilities, if Samarco goes bankrupt.

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The incident also revealed the inadequacy of insurance programs purchased by many Brazilian companies.

Vale executives have stressed that Samarco’s liability program will cover only a small fraction of the expected economic losses. The company reportedly had no environmental insurance in place, a common situation among Brazilian companies, despite the high levels of exposure to the risk.

Even before the accident, risk professionals had warned that the Brazilian authorities were becoming more rigorous when it comes to environmental liability by companies.

“In Brazil, for cultural reasons, companies do not have the habit of purchasing environmental insurance,” said Alexandre Jardim, the head of P&C at Aon in Brazil.

As a result of the accident, he said, insurers will become more selective with clients – which has the potential to affect U.S. companies seeking coverage — although it will not necessarily affect environmental liability rates in Brazil.

The accident and its aftermath should act as a cautionary tale for U.S. companies seeking business partners or to establish operations in the region.

For her part, Karla Costa, a risk management expert at Deloitte in Rio de Janeiro, said that the mining sector will become the target of new, tighter licensing rules. Brazil’s Lower House is already discussing the imposition of mandatory insurance coverages for dams.

The accident and its aftermath should act as a cautionary tale for U.S. companies seeking business partners or to establish operations in the region.

Bribery Scandal

The second scandal that has potential to affect U.S. multinationals is the long-running bribery investigation involving state-owned oil giant Petrobras, public officials, political parties and some of Brazil’s largest business groups.

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If the Fundão tragedy put the failures of risk management in Brazil under the limelight, the Petrobras scandal has revealed the extent to which corporate compliance programs lack credibility in the country.

The long-running bribery investigation known as Operation Car Wash has resulted in the imprisonment of dozens of politicians, officials and business leaders, who were accused of paying bribes for the awarding of contracts linked to Brazil’s large offshore oil reserves and other activities by Petrobras.

Losses suffered by the oil giant due to the criminal activities have been estimated at several billions of dollars.

Many of the companies linked to the scandal claimed to have developed thorough compliance programs in recent years.

Although bribery and corruption are widespread in Brazil’s business community, especially in dealings with omnipresent government entities, the extent of involvement by some of the country’s most respected companies has shocked many.

Executives from Brazilian-based multinational construction firms such as Andrade Gutierrez, OAS, Queiroz Galvão and Mendes Júnior have already been sentenced to jail. The CEO and heir of Oderbrecht, one of the country’s most recognizable international brands, is under arrest.

The scandal has also claimed the scalp of Andres Estevez, the CEO of BTG Pactual, a fast growing investment bank with activities in Latin America and Europe. The bank is now facing a flight of customers.

Many of the companies linked to the scandal claimed to have developed thorough compliance programs in recent years, but the widespread involvement of top corporate executives indicates that the efficiency of such programs in Brazil is questionable.

More worryingly for American companies, though, is that several foreign firms have found their brands dragged into the scandal, including Houston-based Vantage Drilling Co., Italy’s Saipem, the Netherlands’ SBM Offshore and others, which have denied involvement or are cooperating with the investigations.

Brazilian prosecutors, a number of whom are U.S.-trained, are reportedly collaborating with their American peers, which could give rise to further prosecution in America under the FCPA. They argue that many of the bribes were paid via the American banking system.

The purchase of an oil refinery in Pasadena, Texas, by Petrobras is one of the main targets of the investigation.

Future Outlook

Brazil boasts a large economy and, once it leaves its current economic malaise behind, it should offer growth opportunities for American groups.

Rodrigo Fajardo, managing director, Marsh Latin America

Rodrigo Fajardo, managing director, Marsh Latin America

The devaluation of the local currency, the real, coupled with the economic woes faced by many companies, mean that attractive M&A targets should be found in the country in the near future.

But collaboration with Brazilian companies demands caution, especially now that the courts and the media appear to be fully engaged in punishing bad business practices in the country.

U.S.-based companies may find out that compliance and risk management practices at Brazilian companies, when they do exist, are not robust enough to keep threats at bay.

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“There are failures in enterprise risk management programs in the region,” said Rodrigo Fajardo, the managing director of Marsh Latin America.

The good news is that companies appear to waking up to risk management and compliance, according to experts.

“The crisis, in this sense, has been a positive,” said Cristiane Alves França, the president of ABGR, Brazil’s risk management association, at the association’s bi-annual conference in late October in São Paulo.

“Today, there is a higher perception of risks among companies.”

Rodrigo Amaral is a freelance writer specializing in Latin American and European risk management and insurance markets. He can be reached at riskletters@lrp.com.
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Sponsored: State of Vermont

7 Questions to Answer before Choosing a Captive Insurance Domicile

Ask the right questions and choose a domicile for your immediate and long-term needs.
By: | February 5, 2016 • 7 min read
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Risk managers: Do your due diligence!

It seems as if every state in America, as well as many offshore locations, believes that they can pass captive legislation and declare, “We are open for business!”

In fact, nearly 40 states and dozens of offshore locations have enabling captive insurance legislation to do just that.

With so many choices how do you decide who is experienced enough to support the myriad of fiscal and regulatory requirements needed to ensure the long term success of your captive insurance company?

“There are certainly a lot of choices,” said Mike Meehan, a consultant with Milliman, an actuarial firm based out of Boston, Massachusetts, “but not all domiciles are created equal.”

Among the crowd, there are several long-standing domiciles that offer the legislative, regulatory and infrastructure support that makes captive ownership not only a successful risk management tool but also an efficient entity to manage and operate.

Selecting a domicile depends on many factors, but answering these seven questions will help focus your selection process on the domiciles that best fit your needs.

 

1. Is the domicile stable, proven and committed to the industry for the long term?

ThinkstockPhotos-139679578_700The more economic impact that the captive industry has on the domicile, the more likely it is that captives will receive ongoing regulatory and legislative support. The insurance industry moves very quickly and a domicile needs to be constantly adapting to stay up to date. How long has the domicile been operating and have they been consistent in their activity over the long term?

The number of active captive licenses, amount of gross premium written in a domicile and the tax revenue and fees collected can indicate how important the industry is to the jurisdiction’s bottom line. The strength of the infrastructure and the number of jobs created by the captive industry are also very relevant to a domicile’s commitment.

“It needs to be a win – win situation between the captives and the jurisdiction because if not, the domicile is often not committed for the long term,” said Dan Kusalia, Partner with Crowe Hortwath LLP focused on insurance company tax.

Vermont, for example, has been licensing captives since 1981 and had 589 active captives at the end of 2015, making it the largest domestic domicile and third largest in the world. Its captive insurance companies wrote over $25 billion in gross written premiums. The Vermont State Legislature actively supports an industry that creates significant tax revenue, jobs and tourist activity.

 

2. Are the domicile’s captives made up of your peer group?

The demographics of a domicile’s captive companies also indicate how well-suited the location may be for a business in a particular industry sector. Making sure that the jurisdiction has experience in the type and form of captive you are looking to establish is critical.

“Be among your peer group. Look around and ask, ‘Who else is like me?’” said Meehan. “Does the jurisdiction have experience licensing and regulating the lines of coverage for other businesses in your industry sector?”

 

3. Are the regulators experienced and consistent?

Vermont_SponsoredContentIt takes captive-specific expertise and broad experience to be an effective regulator.

A domicile with a stable and long-term, top-tier regulator is able to create a regulatory environment that is consistent and predictable. Simply put, quality regulation and longevity matter a lot.

“If domicile regulators are inexperienced, turnaround time will be slower with more hurdles. More experience means it is much easier operating your business, especially as your captive grows over time,” said Kusalia.

For example, over the past 35 years, only three leaders have helmed Vermont’s captive regulatory team. Current Deputy Commissioner David Provost is one of the longest tenured chief regulators and is a 25-year veteran in the captive insurance industry. That experienced and consistent leadership enables the domicile to not only attract quality companies, but also to provide expert guidance on the formation process and keep the daily operations running smoothly.

 

4. Are there world-class support services available to help manage your captive?

Vermont_SponsoredContentThe quality of advisors and managers available to assist you will have a large impact on the success of your captive as well as the ease of managing the ongoing operations.

“Most companies don’t have the expertise to operate an insurance company when you form a captive, so you need to help build them a team,” Jeffrey Kenneson, a Senior Vice President with R&Q Quest Management Services Limited.

Vermont boasts arguably the most stable and experienced captive infrastructure in the world. Many of the leading captive management companies have their headquarters for their Global, North America and U.S. operations based in Vermont. Experienced options for captive managers, accountants, auditors, actuaries, bankers, lawyers, and investment professionals are abundant in Vermont.

 

5. Can the domicile both efficiently license and provide on-going support to your captive as it grows to cover new lines of coverage and risks?

Vermont_SponsoredContentLicensing a new captive is just the beginning. Find out how long it takes for the application to get approved and how long it takes for an approval of a plan change of your captive’s operations.

A company’s risks will inevitably change over time. The captive will need to make plan changes which can include adding new lines of business. The speed with which your domicile’s regulatory branch reviews and approves these plan changes can make a critical difference in your captive’s growth and success.

The size of a captive division’s staff plays a big role in its speed and efficiency. Complex feasibility studies and actuarial analyses required for an application can take a lot of expertise and resources. A larger regulatory team will handle those examinations more efficiently. A 35-person staff like Vermont’s, for example, typically licenses a completed application within 30 days and reviews plan changes in a matter of days.

 

6. What are the real costs to establishing and managing your captive?

Vermont_SponsoredContentIt is important to factor in travel costs, the local costs of service providers, operating fees, and examination fees. Some states that do not impose a premium tax make up for it in high exam fees, which captives must be prepared for. Though Vermont does charge a premium tax, its examination fees are considered some of the least expensive options in the marketplace.

It is also important to consider the ease and professionalism of doing business with a domicile in the ongoing operations of your captive insurance company.

“The cost of doing business in a domicile goes far beyond simply the fixed cost required. If you can’t efficiently operate due to slow turn-around time or added obstacles, chances are you have made the wrong choice,” said Kenneson.

 

7. What is the domicile’s reputation?

Vermont_SponsoredContentMake sure to ask around and see what industry experts with experience in multiple domiciles have to say about the jurisdiction. Make sure the domicile isn’t known for only licensing certain types of captives that don’t fit your profile. Will it matter to your board of directors if your local newspaper decides to print a story announcing your new insurance subsidiary licensed in some far away location?

Are companies leaving the jurisdiction in high numbers and if so, why? Is the domicile actively licensing redomestications — when an existing captive moves from one domicile to another? This type of movement can often be a positive indicator to trends in a domicile. If companies of a particular size or sector are consistently moving to one state, it may indicate that the domicile has expertise particularly suited to that sector.

Redomestications made up 11 of the 33 new captives in Vermont in 2015. This trend is a positive one as it speaks to the strength of Vermont. It reinforces why Vermont is known throughout the world as the ‘Gold Standard’ of domiciles.

Asking the right questions and choosing a domicile that meets your needs both today and for the long term is vital to your overall success. As a risk manager you do not want surprises or headaches because you did not ask the right questions. Do the due diligence today so that you can ensure your peace of mind by choosing the right domicile to meet your needs.

For more information about the State of Vermont’s Captive Insurance, visit their website: VermontCaptive.com.

 

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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 the State of Vermont. The editorial staff of Risk & Insurance had no role in its preparation.




The State of Vermont, known as the “Gold Standard” of captive domiciles, is the leading onshore captive insurance domicile, with over 1,000 licensed captive insurance companies, including 48 of the Fortune 100 and 18 of the companies that make up the Dow 30.
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