Risk Managers Rank Global Risks
Damage to brand and reputation is the No. 1 risk facing companies today, according to Aon’s 2015 Global Risk Management Survey.
“There’s a lot behind that which is driving that [ranking],” said Theresa Bourdon, group managing director, Aon Global Risk Consulting.
One of those factors is cyber risk, which for the first time in the survey’s history, since 2007, jumped into the top 10 risks, coming in at No. 9. It had been 18 in the last survey, which is taken every two years.
“If you talk to our clients, that’s no surprise,” she said. “The frequency is very low for these cyber events but it is obviously increasing.”
And, just as obviously, there is a correlation between cyber events and brand. Just look at Target, which is still struggling to regain its footing after the personal information of about 110 million of its customers was stolen in 2013.
According to U.S. Reputation Leaders Network, Target’s reputation saw its biggest drop after the cyber attack – and it was the largest drop of any U.S. company from 2013 to 2014, according to an article in “The Street.”
The remaining top 10 risks are: economic slowdown/slow recovery; regulatory/legislative changes; increasing competition; failure to attract or retain key talent; failure to innovate/meet customer needs; business interruption; third party liability; and property damage.
Other key movement in the rankings were the inclusion of property damage, which moved up to No. 10, from 17 in 2013; and third party liability, which had been 13 but moved up to 8.
One risk that dropped off as a top 10 risk was commodity price risk. It had been 8 in 2013, and moved down to 11 in the 2015 survey.
Bourdon said that one risk that remains top of mind for risk managers is regulatory and legislative issues. “It’s consistently a top 3 risk,” she said, noting that it was projected to remain so when risk managers were asked to project their top risks three years from now.
“Organizations are really challenged to respond to the pace at which regulations are coming,” she said. “There is a strong need for governance and a compliance framework.”
That risk, also, she said, relates to the reputational and brand damage that a company can suffer.
As for cyber, one surprising finding of the study — which surveyed 1,400 risk decision-makers in 28 industry sectors in 60 countries — was that 82 percent of the respondents said their companies were ready for a cyber attack, Bourdon said.
At the same time, 58 percent of the respondents said their companies have not done an internal assessment of their cyber risk exposure.
“Realistically speaking, this is relatively new territory that everybody is trying to get their arms around, organizations, insurance companies and those of us who are risk advisers,” she said.
“The goal for the industry as you look at these risks today and in the future is, how are we going to innovate and support these risks.”
Cyber, in particular, needs solutions, she said. “There is not enough insurance out there for the demand.”
Risk managers understand they need more data and analytics to “help them navigate this world” of increasingly complex risks, she said.
More risk managers, Bourdon said, are looking at their organizations holistically and not just focusing on insurance purchasing.
“It’s a much bigger and challenging role than it ever used to be and if you are using the same tools and techniques you were using 10 years ago, then you are not leading your organization down the right path.”
Risks of Celebrity Sponsors
While the use of celebrities or sports figures may generate publicity around a product or service for a company, not all of it is good publicity.
You only have to open up a copy of the newspaper to read about scandals engulfing stars such as Bill Cosby, Brian Williams or Tom Brady with the New England Patriots’ and the “Deflate-gate” saga.
Sponsors have reacted by withdrawing their support, most notably in the NFL, where domestic violence allegations hanging over the sport prompted Procter and Gamble to pull the plug on a deal to supply players with pink mouthguards during Breast Cancer Awareness Month and cancel all on-field marketing.
The risks for any sponsor associated with this type of negative publicity are infinite, said experts, often resulting in the cancellation of lucrative advertising and marketing contracts, ultimately costing the company millions of dollars in lost revenue.
Worse still, the sponsor may be forced to pull its product from the market altogether, with the end result that millions of dollars are wiped off its share value.
Lori Shaw, executive director of Aon Risk Solutions’ entertainment practice, said the main risk of hiring a celebrity to endorse a product is the unexpected or disgraceful behavior of that individual, or unforeseen events such as death.
“The first step is to analyze the potential risks; discuss ‘what if’ scenarios; outline the financial consequences; and to be aware of the risks that can be avoided, those that can be transferred contractually to the celebrity or talent, those that can be transferred to insurance and the risks that must be retained,” she said.
Shaw said that companies need to take a holistic approach to their branding and marketing activities in order to assess the potential impact of any adverse publicity on their balance sheet.
Nir Kossovsky, CEO of Steel City Re, a corporate reputation measurement and risk management specialist, said there are two instances when a company should walk away from a sponsorship.
“The first is if the costs of a parallel communication strategy coupled with the direct costs of sponsorship outweigh the value of the expected gain.
“The second is if, on objective reflection, there is a compelling case that the average stakeholder will hold management culpable for an adverse event no matter what the management says to the contrary.”
To mitigate against these risks, corporations are increasingly turning to specialized insurance plans and writing clauses into their contracts allowing them to cancel a deal if the celebrity is considered to have acted in an inappropriate manner that may damage the company’s brand.
Mitigating Fraud, Waste, and Abuse of Opioid Medications
There’s a fine line between instances of fraud, waste, and abuse. One of the key differences is intent and knowledge. Fraud is knowingly and willfully defrauding a health care benefit program for personal gain or profit. Each of the parties to a claim has opportunity and motive to commit fraud. For example, an injured worker might fill a prescription for pain medication only to sell it to a third party for profit. A prescriber might knowingly write prescriptions for certain pain medications in order to receive a “kickback” by the manufacturer.
Waste is overuse of services and misuse of resources resulting in unnecessary costs, whereas abuse is practices that are inconsistent with professional standards of care, leading to avoidable costs. In both situations, the wrongdoer may not realize the effects of their actions. Examples of waste include under-utilization of generics, either because of an injured worker’s request for brand name medication, or the prescriber writing for such. Examples of abusive behavior are an injured worker requesting refills too soon, and a prescriber billing for services that were not medically necessary.
Actions that Interfere with Opioid Management
Early intervention of potential fraud, waste, and abuse situations is the best way to mitigate its effects. By considering the total pharmacotherapy program of an injured worker, prescribing behaviors of physicians, and pharmacy dispensing patterns, opportunities to intervene, control, and correct behaviors that are counterproductive to treatment and increase costs become possible. Certain behaviors in each community are indicative of potential fraud, waste, and abuse situations. Through their identification, early intervention can begin.
- Prescriber/Pharmacy Shopping – By going to different prescribers or pharmacies, an injured worker can acquire multiple prescriptions for opioids. They may be able to obtain “legitimate” prescriptions, as well as find those physicians who aren’t so diligent in their prescribing practices.
- Utilizing Pill Mills – Pain clinics or pill mills are typically cash-only facilities that bypass physical exams, medical records, and x-rays and prescribe pain medications to anyone—no questions asked.
- Beating the Urine Test – Injured workers can beat the urine drug test by using any of the multiple commercial products available in an attempt to mask results, or declaring religious/moral grounds as a refusal for taking the test. They may also take certain products known to deliver a false positive in order to show compliance. For example, using the over-the-counter Vicks® inhaler will show positive for amphetamines in an in-office test.
- Renting Pills – When prescribers demand an injured worker submit to pill counts (random or not), he or she must bring in their prescription bottles. Rent-a-pill operations allow an injured worker to pay a fee to rent the pills needed for this upcoming office visit.
- Forging or Altering Prescriptions –Today’s technology makes it easy to create and edit prescription pads. The phone number of the prescriber can be easily replaced with that of a friend for verification purposes. Injured workers can also take sheets from a prescription pad while at the physician’s office.
- Over-Prescribing of Controlled Substances – By prescribing high amounts and dosages of opioids, a physician quickly becomes a go-to physician for injured workers seeking opioids.
- Physician dispensing and compounded medication – By dispensing opioids from their office, a physician may benefit from the revenue generated by these medications, and may be prone to prescribe more of these medications for that reason. Additionally, a physician who prescribes compounded medications before a commercially available product is tried may have a financial relationship with a compounding pharmacy.
- Historical Non-Compliance – Physicians who have exhibited potentially high-risk behavior in the past (e.g., sanctions, outlier prescribing patterns compared to their peers, reluctance or refusal to engage in peer-to-peer outreach) are likely to continue aberrant behavior.
- Unnecessary Brand Utilization – Writing prescriptions for brand medication when a generic is available may be an indicator of potential fraud, waste, or abuse.
- Unnecessary Diagnostic Procedures or Surgeries – A physician may require or recommend tests or procedures that are not typical or necessary for the treatment of the injury, which can be wasteful.
- Billing for Services Not Provided – Since the injured worker is not financially responsible for his or her treatment, a physician may mistakenly, or knowingly, bill a payer for services not provided.
- Compounded Medications – Compounded medications are often very costly, more so than other treatments. A pharmacy that dispenses compounded medications may have a financial arrangement with a prescriber.
- Historical Non-Compliance – Like physicians, pharmacies with a history of non-compliance raise a red flag. In states with Prescription Drug Monitoring Programs (PDMPs), pharmacies who fail to consult this database prior to dispensing may be turning a blind eye to injured workers filling multiple prescriptions from multiple physicians.
- Excessive Dispensing of Controlled Substances – Dispensing of a high number of controlled substances could be a sign of aberrant behavior, either on behalf of the pharmacy itself or that injured workers have found this pharmacy to be lenient in its processes.
Clinical Tools for Opioid Management
Once identified, acting on the potential situations of fraud, waste, and abuse should leverage all key stakeholders. Intervention approaches include notifying claims professionals, sending letters to prescribing physicians, performing urine drug testing, reviewing full medical records with peer-to-peer outreach, and referring to payer special investigative unit (SIU) resources. A program that integrates clinical strategies to identify aberrant behavior, alert stakeholders of potential issues, act through intervention, and monitor progress with the injured worker, prescriber, and pharmacy communities can prevent and resolve fraud, waste, and abuse situations.
Proactive Opioid Management Mitigates Fraud, Waste, and Abuse
Opioids can be used safely when properly monitored and controlled. By taking proactive measures to reduce fraud, waste, and abuse of opioids, payers improve injured worker safety and obtain more control over medication expenses. A Pharmacy Benefit Manager (PBM) can offer payers an effective opioid utilization strategy to identify, alert, intervene upon, and monitor potential aberrant behavior, providing a path to brighter outcomes for all.