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Risk Management Manager
Wells Fargo Corporate Practice Group
Minneapolis

Giving Diligence its Due

When it came to sorting out the merger of Wells Fargo and Wachovia, the largest bank merger in United States history, one of the biggest challenges was integrating the workers' compensation programs of the two widespread banking systems.

Nancy Lerach, the risk management manager, was chosen to oversee the workers' compensation and safety & health/loss prevention programs. The immensity of the challenge was staggering. Wells Fargo had approximately 5,900 branches and 165,000 employees, while Wachovia had approximately 5,100 branches and 120,000 employees.

Delivering fast results might have been tempting. Lerach, who works in the bank's corporate finance group in Minneapolis, didn't go that way. Instead, she took a careful, measured approach in which the interests of Wachovia employees received equal treatment to employees at Wells Fargo.

The thoroughness of Lerach's approach extended to selection of a TPA for the merged banking systems. Lerach created an open bidding process. She ultimately chose Specialty Risk Services, which had been Wells Fargo's third-party administrator (TPA), but only after close scrutiny and wide-open competition.

"I believe our success arose from taking the time to engage both legacy teams in the venture," Lerach said. "We did not enter the venture with any preconceived ideas about the outcome. We did our due diligence, analyzing data, internal processes and program design with external vendor partners."

"I've dealt with many kinds of risk managers," said one executive who worked closely with Lerach. "What separates Nancy from others I've worked with is her preparation and her complete understanding of what the situation is before she makes a decision."

With this particular merger, for example, many risk managers would have felt pressured to make a decision without all the facts in front of them. "They would be getting information three months in advance if they were lucky," he said.

With Lerach given control of the program, the integration process allowed a full year of advance work before the program was launched in January.

Lerach convened a merger team comprised of experienced legacy Wachovia and Wells Fargo team members. The team operated on two principals; doing the integration right is more important than doing it quickly. And best practices will be chosen regardless of the company origin.

The team ultimately chose Wells Fargo's workers' compensation and loss prevention program as the preferred approach but incorporated measures to track incoming Wachovia team members' experiences.

Wells Fargo's program is a holistic approach in which responsibility for all aspects of workers' compensation, including claims management, risk financing and loss prevention is centralized in the Risk and Insurance Management department.

The in-house service delivery approach benefits team members by increasing overall efficiency, improving service quality and reducing cost. The model provides the team member and manager with greater access to information and facilitates more timely and efficient reporting of injuries. It frees up time that would otherwise be spent answering benefits-related questions from team members, ensuring a consistent message and allowing managers to focus on more strategic business issues.

In the end, several risk management procedures from Wachovia were incorporated into the integration process. After a year of work, every employee had electronic access to information provided by the new program.

"The plan was executed without a hiccup," an executive outside the banks who watched the integration process step-by-step said. "They dotted every 'I' and crossed every 'T.' " Why was Nancy chosen for this huge and delicate undertaking?

"Nancy clearly was the best person for the job," said Wells' Risk Manager K.C. Kidder. "Her leadership skills, technical knowledge and experience are second to none."

It's no surprise, though. Don't forget that Lerach's integration experience dates back to the Norwest/Wells Fargo merger in 1998, when she helped design and implement the original Norwest model.

--Steve Yahn

President
Sabatini Advisory Services LLC
Granby, Conn.

Breaking Down the Barriers of Parochialism

Today the glitter of globalization makes the Society of Actuaries' Chartered Enterprise Risk Analyst (CERA) credential a highly sought-after designation. But the global nature of the certification did not come easily.

"Initially, there was nominal support for the Society of Actuaries allowing its credential to be transferred to a global entity," said Francis Sabatini, president of Sabatini Advisory Services LLC in Granby, Conn. "At one point, I may have been the only one who thought that a global CERA designation was viable. I worked with the global steering group to move its thinking toward a view that would be acceptable to the SOA, and worked within the SOA to gain acceptance that their concerns, which mostly centered on maintaining the quality of the credential, would be preserved."

The work of Sabatini and the society, in tandem with actuarial groups around the world, culminated in the signing of a treaty to certify the new global CERA certification on Nov. 14, 2009.

There were 14 actuarial groups that signed the treaty. Sabatini, who is the SOA's representative on the Global CERA Treaty Board, also serves on the board of directors of the CERA Global Association; he expects a half a dozen additional associations around the world to become members by the end of the year.

The actuarial associations that adopted the global treaty last fall represented Australia, Canada, Germany, France, Israel, Japan, Mexico, Netherlands, South Africa, Sweden, Scotland, United Kingdom and the United States.

Sabatini emphasized that there is a strong element of Enterprise Risk Management (ERM) in the new CERA certification. "The treaty's signing strengthens international recognition of the actuarial profession's enterprise risk management expertise," he said. "The treaty's signing represents an important and gratifying global endorsement of the strong value created by the SOA when it established the CERA credential in 2007. Today there are 600 actuaries that have the CERA credential.

"It also sends a strong message to employers and candidates that the skill set of actuaries provides significant insight into risk management expertise, especially in this time of increased globalization," Sabatini said.

Sabatini, a former employee of Ernst & Young, frequently uses the word "consistency" in describing the CERA global certification.

"This certification creates a consistent educational requirement," he said. "In the treaty, there's a set of actual educational requirements. Not only does each applying association have to cover them, but they have to cover them with the right amount of rigor. Several pages of content lay out 50 educational topics and 90 percent of the topics must be covered with the right amount of rigor."

Sabatini said that every association that seeks award status gets reviewed by a "review panel." The panel visits with the applying association, studies the materials and exam questions, and ensures that they're consistent with the treaty requirements.

"So before you become an award signatory, you have to go through that review panel to make sure you're covering all the risk management topics that are anticipated in the treaty's educational requirements," he said.

Sabatini added that this is the first global actuarial credential, and that the consistency of the educational requirements therefore are crucial to the certification.

"Various credentials around the world have different sets of qualifications to become an actuary but there's no requirement that they be consistent with certifications elsewhere in the world," Sabatini said.

Today Sabatini continues to work as a CERA Global Association board member to assist in implementing the new certification. He leads the committee charged with website development and he heads the finance committee.

"Five years from now actuaries worldwide will get even great recognition as risk professionals as a result of the CERA certification," Sabatini said. "They will be known as professionals who have the kind of training and skills to provide leadership around enterprise risk management within their organizations."

Independent of his CERA activities, Sabatini's advisory service provides consulting services in two areas: working with insurance organizations on enterprise risk management matters, and working with regulators on enterprise risk management issues.

--Steve Yahn