Risk Management

The Profession

Q&A with Kurt Leisure, vice president of risk services with The Cheesecake Factory Inc.
By: | February 18, 2014 • 4 min read
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R2-14p102_Profession.inddIn 2014, Risk & Insurance® will be featuring Q&As with risk management professionals. Our first installment is with Kurt Leisure, who serves as the vice president of risk services with The Cheesecake Factory Inc.

R&I: What was your first job?

I sold life and disability insurance as my first job. It was financially lucrative but the cold call sales were a challenge for me and I wanted to be on a different side of the business.

R&I: How did you come to work in risk management?

I was working in the benefits department of a large restaurant company (not The Cheesecake Factory) and was asked if I wanted to make sense out of the company’s workers’ compensation and liability claims. At the time, the company viewed these claims as an unmanageable cost of the business. I jumped into the claims to better understand what was driving them, then initiated safety programs to prevent the claims. There was an immediate impact and the company added risk management to my title. As the business grew, I eventually dropped my benefits responsibilities and focused on the risk side of the business.

R&I: What about the profession of risk management do you find the most fulfilling or rewarding? 

This industry brings new daily challenges and I am exposed to almost every part of our business because there is a certain level of risk in everything. With the push to technology, and the speed at which technology is advancing, it is a constant challenge to keep up with the new risks that are emerging in this area. I love the challenge and am very motivated by my desire to identify and mitigate risk.

R&I: What is the risk management community doing right? 

I have been in the risk management profession for 26 years and am excited to see this profession emerge as a recognized profession that companies value.

R&I: What could the risk management community be doing a better job of? 

There are not enough universities that offer risk management programs. This makes it difficult for the industry to recruit from colleges and universities because students have not been exposed to the profession as part of their curriculum.

R&I: What emerging commercial risk most concerns you? 

Cyber risk and the ability of businesses to protect the public’s confidential information.

R&I: Who is your mentor and why?

Matt Clark, senior vice president of Strategic Planning for The Cheesecake Factory Inc. He understands enterprise risk management and allows me the flexibility to apply innovation to my risk programs. This support and Matt’s strategic vision has allowed us to drive our results in a positive way.

R&I: What have you accomplished that you are proudest of? 

I love to drive innovation and constantly push my staff to develop new programs and “pioneer” a solution that no one has thought of. I am also very passionate about risk management and am very visible in the Los Angeles RIMS chapter as well as other industry risk management forums.

R&I: What do your friends and family think you do?

I have a 5- and 3-year-old that consistently ask me what flavor of cheesecake I baked. The rest of my family and friends love having me over so they can hear about the latest crazy claim I have been working on. Most people who know me have a general understanding of what I do, but have no idea how many different pieces of the job there are.

R&I: What is your favorite book or movie? 

My current favorite book is called “Start With Why” by Simon Sinek. I love reading about great companies and leaders and what allows these companies to survive over time. The Cheesecake Factory falls into this category and our leadership team consistently understands why we exist and what place we have in the restaurant industry.

R&I: What is the most unusual/interesting place you have ever visited? 

The Crater Lake area in Southern Oregon is fascinating to me. It is the deepest lake in Oregon and not a spot that a lot of people have visited.

R&I: What is the riskiest activity you ever engaged in?

On my 40th birthday I rode a mountain bike down Mammoth Mountain (in the summer) with absolutely no safety gear at all — it was a spontaneous adventure. I ended up hitting a non-visible tree stump and cracked some ribs. I don’t always practice what I preach.

R&I: If the world has a modern hero, who is it and why? 

Jeff Bezos, the founder of Amazon. He launched e-commerce and has truly changed the way consumers shop.

The R&I Editorial Team may be reached at [email protected]
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Aviation Woes

Coping with Cancellations

Could a weather-related insurance solution be designed to help airlines cope with cancellation losses?
By: | April 23, 2014 • 4 min read
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Airlines typically can offset revenue losses for cancellations due to bad weather either by saving on fuel and salary costs or rerouting passengers on other flights, but this year’s revenue losses from the worst winter storm season in years might be too much for traditional measures.

At least one broker said the time may be right for airlines to consider crafting custom insurance programs to account for such devastating seasons.

For a good part of the country, including many parts of the Southeast, snow and ice storms have wreaked havoc on flight cancellations, with a mid-February storm being the worst of all. On Feb. 13, a snowstorm from Virginia to Maine caused airlines to scrub 7,561 U.S. flights, more than the 7,400 cancelled flights due to Hurricane Sandy, according to MasFlight, industry data tracker based in Bethesda, Md.

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Roughly 100,000 flights have been canceled since Dec. 1, MasFlight said.

Just United, alone, the world’s second-largest airline, reported that it had cancelled 22,500 flights in January and February, 2014, according to Bloomberg. The airline’s completed regional flights was 87.1 percent, which was “an extraordinarily low level,” and almost 9 percentage points below its mainline operations, it reported.

And another potentially heavy snowfall was forecast for last weekend, from California to New England.

The sheer amount of cancellations this winter are likely straining airlines’ bottom lines, said Katie Connell, a spokeswoman for Airlines for America, a trade group for major U.S. airline companies.

“The airline industry’s fixed costs are high, therefore the majority of operating costs will still be incurred by airlines, even for canceled flights,” Connell wrote in an email. “If a flight is canceled due to weather, the only significant cost that the airline avoids is fuel; otherwise, it must still pay ownership costs for aircraft and ground equipment, maintenance costs and overhead and most crew costs. Extended storms and other sources of irregular operations are clear reminders of the industry’s operational and financial vulnerability to factors outside its control.”

Bob Mann, an independent airline analyst and consultant who is principal of R.W. Mann & Co. Inc. in Port Washington, N.Y., said that two-thirds of costs — fuel and labor — are short-term variable costs, but that fixed charges are “unfortunately incurred.” Airlines just typically absorb those costs.

“I am not aware of any airline that has considered taking out business interruption insurance for weather-related disruptions; it is simply a part of the business,” Mann said.

Chuck Cederroth, managing director at Aon Risk Solutions’ aviation practice, said carriers would probably not want to insure airlines against cancellations because airlines have control over whether a flight will be canceled, particularly if they don’t want to risk being fined up to $27,500 for each passenger by the Federal Aviation Administration when passengers are stuck on a tarmac for hours.

“How could an insurance product work when the insured is the one who controls the trigger?” Cederroth asked. “I think it would be a product that insurance companies would probably have a hard time providing.”

But Brad Meinhardt, U.S. aviation practice leader, for Arthur J. Gallagher & Co., said now may be the best time for airlines — and insurance carriers — to think about crafting a specialized insurance program to cover fluke years like this one.

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“I would be stunned if this subject hasn’t made its way up into the C-suites of major and mid-sized airlines,” Meinhardt said. “When these events happen, people tend to look over their shoulder and ask if there is a solution for such events.”

Airlines often hedge losses from unknown variables such as varying fuel costs or interest rate fluctuations using derivatives, but those tools may not be enough for severe winters such as this year’s, he said. While products like business interruption insurance may not be used for airlines, they could look at weather-related insurance products that have very specific triggers.

For example, airlines could designate a period of time for such a “tough winter policy,” say from the period of November to March, in which they can manage cancellations due to 10 days of heavy snowfall, Meinhardt said. That amount could be designated their retention in such a policy, and anything in excess of the designated snowfall days could be a defined benefit that a carrier could pay if the policy is triggered. Possibly, the trigger would be inches of snowfall. “Custom solutions are the idea,” he said.

“Airlines are not likely buying any of these types of products now, but I think there’s probably some thinking along those lines right now as many might have to take losses as write-downs on their quarterly earnings and hope this doesn’t happen again,” he said. “There probably needs to be one airline making a trailblazing action on an insurance or derivative product — something that gets people talking about how to hedge against those losses in the future.”

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at [email protected]
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Sponsored Content by Hiscox USA

Your Workers’ Safety May Be at Risk, But Can You See the Threat?

Violence at work is a more common threat than many businesses realize.
By: | September 14, 2016 • 5 min read
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Deadly violence at work is covered extensively by the media. We all know the stories.

Last year, ex-reporter Bryce Williams shot and killed two former colleagues while they conducted a live interview at a mall in Virginia. In February of this year, Cedric Larry Ford opened fire, killing three and injuring 12 at a Kansas lawn mower manufacturing company where he worked. Also in 2015, 14 people died and 22 were wounded by Syed Farook, a San Bernardino, California county health worker, and his wife, who had terroristic motives.

Active shooter scenarios, however, are just the tip of the iceberg when it comes to violence at work.

“Workplace violence is much broader and more pervasive than that. There are smaller acts of violence happening every day that directly impact organizations and their employees,” said Bertrand Spunberg, Executive Risks Practice Leader, Hiscox USA. “We just don’t hear about them.”

According to statistics compiled by the FBI, the chance that any business will experience an active shooter scenario is about 1 in 457,000, and the chance of death or injury by an active shooter at work is about 1 in 1.6 million.

The fact that deadly attacks — which are relatively rare — get the most media attention may lead employers to underestimate the risk and dismiss the issue of workplace violence as media hype. But any act that threatens the physical or psychological safety of an employee or that causes damage to business property or operations is serious and should not be taken lightly.

“One of the core responsibilities that any organization must fulfill is keeping employees safe, and honoring that duty is becoming more challenging than ever,” Spunberg said.

Hiscox_SponsoredContent“Workplace violence is much broader and more pervasive than that. There are smaller acts of violence happening every day that directly impact organizations and their employees. We just don’t hear about them.”
— Bertrand Spunberg, Executive Risks Practice Leader, Hiscox USA

Desk Rage and Bullying: The Many Forms of Workplace Violence

Hiscox_SponsoredContentBullying, intimidation, and verbal abuse all have the potential to escalate into confrontations and a physical assault or damage to personal property. These violent acts don’t necessarily have to be perpetrated by a fellow employee; they could come from a friend, family member or even a complete stranger who wants to target a business or any of its workers.

Take for example the man who killed three workers at a Colorado Spring Planned Parenthood in April. He had no affiliation with the organization or any of its employees, but targeted the clinic out of his own sense of religious duty.

Companies are not required to report incidents of violence and many employees shy away from reporting warning signs or suspicious behavior because they don’t want to worsen a situation by inviting retaliation.  It’s easy, after all, to attribute the occasional surly attitude to typical work-related stress, or an office argument to simple personality differences that are bound to emerge occasionally.

Sometimes, however, these are symptoms of “desk rage.”

According to a study by the Yale School of Management, nearly one quarter of the population feels at least somewhat angry at work most of the time; a condition they termed “chronic anger syndrome.”  That anger can result from clashes with fellow coworkers, from the stress of heavy workloads, or it can overflow from family or financial problems at home.

Failure to recognize this anger as a harbinger of violence is one key reason organizations fail to prevent its escalation into full-blown attacks. Bryce Williams, for example, had a well-documented track record of volatile and aggressive behavior and had already been terminated for making coworkers uncomfortable. As he was escorted from the news station from which he was terminated, he reportedly threatened the station with retaliation.

Solving Inertia, Spurring Action

Hiscox_SponsoredContentMany organizations lack the comprehensive training to teach employees and supervisors to recognize these warning signs and act on them.

“The most critical gap in any kind of workplace violence preparedness program is supervisory inertia, when people in positions of authority fail to act because they are scared of being wrong, don’t want to invade someone’s privacy, or fear for their own safety,” Spunberg said.

Failing to act can have serious consequences. Loss of life, injury, psychological harm, property damage, loss of productivity and business interruption can all result from acts of violence. The financial consequences can be significant. In the case of the San Bernardino shootings, for example, at least two claims were made against the county that employed the shooter seeking $58 million and $200 million.

Although all business owners have a workplace violence exposure, 70 percent of organizations have no plans in place to avoid or mitigate workplace violence incidents and no insurance coverage, according to the National Institute for Occupational Safety & Health.

“Most companies are vastly underprepared,” Spunberg said. “They don’t know what to do about it.”

Small- to medium-sized organizations in particular lack the resources to develop risk mitigation plans.

“They typically lack a risk management department or a security department,” Spunberg said. “They don’t have the internal structure that dictates who supervisors should report a problem to.”

With its workplace violence insurance solution, Hiscox aims to educate companies about the risk and provide a solution to help bridge the gap.

“The goal of this insurance product is not so much to make the organization whole again after an incident — which is the usual function of insurance — but to prevent the incident in the first place,” Spunberg said.

Hiscox’s partnership with Control Risks – a global leader in security risk management – provides clients with a 24/7 resource. The consultants can provide advice, come on-site to do their own assessment, and assist in defusing a situation before it escalates. Spunberg said that any carrier providing a workplace violence policy should be able to help mitigate the risk, not just provide coverage in response to the resultant damage.

“We urge our clients to call them at any time to report anything that seems out of ordinary, no matter how small. If they don’t know how to handle a situation, expertise is only a phone call away,” Spunberg said.

The Hiscox Workplace Violence coverage pays for the services of Control Risks and includes some indemnity for bodily injury as well as some supplemental coverage for business interruption, medical assistance and counseling.  Subvention funds are also available to assist organizations in the proactive management of their workplace violence prevention program.

“Coverage matters, but more importantly we need employees and supervisors to act,” Spunberg said. “The consequences of doing nothing are too severe.”

To learn more about Hiscox’s coverage for small-to-medium sized businesses, visit http://www.hiscoxbroker.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 Hiscox USA. The editorial staff of Risk & Insurance had no role in its preparation.




Hiscox is a leading specialist insurer with roots dating back to 1901. Our diverse portfolio includes admitted and surplus products for professional liability, management liability, property, and specialty products like terrorism and kidnap and ransom.
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