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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
R2-14p102_Profession.indd

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 riskletters@lrp.com.
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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 riskletters@lrp.com.
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Sponsored Content by Riskonnect

3 + 3: Theory of Risk

A risk management professional constructed a versatile system that he can really believe in.
By: | November 3, 2014 • 5 min read
SponsoredContent_Riskonnect

Anthony Valsamakis doesn’t just practice risk management, he wrote a book about it. And he doesn’t just consult with quants, he is one.

“Risk management has been in my blood for so long that I have to stop myself, otherwise I could go into a two-hour monologue,” said Valsamakis, whose career in the discipline goes back almost 35 years, to his first job with the Standard General Insurance Company.

In 1990, the London-based chairman of the Eikos Group received a doctorate in Business Economics. In 1992, “The Theory & Principles of Risk Management” was published, with Valsamakis the principal author, and is now in its 4th edition.

Valsamakis worked first with a carrier, then as a commodities broker, before taking up an academic post. The company he started in 1999, the Eikos Group, has a risk consulting arm, with clients in most industrial sectors, including the food, mining, forestry, industrial paper and packaging and banking industries. The group also includes a transportation risk brokerage and a Bermuda-based carrier.

SponsoredContent_Riskonnect“I think the idea of having a secure data base that everyone can access and can update at any moment is by far the best innovation that I can see happening in the information game.”
– Anthony Valsamakis, Chairman, Risk Financing Strategy, Eikos Group

For as long as he can remember, Valsamakis sought ways to get better information on the risks he underwrites, brokers or consults on.

“Over many years we’ve tried hard to increase the quality and timeliness of the information that enables us to do just that,” Valsamakis said.

Finally, it looks like Valsamakis has found a risk management information systems platform that enables him to do just that.

For the past year and a half, Valsamakis has been using a system developed by Riskonnect.

SponsoredContent_RiskonnectValsamakis likes the Riskonnect approach for a number of reasons – one of the key reasons that the platform can be readily adapted for each of his clients, regardless of industry.

“What’s useful for me is that the platform basically resides within the client’s systems,” he said.

The information he needs to prioritize, depends on which client he is working with.

“By definition, depending on where I am working and what I am doing, risk management priorities are very different,” Valsamakis said.

The Riskonnect platform provides the necessary flexibility.

SponsoredContent_RiskonnectA mine, for example, could be in a location in Africa or South America with a high degree of political risk. A key risk for a furniture maker might be around trade secrets, the possibility that a disgruntled employee would leak a pricing catalogue to competitors. For a packaging manufacturer, their material supply chain is of the utmost importance, and so on.

For each client, Valsamakis can use Riskonnect platform and work with the client to compile the information that is most relevant to that client and its industry and enter that into a secure system.

“All of these are template facts that you can easily put into the Riskonnect system,” Valsamakis said.

The Riskonnect platform is housed within the client’s information technology system, and it is transparent enough, to give Valsamakis and his client access to the same sets of data.

“I think the idea of having a secure data base that everyone can access and can update at any moment is by far the best innovation that I can see happening in the information game,” he said.

Whose System Is It?

Valsamakis has been around long enough to know a few things about data and risk transfer. He’s seen a number of risk information management systems put out by brokers, for example, that he thinks are set up more for the broker’s business model than for the sharing of information.

Generally speaking, information about an insured’s risks come from the broker and the insured. The Riskonnect system works, according to Valsamakis, because it is designed to be adapted to the client, not the broker.

“I have seen efforts by brokers, for example, over the years to produce a type of risk information platform that becomes theirs,” Valsamakis said.

“It’s been a perennial problem in the industry, where depending on which broker you end up with, you’ll end up with system A, B or C,” he said.

The Underwriter Needs to Know

SponsoredContent_RiskonnectUsing Riskonnect, Valsamakis encourages clients to be as transparent as possible, in order to give the most complete information to underwriters.

“For me the question is, ‘What is the volatility around the asset and can there be an impact on the balance sheet of our clients?’” he said.

“We need to describe this exposure in various contexts so that the underwriters know what they are covering,” he said.

It’s basic human psychology. If an underwriter doesn’t feel they are getting enough information about a particular risk, they will take a negative view of that risk.

The more accurate the information Valsamakis has about a client’s exposures, the better the pricing he gets from underwriters.

“If you were an underwriter putting your capital and risk and I gave you little information, you would actually be less inclined to look at the risk in favorable terms. There will be a natural inclination to downgrade it,” he said.

Where Valsamakis sees enormous value is in the Riskonnect system ability to tag which can be revisited at a later stage.

“It’s amazing how clients forget, in the passage of time, that there are profiles that have changed for better or worse.”

A Long-Term Investment

The Eikos Group invested significantly in the Riskonnect product and are taking it to a number of clients. The transparency of the system and the advantage it gives the Eikos Group and its clients with underwriters is in itself a business advantage over the competition.

“We made a decision as a small company, relatively speaking, to invest a lot of money in Riskonnect and be very proactive about it,” Valsamakis said.

“When I talk to executives I say we invested in it because it’s going to save our clients money. Better information will lead to a lower cost of risk,” he said.

“If I’m talking to someone at a high level, that’s fairly easily understood.”

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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 Riskonnect. The editorial staff of Risk & Insurance had no role in its preparation.


Riskonnect is the provider of a premier, enterprise-class technology platform for the risk management industry.
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