Author Archives: Jared Wade

About Jared Wade

Jared Wade is a freelance writer and former editor of the Risk Management Monitor and senior editor of Risk Management magazine. You can find more of his writing at JaredWade.com.

Economic Crisis Advances Risk Management in India

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According to the Times of India, risk management has come into much greater in focus in India ever since the financial collapse rocked the global economy twelve months ago.

The global shockwaves following Lehman Brothers’ collapse have woken India Inc to the importance of sound risk management system to tide over future crises.

Despite the fact the India was less affected by the meltdown, companies here are pulling up their socks as the slump has demonstrated that risks are entwined and cut across boundaries.

It’s a brief article without many specific examples, but it touches on the fact that risk management in something that many companies now expect from all their units — and they expect them to report their findings to the CFO. All this looks like many businesses in the country are beginning to see that there are real benefits to holistic risk management.

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Much like their U.S. and European counterparts, Indian companies will undoubtedly struggle to turn this good idea into good practice, but the underlying concepts have to come first, and this looks like a positive sign in that a key driver of the developing world economy is moving towards incorporating better forethought throughout its private sector.

Most big players have sought international risk advisory firms like Marsh, to step up the internal control process of their portfolio companies.

“The global credit crisis has driven home the point that although US was the epicentre, its effect has been felt elsewhere too, in today’s inter-connected world. Risk management must factor inter-linkages and remote possibilities,” said Marsh India head Sanjay Kedia.
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“Low-probability and high-severity catastrophes like the recent financial turmoil or the Mumbai terror attacks do happen,” he said.

And when they do, hopefully many companies in India will be able deflect the blow.

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Bangalore, or The Silicon Valley of India, has seen large-scale economic expansion in recent years. Now, a focus in risk management is expanding there as well.

After the Fall: One Year Later, Still No Regulations

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President Obama gave a speech on Wall Street today that sent a strong message: We must learn from last year’s financial collapse and improve our national regulatory system to fix its underlying weaknesses.

“Instead of learning the lessons of Lehman and the crisis from which we are still recovering, they are choosing to ignore them,” Mr. Obama said in a speech at Federal Hall in Lower Manhattan.

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“They do so not just at their own peril, but at our nation’s … I want everybody here to hear my words. We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses.

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Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall.”

These are the strongest statements I have heard from the president on how better risk management — internally at banks, systematically from the regulators and philosophically from those working on Wall Street — must be embraced. With Obama using so much of his political capital and “mandate for change” on health care (albeit with little progress), it remains to be seen if he will be able to spur Congress to enact any progress on reforming the financial industry. The White House certainly hasn’t been able to get Capitol Hill to do much thus far.

From the Wall Street Journal:

Mr. Obama’s planned overhaul would dramatically rewrite the rules of the road for the U.S. financial sector, with new protections for consumers and safeguards against the potential collapse of more big banks. But it is unclear if Congress can unite behind a revamp on Mr. Obama’s timetable, given the time-consuming debate over health care and disagreements between lawmakers on the major components of the overhaul.

The Atlantic ran its piece today to mark the anniversary of the collapse, looking at “5 Reasons to Worry.” In their first reason, they warn against the fact that “in the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” according to Joseph Stiglitz, a Nobel-winning economist and the former chief economist at the World Bank. Among the other four reasons to worry are: continued federal subsidies, unchecked greed and unregulated derivatives.

Those in the risk management industry are unfortunately accustomed to having their advice ignored. Twelve months after the largest collective failure of financial risk management to occur in my lifetime, however, it remains shocking that so little has been done to fix the problem.
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Managing the Risks and Rewards of Social Media, as Illustrated by ESPN’s New Social Networking Policy

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We just wrapped our October issue of Risk Management magazine today, and the cover story discusses the opportunities and risks for companies who use social media like blogs, Twitter and YouTube to enhance their brands and sell products. Nowadays, most companies are involved in such “Web 2.0” activities to at least some degree, but many still seem to lack a proper understanding of the potential exposures.

As always, that’s where risk managers come in. So we hope that the article, which was written by yours truly, will help put the issue on the risk management radar.

The piece focuses mainly on the reputation and possible legal risks involved, but there is a lot more to this issue, much of which unfortunately couldn’t be fit into a six-page magazine article. Thus, I thought I would share one of the things I came across that didn’t make the final cut.

ESPN, which was one of the first traditional media companies to really embrace social media, recently issued an official policy for social networking that limited what the company’s “forward-facing talent” (i.e., anyone in the public eye, such as anchors, analysts, reporters, columnists, etc.) is allowed to discuss on their personal blogs and Twitter accounts. The details of the policy, which have been called “short-sighted” and “draconian” by sports bloggers, are a good specific example of the things that our story discusses in more general terms.

Essentially, the key takeaway in the policy is the line “Assume at all times you are representing ESPN” and, according to ESPN.com’s head honcho Rob King, at least some of the reasoning behind instituting the policy was to protect ESPN from potential legal action.

SBD: Let me ask that another way. What’s out there [on Twitter] that made you raise an eyebrow?

King: I can think of cases in which folks have re-tweeted breaking news that turned out not to be true. Some day somebody’s going to get sued somewhere for re-tweeting something that is false. That’s part of a great IQ test that represents the introduction to social media. That’s just from a journalistic perspective, one that has to be taught and managed very carefully. I don’t know which media company is going to run into it. But some day, somebody’s probably going to find themselves in a court of law. That was in no way a line of thought that drove this conversation. But if you’re asking me, personally, sometimes I see folks re-tweeting stuff that is essentially breaking news without really a sense of the sourcing. It runs counter to the journalistic training that folks ingrained in me.

King explains the policy further.

SBD: Explain ESPN’s ban on personal Web sites. Does that mean that someone like Jeremy Schapp can’t operate a Web site?

King: I hate the word ‘ban.’ The guideline on the personal Web site is that they should not be representing sports content at all. If Jeremy Schapp wants to have a Web site that has no sports content on it whatsoever, I think that’s fine. We felt like our forward-facing talent’s relationship with the audience happens through ESPN media. We wanted to reiterate that’s the relationship we expect as long as people are part of the company.

This is the type of stuff you can expect to see in our October cover story, which we hope will help break down some of the Web 2.0 basics for the many risk managers out there who still don’t know the difference between a tweet and a YouTube.

And the ESPN news all goes to show that media companies are indeed beginning to institute official policies on social media, and I think we will see this as a (slowly) developing trend for even non-media companies, particularly as more legal clarity begins to develop surrounding all these concepts. Things like this case involving a landlord suing a tenant for libel based on a tweet she made will help define how social media grievances are handled in a court of law.

Such clarity is a still a ways off, however. We all know how quickly the courts move.

But in the meantime, watch the extremely cool video below. It really helps illustrate how large this phenomenon is.

“Put Glamour in Its Proper Wartime Place”

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Yesterday, Workers’ Comp Insider posted some vintage safety videos from the 1940s and 50s that were designed to teach women how to work more safely. Viewed through the eyes of today, these films are obviously condescending at best and borderline offensive at worst. But it does go to show how far we’ve come, both as a society and an industry preaching safety/loss control.

Or, as the Workers’ Comp Insider folks aptly put it:

We’re happy to note that in the ensuing years, there have been significant advances for both women and for safety!

Below, you can watch two of the videos. The first is a “United States Office of Education Training Film” that’s titled “Supervising Women Workers” and features a boss who probably isn’t but definitely reminds me of a young Jerry Stiller. The second one discusses proper hairstyles for female plant workers during WWII.

Head over to WCI to catch two other old-school, black-and-white safety lessons, one of which was produced by McGraw Hill and comes with the cringe-worthy title “The Trouble with Women.”