Author Archives: Morgan O'Rourke

About Morgan O'Rourke

Morgan O’Rourke is editor in chief of Risk Management magazine and director of publications for the Risk & Insurance Management Society (RIMS).
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Coca-Cola Hit with a $21 Million Distracted Driving Judgment

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Last week, a jury in Corpus Christi, Texas awarded $21 million in damages to a woman who was struck by a Coca-Cola driver who had been talking on her cell phone at the time of the accident. The plaintiff’s attorneys were able to successfully argue that Coca-Cola’s cell phone policy for its drivers was “vague and ambiguous.” They also suggested that Coca-Cola was aware of the dangers but “withheld this information from its employee driver,” which led directly to the circumstances that caused the accident.

“From the time I took the Coca Cola driver’s testimony and obtained the company’s inadequate cell phone driving policy, I knew we had a corporate giant with a huge safety problem on our hands,” said Thomas J.

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Henry, one of the plaintiff’s attorneys.

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Coca-Cola disagreed with the verdict and, in a statement, expressed its plans to appeal:

“This case was tried because the parties could not come to an agreement on damages. We have accepted responsibility for the accident. We understand that this verdict is a response to a plea from plaintiff’s counsel to the jury to ban all cell phone use while driving.

“Coca-Cola Refreshments’ cell phone policy, which requires the use of a hands-free device when operating a motor vehicle, is completely consistent with, and in fact, exceeds the requirements of Texas law. Coca-Cola Refreshments values the well-being of all citizens in the communities in which we operate. There is no discernible connection between the damages awarded in this case and the injuries sustained by the plaintiff. Although we respect the verdict of the jury, we plan to appeal.”

Nevertheless, the case does emphasize the need for all companies to have a clear cell phone use policy for their drivers. In a recent blog post, Matt Howard, CEO of ZoomSafer, a mobile phone safety software provider, outlined three important lessons the case can teach fleet managers. First, when accidents happen, plaintiffs will sue (and obviously judgments could get costly). In addition, policies cannot exist only on paper and they must be enforced.

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Hoffman concludes:

This case emphasizes just how serious the risk is – and that all employers can be vicariously implicated if they fail to manage and monitor how employees are using mobile devices while driving. Employers who want to minimize liability as much as possible must institute risk management programs to actively or passively enforce cell phone use policies.

The risks of distracted driving have been well documented and with more and more states enacting some sort of ban on cell phone use while driving, either for talking, texting or both, cell phone policies are quickly becoming a necessity. And as this case shows, it’s not just about legal compliance or driver safety–it can also have a substantial financial impact on your company.

Benjamin Franklin: America’s Original Risk Manager

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Benjamin Franklin was a man of many talents. In addition to being one of the key Founding Fathers and one of the most famous people of his day, he was a noted businessman, scientist, legislator, diplomat, author and philosopher. And according to Wendell Bosen, director of risk management for Management & Training Corporation, Franklin was also America’s original risk manager.

In a session today at RIMS 2012, Bosen chronicled the life of Philadelphia’s most important resident and outlined how many of his actions revealed that Franklin possessed the soul of a risk manager. For example, his invention of the lightning rod and a safer wood-burning stove demonstrated his ability to identify risk and develop innovative ways to mitigate it. In order to make Philadelphia safer, he also pioneered the use of street lights, night watchmen, fire departments and even industrial hygiene after he discovered that a common malady of the time called “dry bellyache” was actually symptoms of lead poisoning from unsafe industrial production methods.

Franklin practiced the principles of risk financing through his use of insurance associations and fundraising efforts, both public and personal, and even followed some enterprise risk management principles, such as supply chain preservation and crisis management, when he established river blockades to protect his paper supply deliveries and organized a militia to protect local citizens from the Paxton boys, a gang of criminals who had led a march on Philadelphia in 1764.

Later, when revolutionary conflict began to heat up, Franklin’s risk management efforts took on a more strategic tone. He utilized diplomacy, negotiation and governance efforts to break with England and establish a new Constitution for the young United States. His efforts to protect his fellow citizens continued even up until his death in 1790. Bosen recounted that in Franklin’s later years, he became an outspoken anti-slavery advocate because he felt the institution was not only degrading, but that it had the potential to tear the United States apart. His concern would prove to be prophetic 70 years later.

Risk managers already have many role models, but by adding Ben Franklin to the list, it truly gives the profession a historical legacy befitting a city like Philadelphia.

ERM, Cyber Risk and Ed Hochuli

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Risk management and the sports world unexpectedly intersected in a morning session at RIMS 2012, when panelists discussed how adopting an ERM strategy can help mitigate cyber risk while under the watchful eye (and whistle) of session moderator and well-known NFL referee Ed Hochuli. Much like in an NFL game, Hochuli, who is also an attorney with Jones Skelton & Hochuli, took control of the discussion by donning his referee jersey and throwing his penalty flag whenever any of the presenters went over a pre-determined time limit for remarks.

Panelists Carol Fox of RIMS, David Speciale of Identity Theft 911, Richard Magrath of USLAW NETWORK and John Hall of Hall Booth Smith & Slover were flagged for multiple delay-of-game penalties (and one good-natured taunting violation), but this did not stop them from delivering their timely and informative presentation.

As data breach incidents, such as Sony’s infamous PlayStation Network breach last year,  have increased, so has the financial and reputational impacts. Perhaps more importantly, however, this so-called cyber risk no longer only belongs to IT departments. In fact, many IT departments may not even understand the entire scope of the risk. “They are used to dealing with how many servers they have, not necessarily what is on those servers,” said Fox. Since data breaches effect the entire enterprise, mitigation and remediation efforts need to involve all departments in order to effectively limit damages and reduce costs. This makes a data breach plan a vital component of a company’s ERM program.

And given all the complex data protection regulations, jurisdictional issues, and due diligence and privilege concerns, Magrath and Hall recommended that risk managers do not try to go it alone and instead, should engage counsel as a kind of quarterback to help them assess their risk and make sure they are as protected as they can be.

Speciale warned that despite all of a company’s best efforts, 100% protection may be impossible and some fallout may be unavoidable. “When a company is breached, a small percentage of people will never do business with them again,” he said. The key, then, is to be able to prevent as many breaches as you can and then strengthen your defense so you are a less attractive target.

In order to help companies develop a plan of their own, RIMS, US LAW NETWORK and Identity Theft 911 developed an executive report entitled “ERM Best Practices in the Cyber World.” The report details how risk managers can go about developing an effective data breach plan of their own. As the session made clear, thousands of dollars of investment could prevent millions of dollars in losses.

The Oakland A’s Billy Beane Addresses RIMS 2012

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As the saying goes, “Winning isn’t everything.” That is unless you’re the general manager of a Major League Baseball team. Then it’s probably the main thing. But in the baseball world, winners and losers are often separated by millions and millions of dollars. The smaller market have-nots can’t easily compete with their wealthier large-market counterparts that can spend much more money acquiring star players. Famously, however, the Oakland Athletics’ GM Billy Beane was able to buck this trend in the 1990s by using data analysis to craft a winning team on a relatively small budget. The subject of the book and movie Moneyball, Beane recounted his story in his keynote address this morning at the the RIMS 2012 Annual Conference & Exhibition in Philadelphia.

Beane talked about how his unsuccessful playing career first gave him experience with the proper valuation of assets. As a young prospect, Beane was a first-round draft pick and projected to be a star. But it turned out he was an “overvalued asset” and as he said, he just didn’t have the skills. Beane only played for a few years, compiling a meager .219 career batting average. As an executive, Beane didn’t want to make the same mistakes, particularly since his team didn’t have the money to spend on a pick that didn’t pan out. His cash-strapped team had to get the most bang for its buck, and in order to do that the Athletics needed to identify and invest in undervaled assets that other teams missed.

“The biggest risk for the Athletics was doing things like everybody else,” he said. Beane and his assistant, Paul DePodesta, looked at years of baseball statistics and found that many teams were “paying for skill sets that didn’t correlate with winning.” By concentrating on these areas, such as on-base percentage rather than stolen bases, for instance, Beane put together a baseball team that may not have been glamourous, but it was effective. Throughout the 1990s and early 2000s, the A’s became a frequent contender, depsite their low payroll.

Throughout his career, this adherence to data-driven decision making has meant that Beane has had to make some unpopular and seemingly illogical personnel choices, including trading some of his best players. “The riskiest thing as an A’s fan is to buy a jersey with your favorite player’s name on the back,” he said.

Ultimately, however, the metrics are what rules out. His strategy may not always be popular with the fans, but for Beane, it’s all about what benefits the team. Kind of sounds like what many risk managers have to go through, doesn’t it?