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Chicago Practices Poor Risk Management

Chicago’s worst storm on record paralyzed the entire city and beyond. The area’s heavily-traveled Lake Shore Drive became a parking lot for snow-covered and stranded cars — around 900 of them. City officials are being criticized for not taking action to close the major thoroughfare before conditions became treacherous. Lake Shore Drive was not closed until 7:58 p.m. Tuesday after three crashes occurred. Conditions soon worsened after a string of additional accidents, leaving many motorists stuck in their vehicles for up to 12 hours.

Lincoln Park resident Julius Jellinek, who was trapped on Lake Shore Drive for six hours, called it “a disgrace” that the city took as long as it did to move cars blocking exit ramps. “There was absolutely no reason to hold us hostage,” he said. “With a little planning or a little thinking, they could take all of the cars off Lake Shore Drive, the ones that were stuck.” Aware of the complaints, [Mayor Daley’s Chief of Staff] Orozco took full responsibility for the timing of the Drive shutdown and apologized to the hundreds of motorists who were inconvenienced.

The apology:

And now, another video showing the road conditions.

It’s baffling to see one of the nation’s biggest cities so ill prepared for emergency situations. It reminds us of the post-Christmas snowstorm in New York City, when Mayor Bloomberg was heavily criticized for the city’s slow response to snow removal and other emergency situations. Cities like Chicago and New York should practice better risk management. There is no excuse.

BELFOR’s CEO Goes on Undercover Boss

I had never seen the CBS show Undercover Boss until this weekend. Honestly, I didn’t even mean to watch it. That type of thing just isn’t the brand of TV I make time for. But my DVR decided on its own to keep recording for another hour after 60 Minutes (which featured a great segment on Tucson gunman Jared Loughner that evening), and I noticed that this episode of Undercover Boss was featuring the CEO of BELFOR, one of the world’s biggest disaster restoration companies. So I watched, curious to see a major show profile a company connected to the risk management industry.

The premise of the series is pretty self-explanatory: the head honcho of a big company puts on a disguise to anonymously work for a few days alongside his front-line employees, and in the process, he learns that these salt-of-the-earth workers are the key to his company — a revelation that forces him or to rethink the jet-setting lifestyle of luxury. It’s basically like Goldie Hawn in Overboard but with more inspirational music and voiceover.

And that’s exactly what happened in the BELFOR episode.

Company CEO Sheldon Yellen slapped on a comical wig, donned some Coke bottle glasses and grew a terrible beard to go hang drywall, inspect moldy insulation and clean smoke damage. Then, due to his frustration at how bad he was at these tasks and how much he was touched by the sad-sack stories told by those he worked with, he cried. A lot. Like “five, maybe six, times in a 44-minute show” a lot.

Like I said, this type of television really isn’t my cup of tea, but even I thought some of it was heartening drama. At one point Yellen gets so emotional while talking to a woman with whom he had just inspected insulation in a crawl space that he becomes compelled to remove his wig to reveal his identity. She had been promoted to the position of “water technician” many, many months ago and was clearly really good at this job — but due to a companywide freeze on all pay increases that Yellen and his fiscal decision-makers in corporate had implemented to weather the financial crisis, she still hadn’t gotten her raise. She was just discussing this casually, talking about the difficulty of paying bills with some guy she thought was named “Tom” and mentioned off hand that she didn’t think anyone from corporate would know who she was if they tripped over her. Yellen broke down and hence the big reveal, with him assuring her that he — and the company — does care. Cue the piano strings.

At the end, he continued this theme by bringing back all the workers he spent time with and showering them with bonuses, raises and new opportunities at the company. It was all rags-to-riches, and because you know these are indeed real people whose lives will instantly improve due to a $15,000 check, it was definitely uplifting to watch.

At the outset of the program, I was wondering why an executive would go on Undercover Boss. It’s not so much this show in particular, I have just never understood why someone would want to be on a reality show at all. For reference, I’m the type of person who is still pretty upset with my boyhood hero Jerry Rice for debasing himself by going on Dancing With the Stars. I suppose I can understand a relatively anonymous CEO wanting some “fame” more so than Jerry Rice caring about such nonsense, but it still seems silly.

By the end, however, Yellen’s decision to do this was obviously very good branding for his company (depending on how viewers feel about a weeping CEO, I guess). And I imagine the higher profile for the company, particularly a firm in a relatively obscure industry like this, will help BELFOR draw new applicants. I mean, I was probably one of the few people watching who was familiar with the concept of disaster restoration, let alone heard of BELFOR, so the name recognition benefits gained through Undercover Boss had to exceed anything else the company could do from a marketing perspective. And since the emotional heartstrings gimmick even (somewhat) moved a crusty, skeptical cynic like myself, I imagine the company came off in a pretty good light to most viewers.

Here’s a clip from Yellen’s time on the job.

You can watch the whole episode over at CBS if you want.

Australian Insurers Brace for Worst

Close to 348,000 square miles across 20 towns are flooded and 200,000 residents affected after heavy rains drenched Queensland and neighboring states from December 25 to January 3.

The effects of the flooding are far-reaching. Reports indicate Queensland-based insurer SunCorp has told the Australian Stock Exchange it has received 1,800 claims so far. A JP Morgan analyst has said that losses to the insurance industry due to the flooding are estimated at $1 billion. The Insurance Council of Australia (ICA), however, has said that it is too early to provide a loss estimate.

The worst flooding in decades has affected an area the size of Germany and France, leaving towns virtual islands in a muddy inland sea, devastated crops, cut major rail and road links to coal ports, slashed exports and forced up world coal prices.

Coal production in Queensland has been severely disrupted. “The Queensland Resources Council said lost coal and gas production would run to hundreds of million of dollars.” Economists have projected a $6 billion loss from reduced export volumes.

Key crops such as cotton, sunflower, sugar and wheat have been gravely affected by the floods and, according to the Queensland Farmers Federation, few farmers have flood insurance. Crop losses alone could exceed $1 billion.

Below is a video of the “biblical” Australian floods that have claimed the lives of 10.

Needless to say, the property damage in Queensland and neighboring states will be a hard hit to the country’s insurers.

Ringing in the New Year With Natural Disaster Cleanup

It’s safe to say it wasn’t the best start to a new year for some parts of the United States.

The Northeast continues to dig out with trucks still hauling away snow that fell more than eight days ago. Though many businesses were affected by the storm, it was recently reported that the post-Christmas blizzard cost retailers a whopping $1 billion. That’s according to shopper traffic analysis company, ShopperTrak. The following are their findings:

  • On Dec. 26 total U.S. foot traffic was 11.2% below what it would have been expected if the blizzard had not hit the Northeast.
  • Northeast region foot traffic fell 6.1% on Dec. 26 while the other three regions (Midwest, South, West) had an average gain of 38.6% versus last year.
  • On Dec. 27 total U.S. foot traffic was 13.9% below expectations had the blizzard not hit the Northeast.
  • Northeast region foot traffic fell 42.9% on Dec. 27 compared to 2009, while the other regions averaged a 13.0% gain.
  • Preliminary GAFO retail sales estimates for Dec. 26 and 27 combined are roughly $10 billion. Assuming a conservative 10% sales impact nationally for the blizzard, roughly $1 billion of retail spending was postponed during the two day period.

It’s not only retailers that were financially impacted by the monstrous storm; some estimates say the airline industry could see blizzard-related costs upwards of $150 million.

At least 6,000 flights, mostly in and out of New York City-area airports, were canceled because of the storm, according to the Federal Aviation Administration. Those disruptions, along with the need to bring back planes that had been moved in anticipation of the blizzard and other factors, could cost airlines between $100 million and $150 million, estimates Helane Becker, an airline analyst at Dahlman Rose.

In the West, Californians were hit with heavy rains and winds that caused flooding through the Los Angeles area, the power of which can be seen in this video of Loma Linda, California on December 22.

It was reported that rains dumped more than half the year’s normal rainfall in many California regions, and areas of Los Angeles recorded almost 22 inches of rain. The area continues to assess damage and clean up costs.

And lastly, on New Year’s Eve, a deadly tornado outbreak swept across Arkansas, Mississippi, Missouri and Illinois. The Weather Channel says there were 30 reported tornadoes, with five of the twisters earning an EF3 rating. Seven people were killed during the storms, making it the second deadliest New Year’s Eve for tornadoes.

Is this a sign for what’s to come in 2011 or merely a dramatic end to a year filled with unprecedented natural disasters?