Category Archives: Risk Management

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Safety Groups Warn of Added Summer Risks

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Summer has arrived, but it is not a time for total relaxation. According to the National Safety Council (NSC), July and August typically see more accidental deaths than any other two-month period—a trend that includes drowning, pediatric vehicular heatstroke, pedestrian deaths, natural disasters and gun-related fatalities.

To stress the need for extra caution, the NSC has updated its Injury Facts interactive online database. This year marks the first time the NSC has categorized “hot car deaths” – which it recognizes as an emerging risk.

“Unfortunately, when we look at accidental deaths, summer is not the carefree period we’d like it to be,” NSC Manager of Statistics Ken Kolosh said. “The numbers underscore the need for public awareness. We hope Injury Facts can help people understand the biggest risks to their safety and take the steps needed to ensure no one gets hurt.”

With Independence Day arriving next Wednesday, more workers are expected to travel and take time off from their jobs. With an increase of people on the road and in pools and oceans, for example, more people are at risk of injury or death.
The NSC information released earlier this week dovetails with the end of National Safety Month. Facts and trends include:

  • Pedestrian fatalities. Pedestrian deaths start to increase in late summer and continue a steady increase through the end of the year. Since 2009, pedestrian deaths have risen sharply, totaling 7,330 in 2016 compared to 4,109 in 2009. For the first time, Injury Facts shows where pedestrian fatalities tend to occur, outdoor lighting conditions at the time of the death and the day of the week the incident occurred.
  • Drownings. Swimming, playing in the water or falling in the water claimed 656 lives in July alone in 2016, a 108% increase over the yearly average and their highest level that year. In total, 3,786 people died in 2016 from drowning. Injury Facts now breaks down all preventable deaths by month so people understand the biggest risks facing them throughout the calendar year.

When chronicling drunk driving incidents, the U.S. Department of Transportation (DOT) is pointing out the deadliness of the four-day period between July 2 and July 6. Over the 2016 Fourth of July holiday:

  • 188 people were killed in crashes involving at least one driver or motorcycle operator with a blood alcohol concentration (BAC) of .08 or higher.  (A 28% increase from 2015, which had 146 fatalities).
  • Nearly half of those who died were in a vehicle crash involving at least one driver or motorcycle operator with a BAC of .15 or higher—almost twice the legal limit.

Even if you’re off the road and hosting a company party or celebrating in a backyard, there are risks all around. The National Fire Protection Association (NFPA) warns that there are more fires reported on the Fourth of July than any other day of the year, nearly half of which are caused by fireworks. With extreme drought plaguing the western states, fireworks, outdoor grilling areas, and campfires require extra caution. The NFPA said that July is the peak month for grilling fires, with gas leaks cited as the leading cause.

And while looking to the sky for a fireworks show is always fun, the aforementioned groups recommend attending displays put on by professionals only and avoiding consumer fireworks. According to the Consumer Product Safety Commission’s (CPSC) 2017 Fireworks Annual Report, fireworks were involved in an estimated 11,100 injuries treated in U.S. hospital emergency departments in 2016.

“Preventable injuries are the third leading cause of death for the first time in United States history,” NSC President and CEO Debbie Hersman recently told Risk Management Monitor. “Sadly, our national opioid epidemic and the sudden recent increase in motor vehicle deaths have propelled preventable injuries past chronic lower respiratory disease and stroke in terms of how many lives are lost each year. Every single unintentional injury could have been prevented.”

Despite A ‘Near-Average’ Forecast, Hurricane Flooding May Increase

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With so many businesses and individuals affected by Hurricanes including Maria, Harvey and Irma in 2017, risk managers and insurers are looking to revised forecasts of this year’s hurricane season for a glimmer of hope that 2018 will not bring the same destruction. They may have found it in new information released by Colorado State University, which indicates that a near-average season is likely. It predicts 14 named storms between now and Nov. 30, of which six would become hurricanes. But the caveat is that one immense storm during a “near-average” season can still wreak havoc on businesses and homes.
The criteria is heavily based on the number of hurricanes and not their economic impact. Look to other years with similar buzzword descriptors to determine if its impact is included in your organization’s systematic risk.

“The years 1960, 1967 and 2006 had near-average Atlantic hurricane activity, while 1996 and 2011 were both above-normal hurricane seasons,” said Phil Klotzbach, research scientist in the Department of Atmospheric Science and lead author of the report.

Most of those years endured damage caused by heavy tropical storms—the most noteworthy was 2011 when Hurricane Irene touched down and ultimately cost $15 billion alone. Klotzbach’s team predicts that 2018 hurricane activity will be about 135% of the average season. By comparison, 2017’s hurricane activity, highlighted by Harvey, Irma and Maria, exceeded average season expectations by about 245%.

Given the outlook, experts are still optimistic about the insurance industry’s resilience. A recent Moody’s report noted that despite last year’s losses, the reinsurance industry has sufficient capital to absorb hurricane-related claims.

“Hurricanes, particularly Harvey, Irma and Maria, alongside other catastrophe events last year wiped out a number of reinsurers’ profitability for the year and drove the sector’s profitability to its lowest level since 2005,” analyst Rocio Nunez said in a statement.

Here Comes The Flood
There is another risk associated with hurricanes that could also explain the rising costs and number of claims. The storms themselves—not their windspeeds—have been moving slower than they did 70 years ago. With the collective pace of weather systems slowing down, the risk for flooding increases. Jim Kossin, a researcher at the National Oceanic and Atmospheric Association (NOAA), recently published findings and offered some theories to explain why storms and hurricanes are overstaying their welcome.

According to his recent report, A Global Slowdown of Tropical Cyclone Translation Speed:

One thing scientists do know is that the location where tropical cyclones reach maximum intensity has been shifting toward the poles. And, this may be related to or even causing the overall slowdown.

Using the ‘operational best-track’ data from the Automated Tropical Cyclone Forecasting System (ATCF), the 2017 mean-over-land Atlantic translation speed is 17.9 km h-1, which is at the slowest 20th percentile of over-land translation speeds for the period since 1949.

Some experts believe that global warming also contributes to the slower pace since it “weakens the summertime circulation of the atmosphere in the tropics.” Still, a stalled hurricane and ongoing precipitation may be too much for some infrastructures to handle, as was demonstrated in Houston last year.

Hindsight
The 2017 hurricane season was undoubtedly a wakeup call for the United States, as it saw 12 named storms causing 100 deaths—68 from Hurricane Harvey alone—and is considered the 17th deadliest hurricane season since 1990. With regard to economic impact, last year’s natural disasters between June 1 and Nov. 30 caused $200 billion in reported damages, making it the second-costliest season on record behind the 2005 season.

“Hurricane Harvey was a different beast—its movement stalled because of high pressure regions that essentially blocked its path. It’s not clear whether we’ll see that specific situation more commonly as the world warms,” an Ars Technica article noted. Other ways in which climate change contributed to Harvey’s impact—like warmer ocean water and warmer air holding more water vapor—are more obvious.

Risk Management Monitor reported that the majority of senior executives of large U.S. companies with operations in Texas, Florida or Puerto Rico admitted to being unprepared for the hurricanes that devastated their communities in 2017. According to a survey by FM Global, 64% of respondents said the hurricanes had an adverse impact on their operations, a full 62% said they were not entirely prepared.

New RIMS Report Delivers a ‘Wakeup Call’ To Risk Managers

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According to the new RIMS report, Enterprise Risk Management’s Wakeup Call: 10 Years After, an increasing number of organizations are at least partially integrating ERM into their frameworks as they prepare for the possibility of another financial crisis or a new threat.

“The evidence shows that risk management has evolved from a promising but somewhat perfunctory exercise into a strategic management competency,” said RIMS Vice President of Strategic Initiatives Carol Fox, who authored the report. “Even so, given increasingly uncertain times, risk management professionals would be unwise to declare victory or become complacent.”

The 10 Years After report highlights a range of perspectives from executives, officers and risk professionals who represent banking, higher education, technology, health care, transportation, and a federal agency. These professionals offer their perspectives on where ERM stands today. In fact, one shared observation is that the factors which contributed to the crisis are resurfacing, but that ERM can help protect against them. As one technology officer noted: “…as soon as people are introduced into the equation, things change and risks are introduced into the process. While financial models and robot investing are agnostic, once you introduce people, their biases come back into play and disrupt the integrity of those models.”

The integration of ERM programs—even partially—has seen a slow-but-steady climb in the past decade. The report cites statistics from recent RIMS surveys, showing that 92% of financial institutions have fully or partially integrated ERM programs since the housing market crisis. Full integration, however, may be the key to protection and value—and this is accordingly the most daunting, long-term task. “At any point in time, changes in an organization itself, given myriad complexities and disruptions, may take focus away from full integration,” Fox said.

The report discusses what the experts and their industries learned from the financial crisis in the way of risk appetite and regulatory systems. By examining recent literature and studies to better understand the risks facing organizations, the report challenges risk professionals to deliver programs that generate value.

It also offers insight as to what organizations should consider as they further integrate programs. Changes in legislation, interest rates and the volatility of cryptocurrencies are on the collective radar as risk professionals look to the future.

“[bitcoin’s] future is unknown, especially given its recent run-up and sudden devaluation,” the technology officer said. “Cryptocurrency could become problematic because of scale—particularly if someone figures out a way to short-sell it much like what occurred with CDOs.”

Enterprise Risk Management’s Wakeup Call: 10 Years After is available to RIMS members only for the first 60 days. After the introductory period, it will become available to the broader risk management community. You can download the report via Risk Knowledge.

Complementary to the report, Risk Management Monitor recently published Compliance in 2018: Q&A with James Reese of the SEC, highlighting how the SEC views organizational risk management.

Multiple Risks to Watch Out For at 2018 World Cup

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Above: Luzhniki Stadium in Moscow 

The 2018 World Cup tournament began on June 14 and lasts until July 15. Thousands of fans will travel to Russia for the event, which consists of 64 matches and 32 teams in 11 cities. Like other mega events, it presents countless challenges for a number of industries including construction, travel, hospitality and security.

Circuit Magazine for security specialists reports that threat for terrorism is high, as there have been attacks in Moscow and the North Caucasus and most recently, a suicide attack on a Metro Train in St. Petersburg. It notes, however, that “Past performance in security terms of Russia at large events has been very strong, the Sochi Olympics was well controlled with no terrorist incidents affecting fans.

Based on our assessment we continue to recommend that any attendance at large events, or corporate travel in Russia is supported by additional risk management measures.”

The article also recommends that attendees remain vigilant in public places, adding that to address this risk, security has been increased at airports and transportation hubs. It warns of street crime, including pickpocketing, that targets tourists. “Bogus police officers have harassed and robbed tourists.

If you are stopped always insist on seeing identification. Avoid openly carrying expensive items, or anything that might easily identify you as a tourist. Avoid walking about late at night alone,” Circuit warned.

Not to be overlooked are health concerns.

The European Centre for Disease Prevention and Control (EU/EEA) recommends in a recent report that anyone traveling to Russia for the games make sure their vaccinations are up-to-date, particularly for diphtheria, hepatitis A, hepatitis B, measles, meningococcal infection, mumps, pertussis, poliomyelitis rubella and tetanus. According to the EU/EEA:

“As is often the case with mass gathering events, during the 2018 FIFA World Cup in Russia visitors may be most at risk of gastrointestinal illness and vaccine-preventable infections. The risk of being affected by gastrointestinal illness can be reduced by employing standard hygiene measures including regular hand washing with soap, drinking safe water (bottled, chlorinated or boiled before consumption); eating thoroughly cooked food and carefully washing fruit and vegetables with safe drinking water before consumption.”

It added that while outbreaks and spread of vaccine-preventable diseases are of particular concern during such mass gatherings. “there are no indications that the risk is higher than usual.”

Beazley notes that many of the 2018 World Cup’s risks impacting various industries will be covered by the London insurance market. The insurer outlines some of the key risks and their likely insured values: