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My biggest takeaway from 2021? Insurance professionals need to expand their approach to risk management by incorporating resilience planning
By Bart Shachnow, Head of Zurich Insurance Academy and Sales Performance Director, Zurich North America
I don’t think anyone would argue that this has been an extremely weird and trying year, certainly for us in the risk management industry. The pandemic still lingers. Natural catastrophes, from windstorms to wildfires, continue unabated and are worsening. Traditional financial systems are being challenged by alternative currencies, with an entire nation (El Salvador) adopting Bitcoin as legal tender. Traditional social and political structures continue to fray, with populist movements and extreme polarization of citizens on the rise.
We are in uncharted territory. For us in the risk management and insurance industry, that means we need to change the paradigm and think differently about how we think about and manage risk. We need to make resilience a major component of risk management and insurance planning.
But what does it mean to be resilient? Some analogize it to the ability to snap back from a shock, like a rubber band that snaps back to its original position after being stretched, or an ill person who regains his health. More broadly, resilience assumes the inevitability of losses, the need to learn from those losses and become better and stronger (i.e., more resilient) in the process.
Adopting resilience for an unpredictable future
Here’s where a contrast between our traditional view of risk management and resilience is useful. The former focuses on recovery from known events that have been experienced. Thus, they focus on traditional sources of loss, like fire, flooding and windstorms and, of course, more sophisticated losses like data breaches and employment practices liability claims (such as hostile work environments). We’ve seen those before.
But if the past 18 months have taught us anything, it’s that we have to prepare for the unpredictable — for losses we are not used to seeing. Who would have thought, for example, that a supersized cargo ship would single-handedly block the Suez Canal in March of this year, thereby shutting down a transportation artery through which flows 12% of global trade and 30% of global container traffic, carrying $3 to $9 billion of cargo every single day?1 Or that February winter storms in Texas would cause the lowest temperatures there in 72 years, causing an estimated $195 billion in losses?2 Or that a fire in March at a semiconductor chip manufacturing facility in Japan would impact nearly all of the world’s major auto manufacturers, contributing to a surge in new car prices?3 Or that a massive cyber hack this past May of a fuel refinery and pipeline company would disrupt the supply of gasoline up and down the East Coast?4
The Zurich Flood Resilience Alliance defines resilience as “the ability of a system, community or society to pursue its social, ecological and economic development and growth objectives while managing its disaster risk over time in a mutually reinforcing way.”5 To me, the definition applies to any operation or “system,” which could mean a family, a corner grocery store, or any business of any size.
According to the Alliance, critical components of resilience include:
- Robustness, or the ability to withstand a shock, including shocks that are unprecedented or unanticipated (like the Texas freeze or the pipeline hack).
- Redundancy: Having diverse resources to respond to a loss. At one extreme, this means having alternative sources of supply, duplicative warehousing facilities and backups of data. It also means having a diverse workforce representing different viewpoints, perspectives and insights, all of which can help a company recover from a loss and grow in the process.
- Resourcefulness: Involves the ability to mobilize thoughtfully, strategically and creatively when the organization is or might be subject to unanticipated perils. Think of the companies that had to change their business model or method of operation in the wake of the pandemic. For example, Whole Foods Market turned several of its locations into “dark stores” that didn’t allow retail traffic, but were converted for use as grocery distribution hubs to accommodate online, home-delivery orders.6
- Rapidity: The ability to contain losses and recover in a timely manner. Some companies have been able to adapt quickly. Some have not, and have failed. Fitness centers typically rely on in-person workouts. Some fitness centers converted quickly to a video-based workout model that expanded their offerings to accommodate customer preferences.
The ability to be resilient is and will continue to be a major differentiator going forward. And insurance companies are likely to reward companies that have a meaningful and robust resiliency plan with broader coverage at better rates.
Adopting resilience as a personal game plan
Finally, in the spirit of the holiday season, let me close by suggesting that, as individuals, we also need to be resilient. I’m not a psychologist or healthcare practitioner of any kind, but what I can do is share my own top five list for personal resilience:
1. Stay positive. There’s always enough bad news and “doom and gloom” in the world. Rise above it. Negativity will only drag you down. You’ll feel better about yourself, and those around you will be more attracted to a positive outlook.
2. Always be growing and learning. Risk management and insurance are complex. You can spend your entire career in our business and never master it. Improve your skills, learn from your mistakes, and make every day meaningful.
3. Be passionate and take pride in your work. I love to work in our industry among great, smart and kind colleagues. I take pride in them, the organization I work for, and the work we do. It helps fuel and sustain me.
4. Set personal and professional goals. In addition, be willing to revise and adapt them during the course of the year, always striving to stretch and challenge yourself.
5. Take care of yourself and your significant others. Get plenty of exercise, rest and relaxation, and help others adopt a successful, healthful, happy and resilient lifestyle.
My very best wishes to all of you for a safe and happy holiday season! As always, I would love to hear your feedback and comments. Send me an email.
Bart Shachnow, CFP®, CLU, ChFC, CPCU, is Sales Performance Director at Zurich North America and Head of the Zurich Insurance Academy training programs. Bart works with a variety of stakeholders, including Zurich colleagues, as well as distributors and customers, to develop and share information, ideas and strategies that can help these internal and external audiences perform more effectively and productively.
1. “The Importance of the Suez Canal to Global Trade.” New Zealand Foreign Affairs & Trade. 18 April 2021.
2. “2021 Winter Storm Uri After-Action Review Findings Report.” City of Austin and Travis County. Accessed November 2021.
3. Jie, Yang. “Fire at Giant Auto-Chip Plant Fuels Supply Concerns.” Wall Street Journal. 3 March 2021.
4. Sanger, David E., Clifford Krauss and Nicole Perlroth. “Cyberattack Forces a Shutdown of a Top U.S. Pipeline.” The New York Times. 13 May 2021.
5. “The Flood Resilience Measurement for Communities.” Zurich Flood Resilience Alliance. 2019.
6. Berg, Nate. “The Rise of ‘Dark Stores’ — and How They Could Save Struggling Retail.” Fast Company. 11 September 2020.
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