How To Help Manage Your Company’s Risk
Every day companies in today’s society face innumerable risks to their businesses both internally and externally. Not only are there risks from competitors but in today’s litigious society attacks and threats to businesses can come from almost anywhere.
Each year companies across America and worldwide spend billions of dollars fighting and settling plaintiffs’ claims brought against them. While some cases are warranted, many are the tactics of aggressive attorneys seeking to enrich themselves who file lawsuits in hopes of a big payday at the company’s and their shareholders’ expense.
After college I had the opportunity to work in a 20 person law firm in my hometown in Virginia. My job was to assist the firm’s administrator in her duties which mainly consisted of looking after the firm’s computers, making copies, picking up clients and running whatever other errands she needed done.
One of my daily tasks was getting the mail and making bank deposits. I vividly remember going to the post office and picking up dozens of checks ranging in amounts from the thousands to the millions. In most cases the checks were settlements for the firm’s clients in personal injury asbestos cases. The checks came from companies like Owens Corning and Johns Manville which were some of the biggest players in asbestos manufacturing.
Our firm was just one of many that raked in millions of dollars in fees and expenses for injured parties. Our clients were given death sentences from the mesothelioma found in their lungs caused by the asbestos fibers they had inhaled earlier in their careers. In many cases the settlement amounts were just enough money to give families the ability to give their loved ones a proper funeral.
The personal injury division was by far the most profitable division in the firm. They risked big by taking no upfront fees. I quickly learned that they only took the cases where the odds of winning were high. Not only did the firm receive a third of the settlement amount they also collected the fees associated with making the case. This often left the plaintiffs with less than half of the settlement amount. It became pretty clear to me who really won when juries returned verdicts in favor of the plaintiffs.
From my first day on the job the attorney at the head of the personal injury division took a liking to me. He allowed me to witness the inner workings of his division and the firm. In one case he let me help decide who should be excused from the jury pool.
On one beautiful Spring day I drove his shiny silver Jaguar XJS to Northern Virginia while he sat shotgun preparing for a meeting with the Defendants’ counsel on a pending case. A young man had been left paralyzed from the neck down and unable to speak after a large piece of architectural mosaic stone slid off a tractor trailer bed into the driver side of his car. He was driving to buy his wife a Valentine’s Day card.
When we arrived at the site we were immediately surrounded by a dozen lawyers representing the trucking company, the trailer bed and strap manufacturers, insurance companies and several others. Each one was pointing the finger at each other as the one to blame. When I asked our attorney why there were so many opposing attorneys while he was the only one on the plaintiff side he said, “It doesn’t matter David. I’m gonna make them all pay!”
As time went on I learned that all of the firm’s PI attorneys were constantly looking for the next big thing to sue companies over. It seemed to me like they were some kind of modern day prospectors looking for gold. From breast implants to faulty devices that caused injuries, they were always hunting for a new vein of gold to tap.
The firm cured me of any desire to be a lawyer. It wasn’t Matlock and the whole profession seemed too tedious for me. In my chosen field of Marketing I would soon get a feel from the Defendants side of the equation.
One of the most important jobs of any CEO is managing risk which takes on all different shapes and sizes and is always challenging. Teams of in-house and out-of-house lawyers create strategies and fight hard to protect their company’s interests. Just like the Plaintiff attorneys, there are good lawyers doing it for the right reasons and bad ones doing it for the wrong ones. In my observations it was merely a system of checks and balances to help insure neither side gets the upper hand.
In 2004, an advertising agency I was working for was approached by a large Class-1 freight railroad. The company and the industry in general had been beset by problems stemming from train/car collisions at railroad crossings where in most cases the driver was severely injured or killed. As you can imagine settlements for injured parties could run into the millions. Train-related accidents usually occur when people are in a rush or are distracted. Mistakes can happen but in order to get hit by a train you pretty much have to be in the exact wrong place at exactly the wrong time.
However, the media and juries don’t always see it that way often falling on the side of the injured party. In many cases the large corporation is seen as the villain and is made to pay. Our client wanted to change that dynamic. They took a proactive and effective approach by hiring us to create a strategy and communication plan to educate the public about the dangers of trying to beat a train or walking on railroad tracks.
Walking on railroad tracks is extremely dangerous so please don’t do it. You wouldn’t walk across an airport runway would you?
They didn’t hide but found the courage to approved a cutting edge ad campaign that was recognized by the Wall Street Journal as an innovative approach to risk management communications. More importantly, coupled with multiple operational initiatives the effort helped reduce rail related incidents by over 40% which means more people went home exactly the way they left… alive and in one piece.
Saving lives was always the goal but in business terms it meant less litigation, fewer trains stopped and less legal costs saving literally millions of dollars that could be returned to shareholders. This all goes without mentioning the psychological benefits of saving train engineers and conductors from the trauma associated with being helpless during a collision and eyewitness to a fatality (Trains can take over a mile stop).
Our client didn’t stop at train-related incidents. They enlisted our services to help manage their other risks and challenge the norm on employee health and wellness, the environment and giving back to the communities they serve. It was the right thing do, but our combined efforts helped mitigate the areas where the company had the biggest risk.
Over the years our solutions have help promote a healthy, largely blue-collar workforce, sustained their ability to operate and through a program called “Trees For Tracks” brought warring community and political factions together to discuss and work through their challenges together.
However, some times seemingly benevolent corporate socially responsible campaigns can be deceptive. A September 2014 report issued by Johns Hopkins Bloomberg School of Public Health noted that the alcohol beverage industry’s “Drink Responsibly” campaign has generated more sales than safety. It notes the fact that the “Drink Responsibly” messaging isn’t accompanied by any tangible recommendations of how to drink responsibly or when to abstain.
In my experience the companies that proactively and authentically embrace their responsibility are the most successful. Companies that merely check the box and pay lip service to their efforts will ultimately continue to pay the heavy price in litigation and claims.
Strategies For Effective Risk Management Communication Initiatives
- Learn — You may already know and understand the biggest risks to your business, but it never hurts to do a full assessment and take a complete inventory of the risks you face. Measure them from smallest to largest. Make sure that any Discovery process includes those most affected and the real dollar cost of the risk. Cast a wide, but nimble net to make sure you involve the people necessary to help craft a solution. Make sure you completely understand the risk and any downsides. More importantly determine what can be potentially gained in terms of productivity and the impact to the bottom line. Then build the right team to work on the challenges that can be successfully implemented to mitigate the risk.
- Embrace The Initiative — There has to be real buy-in at all levels of the organization for any communication strategy to work. One influential naysayer can scuttle the whole thing. Communicate with your organization prior to any external launch about why the strategy is important to win buy-in. For example, within the railroad client, safety as a way of life was embraced at every level of the organization from the C-Suite to the Machine Shop. It was only natural for them to promote safety externally.
- Invest — There is no one size fits all formula on how much to spend on Risk Management related activities and CSR. You have to spend what it takes. The investment can’t be looked at as something you have to do or that your board told you to do, but something you want to and should do. Take an educated look at the investment in terms of years and how long it will take to effectively communicate your message to the public. It is OK to start small and grow over time. If done correctly the investment will pay dividends in reduced risk, happier employees, positive public perception and media attention.
- Measure — Take time to create metrics and benchmarks to measure your specific efforts. Our goal was to decrease rail-related incidents which was tangible and easy to track. Goals such as increasing positive public perception my be harder to track and could require the services of an outside firm to help.
- Share The Good News — Share your risk management and CSR strategies with your competitors, especially if your company is in an industry that is lagging behind the times. Elon Musk has made all of Tesla’s patents public https://www.tesla.com/blog/all-our-patent-are-belong-you because he has a much higher vision… Save the planet from the effects of global warming. If someone can build a better electric vehicle than Tesla so be it. Sharing successful tactics with others facing similar challenges will help everyone. In this case, the tide really does lift all ships.