Author: Risk Institute Communications

Economic Nationalism & Trade Conference

On February 8, 2019, The Risk Institute, Moritz College of Law, Fisher College of Business and the College of Food, Agricultural and Environmental Sciences examine — through an interdisciplinary lens — the legal, business and economic consequences of U.S. trade policy.

“Trade policy is an important and complex issue requiring understanding and solutions made through collaborative sharing of the information and ideas from multiple areas of specialized knowledge,” said The Risk Institute Executive Director Phil Renaud. “Interdisciplinarity is one of our hallmarks of our academic efforts at Ohio State, and it is fitting that three of our colleges would co-sponsor this conference.”

The day was broken up into three distinct sections, each focusing on different aspect of economic nationalism: law, economics and business.

Daniel C.K. Chow, Frank E. and Virginia H. Bazler Chair in Business Law at The Ohio State University Moritz College of Law argued that as practiced by the US and China, the two main proponents of economic nationalism in the modern global economy, the term refers to the “adoption of national policies that promote exports while at the same time creating barriers to imports.”

Many of the panelists agreed that tariffs as a trade policy are simply blunt instruments, but the implications and instrumentation of that instrument have tangible political and economic consequences. For example, farmers in China are able to get into global manufacturing and that’s a big job compared to low skill workers in Ohio. An obvious solution then is to reduce the number of low-skill workers in highly developed countries.

The Economic Nationalism and Trade Conference raised as many questions as it was positioned to answer especially surrounding hot-button issues: redistribution of wealth, globalization, economic and actual mobility. The Colleges were very pleased to bring together three connected disciplines – economics, business and law – to discuss about international trade, an issue that affects everyone in our nation and beyond. By sharing perspectives, we broaden our common understanding, and aim to improve the well-being of our state, regional, national and global communities.

Risk Institute Seeking Researcher for Impacts of Opioids in the Workplace

Detecting and Dealing with Workplace Opioid Abuse

From Safety Management Group

To supervisors and managers who grew up during the 1960s and 1970s, the mention of addiction to heroin and other opiate drugs conjures images of skinny junkies wasting away in a filthy apartment, an alley, or a gutter. It was something that happened to other people in other places.

But that’s no longer true. The problems associated with abuse of these drugs appear to be greater than ever, and the users are well-hidden throughout America’s workplaces. A recent study of 200 Indiana employers conducted by the National Safety Council and the Indiana Attorney General’s Prescription Drug Abuse Prevention Task Force reported that prescription drug abuse currently affects 80 percent of companies.

Think there’s a difference between prescription drugs and heroin? Think again. Among the most-abused drugs are synthetic opioids that are prescribed by well-meaning doctors. Familiar painkillers such as Vicodin, OxyContin and Percocet were developed to mimic the effects of opiate drugs such as heroin in a more controlled fashion.

About two in three of the employers who were surveyed saw prescription drug abuse as a bigger problem in their workplaces than illegal drugs, with one in five reporting that there had been an injury or a near-miss related to prescription drugs. A quarter said employees had borrowed or sold prescription drugs at work, and 40 percent said that an employee had missed work time because of prescription drug abuse.

According to a medical journal, American employers lost more than $25 billion to prescription opioid abuse in 2009, and experts believe the problem has grown far larger. Just as chilling, the Centers for Disease Control reports than 44 Americans die each day as a result of abusing prescription opiates.

Opioids and workers
According to the federal Substance Abuse Mental Health Services Administration, roughly 10 to 12 percent of workers are under the influence of alcohol or illegal drugs while at work. Those numbers are likely to be higher in a number of industries, particularly construction, manufacturing, and trucking.

Even if workers aren’t addicted and are simply following a doctor’s directions, the powerful painkillers can create a hazard. The familiar “do not operate heavy machinery” labels are there for a reason, and heavy machinery includes cars and other worksite vehicles.

Signs of abuse
The old stereotype of the junkie described earlier is less applicable today. Many opiate abusers with costly habits are not readily identifiable as addicts. They come from nearly every walk of life, and many have good jobs and what appear to be stable families. But as addiction progresses, their hunger for and focus on their next “high” tends to crowd out the other aspects of their lives.

Opioid addicts tend to be in one of two stages while at work. If they are under the influence of the drugs, at first glance, they may seem to be relaxed and functioning well. However, there may be evidence of mood swings or major changes in energy level. They may appear to nod off while on the job or fall asleep at their workstations, in their cars, or even while using the bathroom.

Then, as the effects of the last dose wear off and the craving for the next begins, they may display signs of withdrawal. The symptoms often appear to be the same ones associated with flu or gastrointestinal “bugs,” including nausea, diarrhea, sweating, shaking, aches, and a runny nose. They may also become irritable and anxious. A worker whose addiction has progressed to injected heroin may need to repeat a dose every few hours, going through the cycle several times a day.

Other warning signs of abuse include an unusually high number of pill bottles in trash cans. Addicted employees may develop serious financial problems, requesting advances on pay or trying to borrow money from or sell things to co-workers. It’s not unusual for addicts to withdraw from the social aspects of work, and a once-gregarious worker may suddenly become quiet and sullen.

Steps to take
Pre-employment and random drug screenings are an excellent strategy for detecting (and providing a deterrent against) drug abuse in the workplace. However, the survey of Indiana employers discovered that while 87 percent of the employers conduct drug testing, just 52 percent include screens for opioids. In addition, only 53 percent of the employers had policies addressing the use of prescription drugs on the job (although 80 percent reported having had an issue with such use in the past).

Would you or your team recognize that an employee was abusing opioids? The Indiana survey found that 60 percent of employers doubted their staff’s ability to spot warning signs, but fewer than 30 percent offer supervisors training about detecting abuse of prescription drugs. The National Safety Council recommends that employees and supervisors receive training to help them spot addiction and respond effectively.

Don’t ignore it
It’s human nature to not want to confront someone about addiction, or to mention a colleague’s apparent addiction to a manager. But when it comes to opioid addiction, there are two important reasons that people should be encouraged to speak up. The first is that a worker with an addiction will place himself and his fellow workers at risk of injury, and could become involved in criminal acts such as theft to support his habit.

Even more important, addictions may become significantly worse over time, possibly ending in an accidental overdose. Speaking up about what appears to be an abuse problem could very likely save that worker’s life.

Ohio State Researchers Find Road Design Changes Can Reduce Distracted Driving Crashes

Columbus, Ohio (Nov. 19, 2018) – While efforts to combat distracted driving have primarily focused on passing new laws and changing driver behaviors, a new study from The Ohio State University’s Risk Institute reveals the important impact that modifying road design can have on reducing the frequency and severity of distracted driving crashes.

Researchers Zhenhua Chen and Youngbin Lym, assistant professor and his PhD student, in city and regional planning at The Ohio State University, found a 35 percent increase in distracted driver fatalities in Ohio and a 23 percent increase in serious injuries for the period 2003-2013. Additionally, distracted driving crashes were more severe in some road environments, such as work zones where they were up to two times more likely to be fatal.

This research found that urbanized areas such as Columbus, Cleveland and Cincinnati had much higher risk in vehicle crashes than other regions in Ohio. Even the length of a roadway segment or number of lanes had an impact on the frequency of distracted driving crashes. On the other hand, roundabouts had a significant effect on reducing the severity of distracted driving-related crashes. Other road environments that have a median or a shoulder with an asphalt pavement were also found to have fewer distracted driving crashes.

“This study helps to highlight that there is a need to improve traffic safety and road management,” said Phil Renaud, executive director of The Risk Institute at The Ohio State University Fisher College of Business. “It provides new evidence that supports taking steps to improve traffic signs and safety regulations for distracted driving in specific areas. There are things we can do on a local, city level to lower crash frequencies and severities.”

Key findings also include:

  • Distracted driving-related crashes account for approximately 18 percent of overall Ohio crash fatalities and 16 percent of Ohio serious injuries.
  • Distracted driving-related crashes are up to 49 percent more severe when they occur on a highway system.
  • The risk of vehicle crashes due to distracted driving is found to be highest in the Columbus area.
  • Distracted driving crashes are 5-10 times more likely to be fatal than severe in a rear end and or angle crash.
  • Roundabouts were found to be the single most effective road design in reducing the rate of crashes and crash severity. Overall, within the data (2013-2017) there were no fatal crashes within roundabouts.

The increase in distracted driving-related crashes in Ohio has become a major concern to various stakeholders, including insurance companies, transportation planners and policymakers. To help address this problem, which is so costly in terms of lives, medical bills, car repairs and insurance costs, the Property Casualty Insurers Association of America (PCI) funded The Risk Institute’s study and is working to raise awareness about the dangers of distracted driving.

“Those of us in the insurance industry hear far too many stories of how families are devastated because someone was texting behind the wheel,” said Bob Passmore, assistant vice president for PCI. “This research confirms some of the trends we have seen in auto insurance claims. Congested, urban roadways, infrastructure challenges along with the ubiquitous use of electronic devices combine to create hazardous driving conditions. As we have seen with other motor safety issues such as seatbelt use and drunk driving, there is no single answer to addressing the problem of distracted driving. It takes a coordinated strategy combining the enactment of laws, strong enforcement, drivers taking personal responsibility to avoid distractions and improvements in transportation infrastructure design.”

About the Risk Institute

The Risk Institute at The Ohio State University Fisher College of Business is a collection of forward-thinking companies and academics that provide effective risk management strategies to not only protect firms, but position firms to create growth and value. The Risk Institute helps members consider risk from all perspectives: legal, operational, strategic, reputational, talent, financial and many more. The Risk Institute operates at a unique intersection between faculty, students and professionals from a broad cross-section of industries. With a leading-edge approach to risk management, The Risk Institute creates a unique exchange for risk-centered conversations, ideas and strategies that can’t happen anywhere else.

About PCI
PCI promotes and protects the viability of a competitive private insurance market for the benefit of consumers and insurers. PCI is composed of approximately 1,000 member companies and 340 insurance groups, representing the broadest cross section of home, auto, and business insurers of any national trade association. PCI members represent all sizes, structures, and regions, which protect families, communities, and businesses in the U.S. and across the globe. PCI members write $245 billion in annual premium, which is 38 percent of the nation’s property casualty insurance marketplace.

Time & Change: Risk Institute Annual Conference 2018

Our 2018 Annual Conference — an invitation-only, two-day event (Sept. 26 & 27) — was attended by C-suite executives and senior risk professionals from around the globe and featured Eddie George, Ohio State Football legend and Jeff Eggers, Executive Director of the McChrystal Group. This year our conference focused on managing talent pipeline and workforce development in the face of massive technological change and economic upheaval.

Our annual conference is an ongoing dialogue between risk management practitioners on risk management successes, challenges and leading practices related to the evolution of risk.

Attendees heard from 15 talented speakers. Each coming from a unique perspective on managing talent pipelines in the face of massive technological change and economic upheaval.

“Some say that Gen Z has an 8-second attention span, but I don’t believe it. I think they have an 8-second BS meter. They can tell in a snap if something is relevant to them — if it’s bogus, if it’s worth their time,” said Marcie Merriman, Chief Culture Hacker at EY. “The millennial boat has sailed and Gen Z is here.”

Professor Joseph Fuller from Harvard University’s Future of Work Initiative offered insight into how Boomers approach a rapidly changing job market, “While Baby Boomers might recognize the job titles of today, many would lack the skills required to do the jobs they had when they retired.”

In addition to discussing demographic changes, Eddie George, Ohio State Legend and Entrepreneur offered attendees some sage advice, “You are going to be uncomfortable in life. So why not learn to be comfortable in the uncomfortable?” He encouraged attendees to eliminate the metaphorical box governing their life, citing his own experience of becoming a wealth manager, getting his MBA, and acting on Broadway after a successful career in the NFL.

We live in a digital world, which means that the risks we face are changing more rapidly than ever before. Over the course of two days, we sought to cultivate a greater understanding of how an organization can approach the many sides of talent risk — and leverage it to create value.

As Greg Khairallah, Senior Manager for Big Data and Analytics at Amazon Web Services, put it, “We simply cannot afford to think about risk the same way we’ve thought about it in the past.”

The Risk Institute Releases Fourth Annual Survey on Integrated Risk Management

Data Reveals Risk Management Funding Growing, Opportunity to Improve Corporate Objectives

Columbus, Ohio – Today The Risk Institute at The Ohio State University Fisher College of Business, a leading risk-management research organization, reveals its Fourth Annual Survey on Integrated Risk Management. The report surveyed more than 500 financial, nonfinancial, public and private firms to understand how U.S. companies view the role of risk management, the influence of governance and culture and how risk impacts business decisions.

The data reveals 70% of firms have an integrated risk management unit and companies are
increasing funding for risk management, but the size of those units continues to decrease. Despite recognizing the need to invest in risk, firms are not investing in people. Among the other 2018 findings:

  • 60% of risk managers believe that artificial intelligence will play a role in risk management in the future.
  • 28% of firms surveyed have been victims of a cyber attack – a risk that continues to grow each year.
  • 55% of respondents do not use predictive analytics, and those that do have been using them for less than two years.
  • 44% expect to outsource some or all of their risk function.

Risk management policies play an increasingly critical role in a firm’s ability to create value and remain competitive. Both financial firms and nonfinancial firms reported that when they integrate risk management into business processes, they are able to improve corporate objectives.

“One of our key objectives at The Risk Institute is to create a greater understanding of how organizations can proactively leverage risk management to create shareholder value,” said Phil Renaud, Executive Director of the Risk Institute. “Volatility in the current economic and political environment, as well as cyber risk becoming a real threat to many firms, lead to a more vulnerable business environment, making the role of risk management more integral.”

To learn more about the Risk Institute and its Fourth Annual Survey on Integrated Risk Management, please visit: http://go.osu.edu/risksurvey

About the Risk Institute

The Risk Institute at The Ohio State University Fisher College of Business is a collection of forward-thinking companies and academics that provide effective risk management strategies to not only protect firms, but position firms to create growth and value. The Risk Institute helps members consider risk from all perspectives: legal, operational, strategic, reputational, talent, financial and many more. The Risk Institute operates at a unique intersection between faculty, students and professionals from a broad cross-section of industries. With a leading-edge approach to risk management, The Risk Institute creates a unique exchange for risk-centered conversations, ideas and strategies that can’t happen anywhere else.

 

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The Risk Implications of Smart Technology

Artificial intelligence, drones, and the internet of Things are some of the most exciting developments happening in the tech world, but with these advancements come new and unforeseen risks for companies, governments and private citizens.

Last week, The Risk Institute hosted a continuing professional development session on the risk implications of smart technologies with experts from DHL, Cisco, EY and The Ohio State University.

“Ten years ago, people thought of drones as something used by the military on covert operations. Today, drones are available for a couple bucks and can fit in your pocket,” said Jim Gregory, Director of the Aerospace Research Center at The Ohio State University.

Gregory believes that the possibilities of drones are far-reaching, from package delivery to search and rescue, but that in order for the economics to work themselves out, the legality of drones needs to shift because under the current FAA regulations, most of these use cases are still illegal.

The most significant risks involving drones are

  • Loss of control link
  • Collision with another aircraft
  • Collision with people or property on the ground
  • Emergent behavior of autonomous system

Many of those risks can be mitigated with “redundancies on redundancies,” which according to Gregory can take the form of robust control links and never allowing one system to become so important that its failure results in catastrophic failure of the entire system. These redundancies are also essential in artificial intelligence.

“Artificial intelligence is not a singular concept,” said Chris Aiken, Executive Director, Advisory Services. “It’s a science-based, multi-disciplinary combination of software and computations presented in a human-like manner.”

Just as the cotton-gin spurred on the first industrial revolution, many experts believe that artificial intelligence will fundamentally shift the workforce, but are also quick to point out that AI is not necessarily smarter that humans, it’s just different.

“The real power of AI is to augment and amplify human intelligence and performance,” said Aiken.

And world leaders are taking notice with the competition between countries like China, Russia, Canada and the United States heating up for a global arms-race to dominate AI.

But what value is there in artificial intelligence really? According to Aiken, the real value of AI exists in five areas:

  1. Revealing insights
  2. Optimize performance
  3. Harness automation
  4. Enhance experience
  5. Sustain trust

As with any disruptive technology, it’s valuable to consider the predominant ethical, legal, risk and social issues associated with it. In the case of AI, companies should:

  • Start any project by examining the ethical and legal impacts
  • Evaluate the consequences on jobs
  • Communicate to win employee approval

Building trust between the user/impacted parties and AI is imperative for the success of the technology and business. Taking a holistic, human-centered approach, focusing on outcomes, and being pragmatic and ethical are common sense steps to take in order to build trust.

The Risk Institute remains committed to leading the conversation on risk in partnership with our member organizations. We examined the risk impacts of artificial intelligence in the risk function in our 2018 Survey on Integrated Risk Management. The findings might surprise you.

Create a Resilient Supply Chain in Spite of Climate Change

In the last year,  there have been 17 natural disasters incurring more than $1 billion dollars in damages. According to experts hosted by The Risk Institute this week at an event on building business resilience to climate change, pre-planning and risk improvement can make a huge difference in loss mitigation.

Scott Anderson, a vice president at FM Global outlined numerous strategies that a company could take on in order to mitigate their risk in the event of a catastrophic weather event. These strategies were much more comprehensive than typical human interventions like sandbags; they are what he called physical flood mitigation — installing metal blockades, floodgates/barriers, etc.

This is much more than fear-mongering, these physical mitigations are scientifically proven to be more effective than human intervention. Take the massive flooding due to a hurricane or stalled rainstorm like Hurricane Harvey in 2017, which dumped nearly 60” of rain in just four days in the Houston area. FM Global clients who had made the recommended mitigations to their facilities only suffered a distraction, rather than devastation during the storm. In contrast, those clients who did not, incurred on average $23 million in damages from physical destruction, as well as in lost revenue.

Can your business afford a $23 million loss?

To illustrate an example of supply chain resiliency, Danielle Virant and Lee Ettenhofer from Abbott Nutrition shared their experience of leading the company through a table-top crisis exercise, which was then able to be acted on during Hurricane Harvey in order to ensure that hospitals — and in one case an immunocompromised baby girl — received the life-saving products they needed.

The key takeaway from their experience with the exercise and the actual emergency is that a plan is only as good as it is current, available, and in writing.

“Institutional knowledge is great, but it’s not so great with that knowledge retires without writing it down first,” said Virant.

Their advice is to set a date on the calendar every year to pull out the plan, review it, and make any changes that way it stays current and can quickly be applied if and when the need arises.

Kirk Pasich, an outstanding L.A. based litigator, shared some fascinating insights on the importance of contract language between the insurer and the insured, saying, “They [the insurer] is nearly always going to win— at least before you call me — when there is vague wording in a contract.”

Proving yet again, that specificity of language is much more important than your 10th-grade self ever thought it would be.

Is your business prepared to deal with climate change?

Two questions to ask to determine if your business has the capacity to be resilient to climate change.

2017 was a banner year.

Well, as far as catastrophic weather events incurring billion-dollar losses go.

According to a recent report, economic damages from weather-related disasters continue to climb towards and sometimes surpass record levels, with more than 800 major events worldwide cause an estimated $130 billion in losses in 2012 alone.

But while many companies are concerned about the cost of such events, they tend to plan for the future based on past trends. In the face of global climate change, 500-year and 1,000-year flood events are becoming more like 10-20-year events.

At a recent event hosted by The Risk Institute, climate researchers from The Ohio State University and industry leader, FM Global, shared their insights into how businesses can do more to mitigate and adapt to our changing climate.

Predicting the severity of climate change on our planet is tricky business, and there’s a lot of variation between scientists as to how bad it’s really going to get over the next 50-100 years, but there is a consensus that it’s going to be pretty bad, any way you slice it.

By 2100, the world’s temperature could increase by 4-6 degrees, which when taken at face-value doesn’t seem like a lot, but David Bromwich, a researcher at the Byrd Polar and Climate Research at The Ohio State University, put it in perspective saying, “During the last ice age when most of America, Europe and Russia were covered by massive ice sheets, the global temperature had decreased by about 4 degrees.”

So yes, 4 degrees can make a huge difference, so what do business need to do in order to prepare?

According to Lou Gritzo, Vice President of Research at FM Global, in order for a business to prepare for climate change it comes down to a couple key questions.

  1. How much are you willing to invest in a given climate change scenario?
  2. How certain are you that you’ve picked the most likely scenario?

A company’s answers to those questions will likely determine their resiliency to climate change and its impacts on their business.

The Risk Institute will dive into the potential answers to those questions at our next session Natural Catastrophic Losses & Resilience on April 12, 2018 from 9am-1pm. Visit our website to register.

Organziational Culture and the Future of Risk

Risk Institute Executive Director Philip S. Renaud was the La Fleur guest lecturer at Hood College this week where he gave a keynote address on organizational culture and the future of risk management.

“Risk isn’t just insurance, actuarial, cost center, process or program,” says Renaud. “World-class risk management is achieved when an organization treats risk as a value.”

His presentation (which can be viewed here) takes the audience on a journey of risk management practices through the years. From risk transfer, insurance and accounting focus of the 1960s to captives in the 1980s to enterprise risk management and cybercrime mitigation of the present, the risk management professional today is just as likely to have an IT background as an insurance or finance background.

Renaud believes that an organizational culture that’s conscious of risk should look at three things: integrity, commitment and transparency.

“Organizations that are lacking in one or all of these spheres are the same organizations you see on the news for one scandal or another,” says Renaud. “Wells Fargo, BP, United, VW — these are companies who’s lack of transparency and integrity have cost them their good brand reputation, their stock price — not to mention the loss of public trust and in some cases landed their leadership in jail.”

Renaud believes that the future of risk management is bright and filled with opportunities for young professionals entering the field. According to a recent survey from the Risk Management Monitor, more than 60% of risk professionals are 55+ and will be eligible for retirement in the next five years, opening the door for bright, young professionals to move into more senior roles more quickly.

When asked if he could offer one piece of advice to companies on seeking to improve their organizational culture, he said, “Cultivate transparency. A lack of transparency is always viewed as deceit.”

Phil Renaud is the Executive Director of the Risk Institute at The Ohio State University Fisher College of Business. The Risk Institute is a research center bridging the gap between academic research and practitioner experience in enterprise risk management.

Impact of Demographic Change on the Macroeconomy

The next installment of the Risk Series will be Weathering the Storm: Building Business Resilience to Climate Change on March 20, 2018 and April 12, 2018.

At the turn of the last century, the majority of American were involved in agriculture. Today that number is less than 2%. Technological advances shifted the American economy then, it’s happening again, but this time in the manufacturing and service industries.

The Risk Institute welcomed Chris Ryan from ADP and Michael Betz from The Ohio State University on February 21, 2018 to discuss on demographic change impacts the macroeconomy.

Betz emphasized that to understand the digital revolution, it helps if we also understand the industrial revolution of the 19th century and other employment revolutions. 

The Luddite revolution of the 19th century began as cotton gins and steam engines were breaking on to the stage in a big way, able to do the jobs of low skill workers faster and more efficiently. These Luddite revolutionaries called for the end of these machines, but their call was shortlived because they were soon able to find other work and reap the benefits of living in a more productive society.

Throughout history, as worker productivity increased, so too did the median household wage, and so there hasn’t been much sustained resistance to new technology.

So is the digital revolution different?

Both Betz and Ryan say yes.

In the past, low skill jobs were taken over by highly specialized machines and workers were able to retrain and procure new jobs that machines couldn’t do, but with advancements in technology, robotics and artificial intelligence even the highest skilled workers are having a tough time competing.

To compound the situation, since the 1980s, worker productivity has increased exponentially, but the median household income has leveled off, so people aren’t experiencing the financial benefits of a more efficient society.

ADPs data calls this phenomenon the “Fading American Dream.” 

According to their data, a child born in 1940 had a 92% chance of earning more than their parents did. However, a child born in 1985 (so today’s millennials), only have a 50% chance of earning more than their parents.

So what can be done?

Ryan suggests looking forward to the future saying that most employment practices are looking in the rearview mirror rather than looking forward to future trends like liquid pay, the gig economy and work flexibility.

The next installment of the Risk Series will be Weathering the Storm: Building Business Resilience to Climate Change on March 20, 2018 and April 12, 2018.