Long time No See

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Marsh Crisis Consulting Ensuring Corporate
Confidence
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Marsh September 11

• Marsh USA lost 313 employees in WTC and in the
  air
• MMC suffered dramatically from the tragic events.
  Our resolve to help the survivors and their
  families and continue our business during times
  of crisis has strengthened.
• We learned that -- as a family, we must enhance
  preparation for, response to, and recovery from a
  range of possible future crises. Our most
  important asset is our people. We are taking
  steps to improve our crisis management
  capabilities, through planning, training, and
  exercising. We will implement a world class
  humanitarian assistance program. We are taking
  steps to augment our business continuity
  capabilities. We have already begun this process
  by forming and hiring Marsh Crisis Consulting.

3
Insurance - Terrorism Crisis Management

• Insurance industry still reeling from the effects
  of 9/11 - continued cost escalation
• Underwriting losses from the terrorist attacks on
  New York and Washington made 2001 the worst year
  on record for commercial property insurance
  underwriters
• Good news more risk capital now entering
  marketplace, with new capacity estimated in the
  range of 25B
• Market had already been hardening for about a
  year, Sept. 11 just pushed it over the edge
• Marsh estimates of property losses from 9/11
  business interruption - 15B - 20 billion,
  physical property - 10B

4
Insurance - Terrorism Crisis Management

• Terrorism remains complex issue for insurance
  industry. Marsh research on 2001found general
  contraction of terrorism coverage for many
  classes of property risk, most notably for larger
  exposures following Sept. 11.
• Most reinsurers have implemented exclusions for
  terrorism. Some terrorism coverage is being
  underwritten for select buyers - these policies
  carry higher premiums and deductibles than in the
  past.
• No terrorism exclusions for workers comp or auto
  liability, handful for general liability.

5
Insurance - Terrorism Crisis Management

• Per person deductibles, as opposed to per
  occurrence, are a possible alternative to
  terrorism exclusions in the future. Insurers have
  filed notices with states around the country that
  would permit them to impose such deductibles, but
  none has exercised this option -- yet.
• Lenders might choose not to lend money because
  of terrorism concerns. Michael R. Murphy,
  president and chief executive officer of Hilb,
  Rogal and Hamilton Co. (Represents 40 Insurance
  Companies)

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Crisis Management

• Do you have a Crisis Management Program Plan?
  Yes, we have a BCP or a DRP or a Security Plan
• These are all were ready if it happens at our
  location or to our enterprise plans -- Not the
  big picture.
• For the most part reactionary -- if your firm is
  reactionary then you may not meet the test of
• Professional
• Predictable
• Acceptable

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Examples of Crisis Management Danger Points

• Delegation can be self-deception and
  vulnerability we delegated that to the
  operating units
• Firms without signals systems for intel
• Firms that have not practiced transitions - shift
  changes, loss of staff, corporate service
  suppliers
• Firms that out source

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Crisis Management

• Incident An event, series of events, or set of
  circumstances that impacts operations and
  requires a prompt, coordinated response beyond
  normal business processes.
• Emergency An incident that poses a potential
  threat to human life, health, property or the
  environment if not controlled, contained or
  eliminated immediately.
• Emergency Management Those measures taken to
  prevent, prepare for, respond to, and recover
  from the acute effects of an emergency.
• Business Continuity The development and
  implementation of pre-planned activities, advance
  arrangements, and strategies for a business
  process that facilitate the continuation of
  operations while recovery actions are taken to
  restore normal operations.
• Crisis An event, series of events, or
  circumstances that threaten to negatively impact
  a firms financial results, reputation or brand
  or relations with employees, customers or
  suppliers.
• Corporate Crisis Management A proactive
  operating philosophy and capability to prevent,
  prepare for, respond to, and recover from a
  circumstance, event, or series of episodes that
  pose an imminent threat to fundamentally affect
  or alter the way an organization conducts its
  business.

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Pre 1980 corporate crises were usually caused by
specific events and had identifiable end points
for their effects. They could be prepared for
and treated discreetly.
Natural Hazards
Technological Emergencies
National Security Emergencies
Post 1995 electronic information sharing became
prevalent and websites proliferated. The
interconnected interruption factor of different
hazard types affecting the global or a
continental economy became a continuous
multiplier of unintended consequences. There is
a constant shifting effect on corporations
because of constant forces caused by events. The
action and reaction never stops at the large
corporations.
hurricane
fire
flood
tornado
earthquake
Natural Hazards
Global and Continental Economies
Worldwide pressures
Technological Hazards
biological
chemical
radiological
mechanical
National Security Emergencies
energy
terrorism
attack
raw materials
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Crisis Management
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Crisis
Hazards Assessments

• Employee Related Hazards
• Governmental Regulations
• Societal Hazards
• Financial Hazards
• Natural Disasters
• Public Relations
• Business Hazards
• External Hazards

Sub-categories are numerous and industry specific
under each major heading
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Risk in a Changed World

Market cap volatility -Lenders attitude
Security impact - Information assurance
C Suite
Agenda
Operational Risk
Financial Risk
Hazard Risk
Strategic Risk
Impact business direction
Escalating insurance cost - Business continuity
Equipment
People
Facilities
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Policy - Coordination - Operations
Site Response Team

Delegation
Escalation
Operations Coordination Policy
Incident Support Team
Escalation
Delegation
Corporate Crisis Management Team
14
One Companies C Suite approach to crisis
management

• effective crisis management requires top down
  leadership
• policy guidance
• standards coordination
• audits exercises
• facilities budgets

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Crisis M
Crisis Management Programs

• Crisis Management Strategic Program
• Facilitated Development for Humanitarian
  Assistance Plan Annex
• Workplace Violence Evaluation
• Crisis Management Tabletop Exercise
• Business Continuity Standards
• Financial Recovery Planning
• Crisis Management Quality Conferences
• Crisis Management Capabilities Review and Audit
• Facilitated Development for Crisis Communications
  Plan Annex
• Workplace Violence Prevention and Event Specific
  Plans
• Crisis Management Drill
• Business Continuity Planning
• Biological Safety Plans
• Case Study Presentations
• Crisis Management Plan Review and Assessment
• Facilitated Development for Crisis Management
  Information Technology Plan Annex
• Crisis Management Information Technology
  Standards

• Crisis Management Facilitated Planning
• Workplace Violence Prevention and Awareness
  Program Plan
• Crisis Management Information Technology Plans
• Facility Evacuation and Shelter Plans
• School Facilities Safety Planning
• Radiological Safety Plans
• Marsh Crisis Training Academy
• Operations Center Design and Review
• Crisis Management Plan Update
• Workplace Violence Prevention and Awareness
  Training
• Post Incident Reviews
• Facility Security Assessments
• School Violence Prevention and Event Specific
  Plans
• Counterterrorism Safety Plans
• Supply Chain Preparedness Review and Audit
• Crisis Management Full scale Exercise
• Business Continuity Drills
• Chemical Safety Plans

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The Impact on Shareholder Value
Effective vs Ineffective crisis responses
Reflex market response
Cumulative Abnormal Returns () i.e., change in
market cap adjusted for market movement

• After 10 trading days, the market assesses the
  companys response to the crisis

Trading days after the event
Source The Impact of Catastrophes on
Shareholder Value, Rory F. Knight Deborah J.
Pretty, Templeton College, University of Oxford,
p. 3.
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A Comprehensive Approach
Financial Recovery
Chemical/Bio
Humanitarian Assistance
Organizations with the expertise, experience and
resources to create a comprehensive approach in
Crisis Management
Business Continuity
Emergency Mgt.
IT Security
Crisis Communications
Security/Terrorism
Environmental