Governor Scott supports shrinking Florida’s hurricane fund

By BILL KACZOR

Associated Press

TALLAHASSEE, Fla. — Gov. Rick Scott said Tuesday that he supports shrinking Florida’s hurricane insurance backup fund even though that would raise premiums.

Scott also said he sees no need to abolish the state’s mandatory no-fault automobile insurance system, which has been riddled with massive fraud. Scott said he’s confident lawmakers can find a way to fix the system.

The governor and Florida Cabinet took no action after listening to a proposal for downsizing the Florida Hurricane Catastrophe Fund to eliminate a potential $3.2 billion shortfall.

Later though, Scott said he supported the idea.

“It’s shrunk already,” Scott said. “We can’t borrow the money. … I want to spend more time on that proposal, but I think we do need to reduce the size of the ‘Cat Fund.’”

Cat Fund chief operating officer Jack Nicholson told Scott and the three Cabinet members that due to volatility in the world finance markets, the state would be unable to find investors willing and able to buy enough bonds to help meet its coverage goal of $18.4 billion.

Insurers including the state-backed Citizens Property Insurance Corp. can get reinsurance through the Cat Fund at lower rates than in the private market.

The fund, though, has only $7.1 billion in cash. That’s expected to increase to $8.4 billion if Florida finishes the year without getting hit by a hurricane.

To make up the difference, the fund would have to borrow the rest, but Nicholson said it no longer can expect to find buyers for the full amount, hence the estimated $3.2 billion shortfall.

Nicholson said the fund probably could sell no more than $7 billion in bonds. He recommended that the Cat Fund’s coverage goal be reduced by $5 billion, which would require legislative action.

“The state is taking a risk today that it doesn’t need to take,” Nicholson said. “You’ve got a private insurance market. It has the capacity today to
take that risk.”

Private reinsurance, though, would cost more. A preliminary analysis shows the down-sizing proposal would increase premiums for homeowners, businesses and other consumers by 10 percent over seven years, Nicholson said.

Scott said higher rates would be worth the trade-off.

“Consumers actually want real insurance,” Scott said. “They don’t want to have insurance that they know that no one can write the check. And basically right now if the Cat Fund can’t bond, then people are buying insurance believing that they’re going to get paid when they’re not.”

The Cat Fund repays its bonds through special assessments on almost all insurance policies sold in the state, including auto.

Scott and Chief Financial Officer Jeff Atwater held a news conference to urge the passage of legislation that would stop auto insurance fraud they say is costing Florida insurers and motorists $900 million a year.

They did not, however, offer specific suggestions. One option lawmakers are considering is to abolish what’s known as Personal Injury Protection, or PIP coverage, but Scott said he doesn’t think that’s necessary.

“We’ll see what comes through the Legislature,” Scott said. “Right now I believe it can be fixed.”

Motorists now must buy PIP insurance that provides $10,000 in coverage for injuries suffered in traffic accidents regardless of who is at fault.

Officials say the system is being abused through staged accidents as well as claims for nneeded health care services. They also blame lawyers who often seek fees more than the $10,000 limit even though no-fault was supposed to eliminate or reduce the need for litigation.

Crisis Management Lessons from the Penn State Press Conference

Author: Shari Schmidt

It was painful to watch the Penn State University Board of Trustees at last night’s press conference. From the awkward set-up to the clipped
responses, it was a case study in how not to handle a crisis. How can you avoid making the same mistakes? Here are three lessons to learn.

1. Put your most prepared person at the microphone. The entire press conference lasted about 20 minutes, yet the spokesperson continually looked at his watch. He seemed frustrated at times that “We feel this is in the best interest of the University” wasn’t blindly accepted as the answer to many questions. He did stay on message, but it was his body language and tone of voice that needed some coaching.

2. Show some compassion. Perhaps the most interesting part of the press conference was the board’s inability to appear connected. If you’re going to fire a long-time, beloved member of your institution, you need to have the information and compassion to back-up the action. Most of the answers were along the lines of “we looked at the information available at this time and thought this was in the best interest of the university.” Sometimes leaders have to make hard decisions, but it always helps to show compassion while delivering the news. There are a lot of unanswered questions. Still, there is no reason to look like you’re rushing to judgment when you don’t have all the facts and sounding like you’re not sure you’ve made the right decision.

3. Look at the big picture. This event was broadcast live, so the picture was as important as the message. What did we see? Multiple older, grey-haired white men in grey suits. Since the time of the Kennedy/Nixon debates, public relations experts have known that grey, rumpled suits don’t show well on television. It wasn’t until the camera took a long shot that we saw a person of color and a couple of females sitting with the group. Were they on the board? We didn’t know, but if they were, they shouldn’t have been seated on the fringe.

Also, make sure whoever is sitting behind the speaker has some media training. A man in the second row reacted to a few questions by contorting his face. It wasn’t often, but he was right behind the speaker so it was obvious. Several men in the back row started making comments to each other after certain questions were asked. It was clear they weren’t pleased with the questions, but they shouldn’t have shown it during the press conference. Most of the time, they all looked bored. It didn’t give the impression of a thoughtful, engaged group who just made a difficult decision.

Your crisis might not receive the same world-wide visibility of the Penn State situation, but it will be just as important to your business. Now is
the time to learn from this situation so you don’t make the same mistakes.

Crisis Communications / Public Relations Nightmare

Sex scandal at a major University! Sexual harassment allegations against a US Presidential candidate! A large regional power company answering charges that they may have been negligent in their handling of the power outages following the October 29th snow storm! A major theme park discussing how one of their trainers was killed by one of their key show animals! A multi-national petrochemical firm explaining the consequences of an oil leak of unimaginable proportions in the Gulf of Mexico!

Each of these seemingly unrelated incidents have one major element in common — a Public Relations Nightmare in the making.

How would your organization handle these types of scandals? Who would speak on behalf of the organization? What would they say? Who would help them craft the appropriate message, and then give them guidance to field the tough questions which would inevitably follow the initial remarks?

Take the time to follow these stories in the news, and learn from their mistakes. Ask yourself what you would be doing differently, and then make the effort to put some appropriate plans in place.

At any given point in time an executive member of the staff must be prepared to speak on behalf of the organization. In that critical moment, who will take that lead role? Have they been trained?

Just some things to consider as you watch these stories being played out in the media and the court of public opinion…

How to use enterprise risk management to address risks faced by your organization

Mike Corbin, Director of Internal Audit and Risk Management at Nichols, Cauley & Associates, has written an interesting article about how to approach the enterprise risk management process to assess and address various hazards and vulnerabilities which may impact your organization.

Corbin states, “Today’s businesses face a rapidly changing regulatory environment, increased economic pressure, political uncertainty and a changing global marketplace, making it more important than ever to take steps to assess and address the risks faced by your organization.”

“ERM begins with an enterprise risk assessment. Formulate a series of survey questions that are designed to measure corporate culture, the organization’s appetite for risk, knowledge of risks within the organization and existing control design and effectiveness.”

“The survey should be conducted by cross-functional disciplines and should provide a detailed evaluation of the organization’s vulnerability and exposure to environmental conditions. We are in a new era of increasing governmental regulations and the increased need for internal audit and related skill sets. This will also necessitate a change in the internal auditor’s role to better understand risk exposure and mitigation.”

For more information about the enterprise risk management model, and how to apply the key elements to your organization, please click the link below to read the remainder of the article:

How to use enterprise risk management to address risks faced by your organization | Smart Business.

Supply Chain Disruptions

Earlier this year the earthquake, tsunami, and radiological leaks reeked havoc on the residents of northern Japan. These same natural disasters impacted many manufacturing facilities for automotive parts and electronics – in effect, shutting down supply chain routes for many international corporations.

About two weeks ago major flooding in Thailand ravaged thousands of factories and parts manufacturers in the suburbs north of Bangkok. Companies such as Seagate announced that their factory which produces disk drives is underwater; while Canon’s printer-related factory is also submerged. Automotive companies such as Honda, Toyota and various car makers from India get components, transmissions and engines from subcontractors in that same flooded region of Thailand. While electronics manufacturers are also heavily dependent upon production from manufacturers in that area. Nikon Corporation’s Thailand plant produces low- to mid-range single-lens reflex cameras, which accounts for 90 percent of the company’s SLR camera production. Sony Corp. manufactures all of its digital SLR cameras in the same region.

Closer to home, this past weekend saw a massive snowstorm blanket the northeastern United States, knocking out power to millions, and once again disrupting supply chain channels to thousands and thousands of companies.

Based on all of this news, have you stopped to examine your organization’s supply chain? Do you know where your company’s raw materials are manufactured, and have you considered contracting a secondary manufacturer as a backup? Have you asked your manufacturers to provide you with a copy of their business contingency plan? How will they support you if you have a disastrous incident, and equally important how will they support you if THEY have a disastrous incident?

Supply chain mapping and understanding where your goods and services are produced or are run from are an important part of the business continuity manager’s role. Take the time now to understand your supply chain and to have alternate plans in place — proactive planning will save your company from the impacts of a third-party disaster.

2011 Cost of Cyber Crime Study

Despite widespread awareness of the impact of cyber crime, new research indicates that cyber attacks continue to occur frequently and result in serious financial consequences for businesses and government institutions. The study found that recovery and detection are the most costly internal activities, highlighting a significant cost-reduction opportunity for organizations that are able to automate detection and recovery through enabling security technologies.

This year’s 2011 Cost of Cyber Crime Study from Ponemon Institute is based on a representative sample of 50 organizations in various industry sectors. While the research focused on organizations located in the United States, many are multinational corporations. Key takeaways from this report include:

• Cyber crimes can do serious harm to an organization’s bottom line. We found that the median annualized cost of cyber crime for 50 organizations in our study is $5.9 million per year, with a range of $1.5 million to $36.5 million each year per company. This represents an increase in median cost of 56 percent from our first cyber cost study published last year.

• Cyber attacks have become common occurrences. The companies in this study experienced 72 successful attacks per week and more than one successful attack per company per week. This represents an increase of 44 percent from last year’s successful attack experience.

• The most costly cyber crimes are those caused by malicious code, denial of service, stolen devices and web-based attacks. Mitigation of such attacks requires enabling technologies such as SIEM and enterprise governance, risk management and compliance (GRC) solutions.

What Can You Do About the Weather?

As I write this post, many people in South Florida and the Caribbean are focused on the track of Hurricane Rina. Which way will she turn? What is the likelihood that she will strengthen into a major hurricane? Should I activate my company’s severe weather plan? Where can I get current weather information to help me make the right decisions?

Mike Thomson, Senior Manager, Client Services & Business Continuity Programs for ImpactWeather in Houston has written a terrific article regarding site-specific weather monitoring & alerting service options which I’ve reprinted below with his permission.

Mark Twain once said “Everyone talks about the weather, but no one does anything about it!” Why? Weather affects every business and organization – large and small, public and private. Whether it is employee safety, potential facility damage or driving risks to vehicles, weather impacts everyone to some degree and is a real risk to mitigate and plan for. Excessive heat, lightning or tornadoes affect employees. Snow accumulation, hurricanes and flooding can damage and destroy equipment and facilities. Freezing precipitation, blizzards and high winds can impact vehicle fleets and product distribution. Some businesses may even need to plan their commercial operations to coincide with
severe weather – pre-position stock for sale, alter retail staffing to match customer demands or open earlier or late. Whatever the potential impacts of weather on organizations, they are as varied as the organizations themselves, but weather leaves no one untouched.

According  to Forrester Research, weather is the leading business disruption facing companies today. When you consider that most power failures and attendant communications outages (the second leading cause) are also the result of weather (heat, lightning, tornadoes, hurricanes, etc.), a resilient business needs the ability to monitor and be alerted to severe weather that will specifically impact their operations. Yet most businesses do not include a weather service solution in their preparedness planning.

During a recent Continuity Insights conference in Atlanta, less than 10% of companies attending had a dedicated weather service and instead relied on non-specific, general public information available in the media, on the internet and from the National Weather Service (NWS) to deal with the severe weather threat. By law, NWS can only provide the general public, not private businesses, site-specific weather information. As a result, NWS forecasts and alerts cover broad geographic areas, not company specific locations. In turn, the broadcast media and web-based weather service repackage the generalized NWS information. Not only is weather is the leading cause of major business interruptions worldwide (2010 Business Continuity Institute Study), severe weather disruptions are up 29% from last year, and the United States has more severe weather events than any other country on the planet.

On average, Americans cope with 10,000 thunderstorms, 5,000 floods, 1,000 tornadoes, and two deadly hurricanes every year. This is in addition to winter storms, intense summer heat, high winds, wild fires and other deadly weather incidents. Losses are staggering and increasing. In the first 9 months of 2011, there have been eleven $1 billion+ severe weather events in the US (Mississippi river floods, Alabama and Missouri tornado outbreaks, Texas drought, wildfires, Indiana state fair wind stage collapses, etc). Severe weather comprises about 90% of all FEMA Declared Disasters, causes $14 billion in damage, and results in the deaths of more than 500 people every year. Five years ago, the National Weather Service (NWS) set business losses from flooding at nearly $4 billion alone while tornadoes accounted for only $759 million.

Weather is also the primary contributor to power outages – a major challenge for today’s technology-driven, power-dependent economies and business. Over the past 10 years, on average, over 55% of most major power outages (those affecting > 1 million people) were weather related with the range being 33-75% each year. The 2003 Northeast power outage alone cost $10 billion according to most estimates, and ICF calculates the economic impact of power outages at 100 times the price per Kw hour or roughly $4 per outage hour times the number of people affected! In a model simulation for a power outage affecting Los Angeles, Carnegie Mellon estimated that basic resiliency measures would save 86% of the estimated $20.5 billion loss.

Your company cannot prevent severe weather, but you can mitigate the impact with a dedicated weather service solution just like you buy accident insurance. Like most things in life, not all weather service solutions are equal, and you generally get what you pay for. Companies need to determine which solution works best for them – public/media, internet-based, an in-house meteorologist or a dedicated weather service provider.  While the NWS is free and available 24x7x365, other no-cost media and web-based weather solutions lack site-specific monitoring, have limited capabilities and availability, come with advertising as well as a nominal cost and may not provide both full domestic & international coverage. Having a resident meteorologist is the most costly option and cannot provide around-the-clock alerting, any time anywhere help, integrated contingency planning services or a “single pain of glass” all-hazards situational picture and lack capabilities like a branded, direct access website, video production, crisis web-conferencing, full-range alert messaging and site specific trigger reports keyed to company emergency response plans. A dedicated weather service provider can and should be able to provide companies the following severe weather monitoring and alerting capabilities:

• Available 24x7x365
• Site-specific domestic & international coverage
• All weather services – severe, tropical & marine
• Customized alerts & forecasts
• Any time, live help
• An on-site meteorologist when needed
• Imbedded “call to action” statements in alerts
• Integrated business continuity planning services
• Certified crisis experts on-call
• Branded, direct access weather website
• All-hazards data feeds and severe weather alerting
• “Single pane of glass” operational picture for weather
• All clear notices when severe weather passes
• Full-range alert communications (email, text, video, web)
• Web & teleconferencing to support crisis events & incident management
• Daily branded weather forecasts, advisories and alerts both pushed to & pulled by users
• Site-specific, all-hazards alerting and plan-specific trigger reports for emergency response plans
• Educational seminars, webinars, research papers & white papers
• Delivery to any mobile device, smart phone or computer with internet access
• Cost less than $15/day or 60¢ per hour

Following Hurricane Ike, over 70% of the 75+ Texas companies surveyed in an Association of Contingency Planners (ACP) research study had, used and rated their dedicated weather services (not the media or NWS) as “highly effective”.  Businesses without a dedicated weather service felt impeded and less effective in their response and recovery efforts. Companies reported that more targeted and effective operational decisions were possible with dedicated weather services than with the media or public weather forecasting (NWS), e.g. office closures, re-openings, evacuations, employee releases and shut-downs/shut-ins. They also reported that dedicated weather services provided more specific and localized alerts and weather data (wind fields, storm surge, timing, duration, etc) than generalized data available to the public.

In selecting a dedicated weather service insist on things like 24/7 alerting (including “all clear” notices) and access to trained meteorologists for
consultations and conference calls, domestic and international coverage of both tropical and non-tropical severe weather, and web-based weather briefings for key personnel. Information should be both “pushed” to users in email, text, and text-to-voice calls to mobile and other communications devices and also available to be “pulled” from sites accessible from any internet browser in both text and video formats. Dedicated weather service provider fees can vary from about $500 per year with restricted alerting/forecasting to less than $15/day or 60¢ per hour for full-service 24x7x365 coverage per site. Companies that have switched to a dedicated weather service have reported a return on those investments ranging from 170 – 450% and $105,000 to $1.3M per year.

Twitter Becoming Critical Tool For Crisis Communications

A recent article written by Camrick Clark spotlights the need to explore new forms of electronic communications, and consider adding them into your organization’s crisis communications mix. Camrick advises that organizations should study their communications options, and then take action before the tweet hits the fan!

As any firefighter will tell you, the best way to put out a fire is to prevent it. But when something does catch on fire, a quick first response can help keep things from going up in flames.

Using Twitter for crisis communications is fast becoming a critical component in any company’s strategy. Twitter is as much about preventing an isolated issue from becoming a full-blown crisis as it is about communicating quickly to key stakeholders and the public once a crisis has happened.

Crisis communication is a public relations activity that, with careful planning, rarely needs to be implemented. Still, it’s very important to have a plan in place when an emergency rears its ugly head. When a product fails, an accident occurs, financial crisis arises or natural disasters happen, whatever the case may be, crisis communication plans keep the peace and give direction to chaos.

Social media has changed the landscape for the development of crises and offers a critical communications channel to address and abate a crisis. Social media can blow up a situation in a matter of minutes. When a story breaks, people are actively looking for answers, and more people than ever are turning to Twitter for those answers.

As in all business communications, Twitter needs to be part of a broader strategy, and one of a variety of channels you use to listen and share with your employees, customers, clients, and industry. This is true both when it comes to prevention and when it is time to react.

How to use twitter for crisis communications:

1. Educate – Bring yourself and your staff up to speed on how Twitter works and the social norms of the platform.

2. Plan – What will you do when something bad happens? Identify and plan for crises you can foresee, and those you’d never expect. Think about thinks that could happen to you – disasters, etc., and crises that are self-inflicted – product recalls, hazardous materials spills, etc. Who will be the one to speak on behalf of your company? Answer these questions and more by creating a crisis communications plan.

3. Listen – Good communicators are always good listeners first. In other words, you won’t know what’s happening unless you’re actually listening. If you’re not on Twitter, then you won’t know who’s talking about your brand in that space, much less take part in that conversation. You shouldn’t join Twitter just to react to an issue. Creating a presence pre-crisis helps develop a network you know shares an interest in you and what you do.

4. Be Active – Become part of the online community. Don’t wait for the building to be burning down around you to engage your public. Prevention is always better than reaction. There are also many great free tools for tracking what happens on Twitter. Use those to preemptively ease into the conversation before a crisis even hits.

Zombie Alert!

Beware the flesh-eating Zombies!!!

Just in time for Halloween, the Centers for Disease Control and Prevention (CDC) have developed a fun new way of teaching the importance of emergency preparedness. This new graphic novel, “Preparedness 101: Zombie Pandemic” demonstrates the importance of being prepared in an entertaining way that all of us will enjoy.

Readers follow Todd, Julie, and their dog Max as a strange new disease begins spreading, turning ordinary people into zombies. Stick around to the end for a surprising twist that will drive home the importance of being prepared for any emergency.  Included in the novel is a Preparedness Checklist so that readers can get their family, workplace, or school ready before disaster strikes.

Even though the premise is very tongue-in-cheek, the lessons learned will remind us of the challenges we faced when dealing with the threat of a pandemic / epidemic.

Click below for your very own copy of the “Zombie Pandemic Handbook”:

Is your organization prepared for a disaster?

Disasters can strike at any time – often with little or no warning – and the effects upon your business can be devastating. Preparing for uncertainty takes time, money, resources, and effort; however… preparedness planning certainly outweighs the alternative of assuming “Nothing bad will never happen to me”.  Following a disastrous incident we often hear business owners say, “We could and should have been better prepared.”

The following is a very simple ten question self-assessment exercise which will allow you to gauge your organization’s level of readiness to withstand an unplanned business interruption:

1. Does your organization have a current emergency preparedness plan that addresses all types of business disruptions?

2. Have you reviewed your critical business activities to understand the necessary resources, staffing, and interdependencies of each department in your organization?

3. Do you have a plan to recover those business activities following an emergency, and do you know in which sequence they need to be restarted?

4. In the event of an emergency, do you know how to contact your employees, your customers, and your suppliers during or after work hours? Do you have an emergency communications plan that does NOT involve a manual call tree system?

5. Have you reviewed your insurance coverage with your agent in the last twelve months to be sure you have adequate coverage to protect your facilities, your employees, and your business revenue flow?

6. Have you taken steps to secure your critical business records, including both paper files and electronic data?

7. Does your organization have a documented data backup policy with regularly-scheduled backups which are stored in a secure off-site location? Have you ever tried to recover lost data from a backup? Have you ever rebuilt a server from scratch using your backup media?

8. Do you have an alternate place to conduct business which could be used as your primary worksite in the event of an emergency?

9. Are you prepared to conduct business if your primary suppliers cannot deliver your products because of a disruption in the supply chain? Do you have alternate vendors for raw materials, shipping, computer services, payroll, and basic human needs?

10. Have you reviewed your organization’s emergency plans with your employees? Do you know the personal emergency plans of your key employees?