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Failing to Plan is an Insurer's Biggest Risk

Oscar Lewis | June 23, 2014

Independent studies have shown that most small- and medium-size enterprises do not devote enough time to the planning process. Time constraints, lack of training, and personnel resources may drive this lack of planning.  Planning, in any form, is a way to ensure continued organization performance.  Not planning is simply giving up, passing up opportunities to govern and control your own future.

The three top planning omissions are fraud and internal control systems, disaster and business recovery planning, and succession and manpower planning.  Fraud, according to the 2010 annual report of the Association of Certified Fraud Examiners, cost businesses an average of $160,000 for each occurrence.  And one only needs to read the business trades to see how many organizations failed after the passing of their founder, due to lack of continuity planning.

While each enterprise is unique, the planning process is the same.  It’s scaling the process that makes each organization different.  And the technology exists for assisting with this planning process.  There are software programs that enable organizations to automate and streamline the risk management process to save time, money, and resources associated with ongoing compliance.

With this, businesses can consistently identify compliance gaps, help justify risk acceptance, prioritize remediation, and react quickly to evolving regulations and overlapping compliance standards. Risk analytics help you prioritize enterprise-wide risk issues. Reports and dashboards turn information into intelligence, allowing you to take action before a compliance breach occurs.

Fraud and internal control systems are standardized, which means you can get the framework for each business unit and customize for different circumstances.  If you have a business unit that does not take cash or credit cards in payment, then you don’t need as robust a set of controls for cash as you would in a retail business unit.  But since every organization has assets and liabilities, the universal framework is applicable to everyone.

The framework for fraud and internal controls is spelled out by the Committee of Sponsoring Organizations (COSO), which is a collection of the major accounting groups in the US.  This framework has been around for almost 30 years, and was recently updated to reflect changes that have occurred over that time. The AICPA released a white paper on this subject, which is fairly comprehensive, and easy to follow.  Plus, there are several inexpensive software packages that will aid in designing and installing internal controls into any type of organization.  BWise has one package that is both comprehensive and affordable.

There is a similar framework for business and disaster planning.  Many state and federal government websites have basic plan outlines available at no charge, to help individuals and companies get started with this process.  The basic framework exists, but the probability of different disaster types, such as earthquake or hurricane, changes. 

Ultimately, you can customize the procedure to meet the unique circumstances for your organization. Virtual Corporation has a product called “Sustainable Planner” which lays out a step-by-step process for developing a plan. SunGard also has a downloadable planner that can get you started on the right track to business continuity.

Succession and manpower planning also lend themselves to a technological solution.  First, designate the skillset you need to make any position successful.  Then review all your people to see who may possess these particular skills.  This tells you if you have someone inside or you need to recruit outside. 

You can weight different attributes, depending upon the requirements of the position.  For example, you may want your head of sales to be more of a people person than your IT manager. Manpower and succession planning don’t have as many tools choices, but there are some available.  One of the better outlines is from It is informative and free to download. It will walk you through the process of choosing the right successor.

Taking the time to focus on the planning process allows everyone to think strategically.  Smaller organizations spend an inordinate amount of time with the tactical and not enough with the big picture. Ultimately, the vision of where you want the organization to go is why planning is so important. 

Remember the old adage: Failing to plan is planning to fail.  Don’t abdicate your future because you’re too busy dealing with the present.  There are ways to find planning time.  Take a weekend and meet offsite at a hotel conference room.  Brainstorm and set assignments for everyone.  Start the process, and see where it takes you.  Moving toward a shared vision will engage and energize your leadership team.

(Oscar S. Lewis serves as a financial analyst with Salient Commercial Solutions. He is a frequent speaker on the topic of risk management with various organizations including the American Institute of Certified Public Accountants (AICPA), the Institute of Management Accountants (IMA), and was twice a featured speaker at the Global Risk Management Conference.)

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