Better Safe Than Sorry, MMCs CEO Contends

Are you prepared? Well over three years after 9/11, it is a question risk managers as well as their insurers and brokers should still be posing. At times, it seems that a general sense of complacency has set in. If you don't think that's true, consider the recent spat over body searches at the nation's airports.

Transportation Safety Administration officials decided inspectors would pat down women to check for explosives under their clothes. The action came after an incident in August, in Russia, when two Chechen women boarded separate planes with explosives hidden under their clothes and blew up the planes while in flight.

The pat-downs produced howls of protest from a few women as well as the American Civil Liberties Union. The TSA amended the practice. But consider, if the government conducted a similar search shortly after 9/11, I wonder if we would have heard similar howls.

That might be the most extreme example, but you get the point. Time has allowed for complacency. And complacency is a prime opening for the terrorists to strike again.

In the back of our minds, we may be aware of the risk, but are we concerned? Terrorism insurance is still not widely purchased, except in certain high-profile locationssuch as New York. The market that politicians predicted would evolve to make terrorism coverage available is still inadequate to the need, yet the industry still faces an uphill battle against skeptics who are opposed to extending the Terrorism Risk Insurance Act.

In his book, “Forewarned: Why the government is failing to protect usand what we must do to protect ourselves,” Michael Cherkasky, president and chief executive officer for Marsh & McLennan Companies, takes the government and corporations to task for not being adequately prepared for the next terrorist attack. He and others, such as the 9/11 Commission Report, are emphatic on this point: There will be another attack.

“I am not convinced that America fully understands that we are in a state of war and have been for close to 20 years,” he wrote in his book. “We chose to look away. We no longer have that luxury.”

At the time of his writing, in 2003, he was the head of the security firm Kroll Inc., which was purchased by MMC last year, prior to the contingency fee abuse and bid-rigging scandal that brought him to the top job. The former New York City prosecutor (who was N.Y. Attorney General Eliot Spitzer's boss back thenMr. Spitzer was kind enough to write a blurb for the jacket of the book) suggests in his book that the government is open to a lot of criticism for its handling of security. However, there is a lot we can do to prepare and try to prevent another attack.

He calls his program the “Proteus Plan”named after the son of Neptune in Greek mythology famous for his wisdom and knowledge of the future as well as his ability to change shape at will. His plan is a comprehensive security system covering intelligence gathering, internal security, transportation screening, cargo identification and government-mandated corporate security measures that can adapt to changing needs. Some of his ideas echo the recommendations of the 9/11 Commission. Few have been implemented.

One section that appears to underscore his point concerns the role corporations play in this war. He made the point that few companies were implementing security plans, despite hiring consultants at Kroll to draw them up. “Security is no longer a luxury or a sideshow. For any organization, having a well-conceived security plan is now part of the cost of doing business,” he wrote.

Today, points out a Kroll executive (Mr. Cherkasky was unavailable to comment for this column), there is some improvement from when the book was written. More companies are beginning to institute security plans after the initial shock of 9/11 and the new reality that it brought.

Chris Grniet, vice president with Kroll, Shiff & Associates, a unit of Kroll, added that after 9/11, many companies were stunned to find how vulnerable their businesses were, and how much it would cost to fix. Security systems built to prevent theft were inadequate to head off terrorist attacks. Some, he said, dismissed the consultant's findings as overkill.

Time has educated some. An improving economy has helped to finance improvements. Government regulations have also prompted corporations to make changessomething Mr. Cherkasky advocated. Unfortunately, Mr. Grniet noted, he has no way of knowing how deeply the security improvements have penetrated the corporate American psychehe could only speak about the Fortune 500 companies with which Kroll is associated.

The problem, he noted, is falling into a rut of complacency and failing to look at the total security picture. Your facility may be secure, but what about the guy next door? Can that place become a soft target from which an attack can be launched on your facility? Some, he suggested, have formed a security consortium with their neighbors, but overall preparedness is “a mixed bag. It's all about perception and what is important to me.”

“I think there is a lot more that the general public needs to do, that corporations and major real estate owners should continue to do,” observed Mr. Grniet. “They have to maintain vigilance and cooperation with the federal government, and it has to be a two-way street. The federal government has to be informative, and they have to assist us in assessing where the threats and risks are so that we can respond to them appropriately.”

We are still in the early stages of this war on terror. It is a war that will probably be measured in generations, not years. For risk managers, the question they need senior management to answer each day is: Are we prepared?

Mark Ruquet, NUs agent/broker editor, may be reached at mruquet@nuco.com.

Reproduced from National Underwriter Edition, January 20, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Better Safe Than Sorry, MMCs CEO Contends

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