NU Online News Service, June 23, 2:55 p.m.EDT

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BERMUDA--In the current market, the top concern forrisk managers is the economic slowdown, which means added scrutinyof any dollars spent, an expert related at an industry conferencehere.

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"They must look at whether a solution is driven by compliance,or if it will bring additional revenue or return on costinvestment, whether it's from safety, or loss prevention servicesto risk management," said Christopher Iovino, managing director,risk consulting, risk control and claims with AON Global in NewYork, addressing a seminar at the Bermuda Captive Conference.

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He asked his audience to consider if risk managers "only have $1to spend in their risk management budget, will it be for a new ITsystem, or to reduce legacy claims?"

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He added that risk managers are turning over every stone to savemoney. He suggested that one way they can save is by examiningrecommendations made by insurers based on engineering.

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"Although it's not necessarily top of mind, sometimes, when riskmanagers see the lists and recommendations, they intuitively feel,'I need to do this because the insurance company is telling me todo so.'"

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However, with a little more education and awareness, Mr. Iovinosaid, "they can stop the bus for a minute and truly analyze thesize of the risk and how it impacts their program in the marketgoing forward." They then can determine whether the same result canbe achieved for less capital expenditure, he explained.

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While this may seem simple, he said that often risk managersaccept the recommendations, but that "whether it's a half-millionor million-dollar sprinkler system improvement, sometimes there areoptions."

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In another area, he said, "we can really show the benefit ofbetter data, better analysis." He said clarifying and strengtheningtheir organization's risk from a business interruption perspective"will impact how the market views their risk and how many risktransfer, risk finance issues they have to consider."

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The fact that risk managers are taking fresh looks at theirrisks and expenditures is "a good thing," he said. "Because ifwe're impacting one element of the total cost of risk equation, Ithink the risk manager can sell that a lot easier than some otherthings, like strategic thinking three-year plans."

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With the way the economy is now, he added, "I don't know if theycan get their hands around 90 days in advance, let alone threeyears in advance."

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The issue they are dealing with is "When's the next quarter andhow am I being evaluated?" he said. He noted that in today's world,risk managers need to "be more than just transactional and morethan just an insurance manager."

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What's needed is "the true risk manager. We're seeing someorganizations gravitate to the chief risk officer" position.Looking back just five or 10 years, he observed, risk managers didnot concern themselves with issues such as supply chain andbusiness issues to the extent they do now.

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"If you're a smart risk manager you'll be looking at the wholegamut of risks and not put yourself into that silo," he noted.

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He added that in this market, decisions shouldn't be based on"it's a good thing to do." For example, "if I run an ergonomicssafety program that's going to impact 40 percent of my workers'comp losses, what is it going to get me back? As a consultant, wehave to answer that question."

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And while it may be the right thing to do for employees, hesaid, "that's not going to get the check cut to fund a large,elaborate program, especially now."

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Mr. Iovino said that AON's 2009 Global Risk Management Surveyfound the top-10 risks cited by risk managers are:

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o Economic slowdown

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o Regulatory and legislative changes

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o Business interruptions

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o Increasing competition

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o Commodity price risk

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o Damage to reputation

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o Cash flow and liquidity risk

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o Distribution or supply chain failure

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o Third-party liability

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o Failure to attract or retain group talent

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The survey found that economic slowdown was ranked eighth as aconcern two years ago; that there is more pressure to deliverresults with fewer resources; and that risk managers find itdifficult to remain committed to established, effective riskmanagement strategies, which affects all other risks surveyed.

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