Hey, Let Me IACFA Something: Are You in Control of All Your Risks?

Transcription

1 Hey, Let Me IACFA Something: Are You in Control of All Your Risks? Nate Tallarino III CIC,CRM National Director Auto Dealer Insurance Group at adig1.com Anthony Grace Risk Management Services Raleigh ~ Tampa ~ Topeka Nate@anthony-grace.com

2 The views and opinions presented in this educational program and any accompanying handout material are those of the speakers, and do not necessarily represent the views or opinions of NADA. The speakers are not NADA representatives, and their presence on the program is not a NADA endorsement or sponsorship of the speaker or the speaker s company, product, or services. Nothing that is presented during this educational program is intended as legal advice, and this program may not address all federal, state, or local regulatory or other legal issues raised by the subject matter it addresses. The purpose of the program is to help dealers improve the effectiveness of their business practices. The information presented is also not intended to urge or suggest that dealers adopt any specific practices or policies for their dealerships, nor is it intended to encourage concerted action among competitors or any other action on the part of dealers that would in any manner fix or stabilize the price or any element of the price of any good or service. 2

3 Risks are considered in a multitude of ways. Financial institutions credit risk Floor Plan companies evaluate what risk they are taking lending money to a dealer to purchase inventory. operational risk - Safety and security of funds, branches, etc. Speculative Gambling some of you in the room may already know about this first hand being in Vegas Stock Markets obvious ups and down Pure Risk all Perils slip & falls, car wrecks, liability issues, etc. 3

4 Many Meanings of Risk Management Risks are handled in a multitude of ways. Proactive evaluations your Floor Plan company does this regularly Avoidance ex. not having a collision repair center avoids the risk associated with auto body work. Purchasing Insurance to protect against financial loss 4

5 5 Steps in risk Management 5

6 Risk Management in today s dealerships Individual Approach Many smaller risk management is done by default one or more of the individuals listed below: Dealer Principal single points or smaller groups may have a principal steering the management of risk. General Manager much of the GM s time is concentrated on revenue and the bottom line HR manager usually focused on the narrow aspect of employee related risk Office manager again focus is usually aimed at the paperwork flow from an efficiency standpoint. This can be a successful approach assuming the individual is efficient and communicates well with other department heads. Often the risk management becomes nothing more than shopping insurance and reacting to losses that were unforeseen. 6

7 Risk Management in today s dealerships Departmental Approach Dealerships may assign the risk management functions to departments such as: Human resources department can be an important aspect of an overall approach due to the amount of risks employees can bring to the organization. Auto dealership employee arrested on theft and other charges Gainsville Times 3/31/2015 Accounting department May be the contact point between insurance provider, F & I compliance and/or accounting professionals. Often the first to recognize a risk. This can lead to a blind leading the blind approach. Or narrow focus by department leaders to risk that affect their respective areas. 7

8 Risk Management in today s dealerships Team Approach A football team needs a Quarterback; a Baseball team needs a catcher. Any good team needs a captain or leader to ultimately be responsible for moving the ball down the field. A risk management team should at the very least have : 1) General manager or Controller 2) Parts and Service management an employee who really rolls the sleeves up and works day in and day out on the fixed ops side 3) F & I and/or accounting personnel compliance compliance compliance 4) IT professional either in house or vendor driven And, If size and resources dictate: 5) Insurance agent or broker professional 6) Corporate counsel? 7) 3 rd party accounting audit support 8

9 Identify How can you plan to handle a risk if you don t see it coming? A plethora of information is available regarding risk identification in a dealership and garage arena. There is the obvious and the obvious Learn from others mistakes PWC ID model Druml Group Quadrant Price Waterhouse Coopers Risk ID classification graphic 9

10 Druml Group Spider Graph Note the use of time as a commodity at risk time can really effect fixed operations think of scheduling our parts delays and how they can affect the service side 10

11 Identify Most common Methods for risk identification 1. Checklists 2. Flowcharts Method 3. Insurance Policy analysis 4. Physical Inspections 5. Financial Analysis 6. Compliance review 7. Contract reviews 8. Policy / Procedure review 9. Loss history / Claims review 10. Experts 11

12 Identify #NADA

13 Identify Left Field losses Service loaner damage denials Retaliation claims Dealer Fee class actions Prior damage issues Attorney General office inquiry versus lawsuit example 13

14 Analyze Ask peers and pros don t lone wolf it Review internal procedures for handling the newly discovered risks The past speaks volumes about the future loss history reports 14

15 #NADA2016 At the Analysis stage the concept of risk appetite comes into play. When you stop to think how often risk appetite comes into play in everyday life, you ll find that the frequency is amazing. Think about the last time you purchased auto insurance and had to decide how high a deductible to choose, or even the last time you climbed into a car with a person driving you did not know. You mind thought about the safety of the car and how much risk you were taking being a passenger. 15

16 Analyze Estimation and evaluation take place here Prioritize utilizing severity and probability models are available #NADA

17 Control Accept the Risk Avoid the Risk Transfer the Risk #NADA

18 Control Accepting the Risk Petty theft Exposure segregation Separation executive travel example Duplication multiple vendor example Risk deemed highly improbable Risk deemed low severity Accepting = Retaining Retention of risk Active retention Passive retention #NADA

19 Control Examples of Accepting exposure in dealerships Multiple storage lots (duplication) Multiple repair facilities (separation) Claims example: Collision repair after storm loss Higher deductible for cat losses (passive retention) EQ deductible increase for premium savings Property coverage NOT purchased for low values (passive retention) #NADA

20 Control Avoiding the Risk Change of business procedures: Not repairing total loss vehicles (salvage/branded titles) Weather risks Moving inventory indoors or away from a storm Driver screening Age limits both too young and too old MVR guidelines Proactive loss control Clean service bays Anti slip surfaces, etc. #NADA

21 Control Transferring the Risk Incidental Transfer 3 rd party delivery auction haulers Uber Contractual Transfer Insurance contracts Non insurance contracts Hold Harmless agreements #NADA

22 Finance Premiums for Insurance contracts There should not be unforeseen premium spikes Work Comp modifier green year example Proactive monitoring of insurance program Reserving for retained risks Active retention low level theft, deductibles Passive retention Failure to identify or act on a risk #NADA

23 Finance Cost benefit analysis Overall mitigation costs should not outweigh the underlying risk Wind coverage on old buildings The asteroid strike example of favorable cost to benefit ratios #NADA

24 Administer Risk Handling Axiom Effective risk management programs utilize at least one risk control technique and one risk financing technique for each identified exposure Share your plan Having a risk management team allows for delegation to those best equipped to help manage in each area #NADA

25 Administer Resources for administrators Consultants Pros Well versed in risk management Cons can be expensive. Maybe TOO generalized Resident Partners Dealer software vendors IT venders and contractors» Vulnerability auditors Insurance agents esp. if they know your industry 3 rd party Compliance venders / auditors 25

26 Administer Monitoring The Plan Key Risk indicator metrics Set review schedule MVR report dates, inventories, etc. Delegate responsibility for audits Dashboard approach 26