The Future of Environmental Due Diligence and Risk Management. September 16, 2015

Transcription

1 The Future of Environmental Due Diligence and Risk Management September 16, 2015

2 Speakers Matt Winters, Sr. Vice President Frenkel & Company Chip D Angelo, Founder & CEO WCD Group, LLC Marcel Ricciardelli, Sr. VP, Environmental & Engineering Group Allied World Assurance Co. Christopher Ball, Partner Manko Gold Katcher & Fox 2

3 Agenda and Objectives Setting the Stage Introductions Chip D Angelo Data Driven Decision Making Marcel Ricciardelli Balancing Data & Risk Evaluation Chris Ball Evolving Due Diligence & Contractual Issues 3

4 Chip D Angelo Founder and CEO WCD Group, LLC Data Driven Decision Making 4

5 Due Diligence = Preventive Risk Management Understanding the Integration of: 1. Insurance Coverage 2. Contracts and Indemnity 3. Performance Technical Issues Schedule Budget 5

6 Quantitative Analysis: Environmental Risks in Transactions How do we get to a credible number for the lawyers, underwriters, and bankers? How do we typically evaluate environmental risks? How should we evaluate environmental risks? How do we mitigate environmental risks? How do we get the deal done? 6

7 The Bottom Line If environmental issues are affecting a transaction, and a remediation or risk mitigation is required, clients really only want to know three things: How much will it cost? How long will it take? Will I have a liability? A decision by someone will have to be made. 7

8 Typical Due Diligence for Transactions Real Estate (Us Old Timers) 8

9 Proper Risk Management Decision Making Risk is the relationship between probability and consequence Risk assessment is often gut-based or based on past similar experiences + human nature Risk needs to be assessed during acquisition pursuit, planning, and before Initial Offer or Term Sheet What is required: Precise and accurate quantification of risk to determine true financial or schedule impact 9

10 Decision Making Behavior Limits of Anchoring* Decisions influenced by random or uninformative numbers, information, or starting points Anchoring produces bias Previous input attribute = preferential judgment Underlying mechanism vs. compatibility, e.g., decision maker increases compatibility between previous attribute and new decision Anchoring reduces or eliminates good judgment *Journal of Behavioral Decision Making 10

11 Who Are the Decision Makers? Generation X Millennials/Generation Y Nearly 60% of the Population 11

12 Gen X, Gen Y How Do They Think?* Gen X Highly educated Tech savvy Entrepreneurship Communicate with: Emphasize solutions Provide supporting evidence Don t overwhelm with information Straight talk (avoid excessive detail) Gen Y Hyper educated Digital natives I am authority! Resourcefulness Communicate with: Instant message/ text/social networks Make message relevant Utilize technology * Mary Noffsinger, Ph.D. Litigation Consultant 12

13 The Scientific Solution Data Driven Risk Modeling 13

14 numσrical is applied to model the probability of a project s given outcomes and becomes a critical tool to successful identification, quantification and mitigation of environmental risk. 14

15 We have limited investigation funds; where do we focus efforts? 15

16 What is the probability of completion in less than 135 days? Can we optimize the schedule to increase probability of success? 16

17 What is the probability of either party carving out the facility? With given information and acceptance of assumptions 88% likelihood remediation will exceed $ 1 Mil 17

18 Marcel Ricciardelli Senior Vice President, Environmental & Engineering Division Allied World Assurance Company Balancing Data & Risk Evaluation 18

19 Basic Review of Environmental Coverage The Underwriting Process Driver of Purchase Use of Due Diligence Data Gaps and Coverage 19

20 Christopher D. Ball, Partner Manko Gold Katcher Fox LLP Evolving Due Diligence & Contractual Issues 20

21 Due Diligence - Goals Minimize uncertainty in transaction by: confirming buyer s assumptions verifying seller s representations revealing other undisclosed material facts Minimize potential liability in a transaction by: qualifying for available statutory defenses to liability identifying possible common law claims developing risk mitigation strategies to addressing any identified liabilities 21

22 Evolving Due Diligence: Vapor Intrusion VI Requirements - EPA s new VI Final Guidance CERCLA Hazard Ranking System? State Cleanup Programs OSHA Permissive Exposure Levels VI in Due Diligence ASTM Phase 1 Standard (E1527) Standard Guide for Vapor Encroachment Screening (E2600) not required for AAI/Phase 1 22

23 Evolving Due Diligence: Closed Sites For previously-remediated sites relying on engineering or institutional controls consider: What limits do the controls put on development? What changes to the controls are needed to maximize transactional value? Who is required to perform work on existing site controls? How to handle an Environmental Covenant for the site? 23

24 Contractual Considerations Contractual Mechanisms: Letter of Intent Agreement of Sale Access Agreement Deeds, easements, etc. Liens/other title exceptions Loan documents Insurance Contractual Protections: For Buyer: Representations, Warranties and Indemnities For Seller: As-Is Language, Releases and Indemnities Post-Closing Obligations/Escrow Agreements 24

25 Questions 25

26 Build the Proper Risk Management Team Thank You! 26

27 Frenkel Environmental Matthew L. Winters, CRM, Sr. Vice President / (cell) Matt entered the insurance brokerage business in the beginning of 1997 following his tenure as Senior Vice President for an engineering consulting firm s Environmental, Health & Safety Management Division. Matt is a 1990 graduate of Lafayette College, received his MBA from St. Joseph s University and holds the distinguished Certified Risk Manager professional designation. Upon graduation from Lafayette College, Matt was employed as a Principal Environmental Compliance Officer for the New Jersey Department of Environmental Protection where he was responsible for coordinating compliance inspections and investigations of numerous municipal public works and private / public industrial operations throughout the State. Matt offers a unique perspective to Frenkel s clientele in that he has experience in a number of disciplines. As a Risk Management professional, Matt successfully integrates his regulatory and technical expertise with a business management and bottom line approach. 27

28 Frenkel Environmental It is our mission to provide more specialized, attentive and dedicated environmental risk services to our clients than any other environmental insurance broker. We know and understand environmental business risks! Effective management of the exposures that can potentially impact a company s profitability is what sets Frenkel s Environmental Risk Division apart from other insurance brokers. We employ environmental specialists who can more accurately assess your company s liability exposures and risk. With over 60 years of environmental consulting, risk management, underwriting, and regulatory experience, Frenkel s Environmental Division leads its industry. We are active participants in industry-wide associations and we devote a great deal of time fostering relationships between our clients & centers-of-influence. We are not a typical brokerage firm; we are your business partner. 28

29 WCD Group, LLC Chip D Angelo, Founder and CEO cdangelo@wcdgroup.com WCD is a sophisticated environmental and construction risk management company offering pragmatic and out-of-the-box solutions at pivotal points in the project to solve complex issues affecting the real estate, construction, insurance, and legal arenas across all phases of the Project Life Cycle. WCD combines our years of professional expertise in environmental engineering, consulting and testing, with our hands on construction management skills and supplemented by our unique experience in environmental and construction claims and litigation support. 29

30 WCD Group, LLC WCD manages risk in the Real Estate and Construction industries and services the lenders, lawyers, and insurance companies active in those industries. If a client is buying or selling a property, lending on a project, demolishing or renovating a building, developing a site, building a project or managing properties of any type WCD identifies and manages all of their environmental risk. Further, if there is an emergency: fire, flood, water leak, collapse, explosion, storm, or any loss or event that either damages property or may cause an environmental release or exposure, and insurance is always involved, we manage the entire response, restoration, and claims process. If a client finds themselves in a dispute, insurance claim, or lawsuit, WCD provides professional guidance, consulting, litigation support, and expert witness testimony. 30

31 Manko, Gold, Katcher & Fox, LLP Christopher D. Ball, Esquire Manko, Gold, Katcher & Fox (MGKF) is an environmental and energy law firm spanning the full range of regulatory compliance, transactional, and litigation services entailed in these fields. MGKF represents clients ranging from Fortune 100 corporations to small, privately held enterprises, both in the Mid-Atlantic region and on a national basis. From its founding, the firm has embraced a core set of principles: providing high quality legal services cost-effectively; understanding clients businesses; handling complex, cutting edge matters regionally, nationally and internationally; combining the firm s legal and technical services in a multi-disciplinary, problemsolving approach. All of these principles aim towards our singular goal: exceptional client service. 31