Crisis Management Solutions Michael Lincoln Underwriting Manager – Asia Pacific 6 December 2011.

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Crisis Management Solutions

Michael Lincoln Underwriting Manager – Asia Pacific6 December 2011


Crisis Management

• Case Studies

• Analysis


A “Typical” Crisis

• For any one individual company, very rare

• Real time events, limited time frames with limited information

• Highly stressful

• Financial impact often severe


A “Typical” Crisis

• Two main risks:

–The incident itself

–The handling of the crisis


Case Study 1

• Beverage manufacturer• $2.1m extortion letter• One person seriouslly ill from consumption• 40,000 cases of product recalled


Case Study 1

• Colour of bottle caps changed

• Decreased sales for subsequent 12 month period

• Loss ~ A$ 12,000,000

–Loss of profits–Replacements Costs–Recall costs–Rehabilitation Expenses


Case Study 2

• Tylenol

• Potassium cyanide poisoning

• 7 deaths

• 31m bottles recalled


Case Study 2

• Market share collapsed from 35% to 8%

• Introduction of tamper evident packaging

• High level of communication

• Sales rebounded within 12 months

• Losses of ~ US$100m


Case Study 3

• Pasta manufacturer

• Strong Quality Assurance plan in place

• High salt content product

• Eroding metal conveyor belt


Case Study 3

• Metal pieces found in product by multiple products

• Losses ~ A$5m


Case Study 4

• Kidnap of CEO

• 5 people involved

• Held for 13 days

• Media reported ransom of $18m paid


Case Study – other losses

Product Annual Sales Loss

Pre-prepared meals $12m $1.4mBeverage $9m $1mSnack Food $6m $250kDessert $1.5m $100k


Analysis• All cases different, no one model

• Transparency & communication with stakeholders

• Long term financial impact closely correlated to brand reputation


Analysis

• Two most common results:–Used as an opportunity–Handled poorly

• Usually linked to the handling of the incident


Presented by Liberty International Underwriters (a trading name of Liberty Mutual Insurance Company ABN 61 086 083 605 Incorporated in Massachusetts, U.S.A. The liability of members is limited). The presentation is intended to illustrate broadly some, but not all, of the kinds of exposures a business can face from Cloud Computing. It is not a comment upon insurance coverage available from LIU. It should not be relied upon as advice or any definitive statement of law or the principles of insurance in any jurisdiction. This information is accurate as at 5 December 2011.

Crisis Management Solutions Michael Lincoln Underwriting Manager – Asia Pacific 6 December 2011.

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