Risky Business – An Interview With Professor Steven Benjamin

By: Taryn Van Deusen| Staff Writer

INTRODUCTION

Steven Benjamin is an adjunct professor at Tobin College of Business at St. John’s University. Staff writer, Taryn Van Deusen, came to know Professor Benjamin while taking his Risk Management course as part of her dual JD/MBA program. During the interview, Professor Benjamin provided insight into a risk manager’s role in identifying, assessing, and treating risk in a corporate environment. Professor Benjamin has experience with class actions, malpractice arising out of representation of commercial matters, environmental insurance coverage, and commercial insurance coverage (e.g. directors and officers, errors and omissions, and business interruption coverage). All of these types of risk can become the focus of costly litigation. When he is not teaching, Professor Benjamin works as a risk management consultant. He has 30 years of experience in the risk management field.

INTERVIEW

Taryn:Tell me about your background, how you got into your field of work, and how your interest in risk management started.

Professor:I sort of fell into what I do. In 1983, I graduated with a business administration degree with a finance minor, and I eventually got my MBA. I started out as an insurance adjuster and got to know the risk manager position by handling claims for self-insured companies, or, companies that purchase claims services from other companies. My first risk management position was with Volt Information Sciences. Volt was a $2 billion company with about $15 million in workman’s compensation claims a year. They either made or lost about $2-3 million in a given year. So, the workman’s compensation was front and center – very prominent within Volt. After Volt, I worked for the New York Power Authority, and then Barnes and Noble during their big growth period, during which they added 90 plus super-stores per year.

Taryn:How do you advise a company, like Volt, about risk?

Professor:There’s a lot to do from selecting your brokers, your partners, your insurers, tailoring the type of insurance programs you set up to the needs of the business, setting up your claim services, and making sure you have the right adjusters and attorneys working on your account. Generally, I have been with companies that have high retention levels for workman’s compensation and its liability programs. High retention levels mean the company is taking on a lot of risk. Of course, it’s imperative that you control your losses. Not only try and put things in place on a safety-related basis – try to prevent things from happening – but when they do happen, you want to make sure you’re managing claims as well as possible. There is also a financial aspect to it. You need to budget and forecast and fund for those retained losses.

Taryn:Can you explain how risk management and commercial law overlap?

Professor:Enterprise risk is looking at risk on a holistic basis. We’re not just talking about insurable risk, we’re talking about total risk for the company. Commercial law comes into play particularly in the area of compliance. Enterprise risk involves operations, finance, human resources, your legal department, and your marketing people. The whole company is involved with managing risk. Risk management is identifying your risks; assessing and analyzing your risks; treating your risks, which is risk control or risk financing and transferring; and then monitoring it all. It always has to be changed as your business changes.  Your risk register is a living document. Most risks that a company has are not insurable. Most are operational risks, some finance risks, and a lot are strategic risks. Risk strategy must be in line with the organization’s goals and objectives.

Taryn:Can you tell me about a case that you have been involved with that ended up in litigation?

Professor:I have been involved in all types of litigation but something that comes to recent memory was a class action involving hotel workers who filed a discrimination lawsuit. That triggered some coverage under the company’s Employment Practices Liability program but with coverage disputes with the insurer.  I recall being involved in complex Directors & Officers litigation where there was a securities class action. That often will happen if a large company has a merger or acquisition; somebody is going to file a suit. In the case I was involved in, the board decided to sell some of the company’s assets and they made some high-end decisions, which barely got past the shareholder votes. Some of it wasn’t even put up for shareholder votes and a few of the larger shareholders filed suit against the board of directors and the company. One of the board members filed suit against the board. It was problematic because the board wasn’t united.

Taryn:How did the case turn out?

Professor:There was an eventual settlement. About $18 million was paid out in total but about $12 million of it went to the attorneys. I was heavily involved in making sure the attorneys were reimbursed for expenses through insurance coverage.  There were many disputes with the insurers.

Taryn:Do most cases go to trial?

Professor:No, the vast majority of cases wind up settling. Trial is always an expensive and uncertain outcome.  For example, with trademark and patent infringement cases, big players like Google or Apple can afford to litigate for long periods of time. But smaller companies have to settle because they don’t have the same resources. It’s not just a cost issue, it’s taking up executive and employee time as well.

Taryn:How can companies avoid risk-related litigation?

Professor:Risk avoidance is a strategy for some things, but to be successful in business, you’re taking risks and you just have to manage those risks properly. Know your risks and what you’re taking on. Develop your risk appetite, your enterprise risk program, and have a plan to try and take on risks that you can properly identify, assess, treat, control, and, maybe, to some extent, transfer. I certainly recommend the enterprise approach where everybody is involved in risk management, not just one designated department or person.

Taryn:Thank you for your time, Professor.

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