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What risk managers should know about coming changes to the accounting treatment for lease obligations

Many organizations lease assets such as real estate, airplanes, trucks, ships and construction and manufacturing equipment. Because of the prevalence of leasing, it's important for users of financial statements to have a complete and understandable picture of an organization’s leasing activities. For this reason, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have issued guidance and a proposal to change the accounting treatment for lease obligations. This isn’t new. FASB/IASB have been working on this revision since 2005. For those who like to get the details, see this FASB update from last month. (These changes are supposed to be effective in 2016, but given the magnitude of the impact, it could well be 2017 or 2018.)

As a risk manager, you may say, “Yes, this is interesting, but what does that have to do with me?” The answer could be "A lot!" depending on the structure of your property and casualty insurance program and your surety bond program. For example, when the forward obligations for leases have to appear on the liability side, the accounting rule change will make a pretty significant change in your company's balance sheet. Generally speaking, it will give the appearance that your organization has a lot more debt than was previously disclosed. This will likely have immediate impact in two areas: casualty collateral and surety collateral.

Topics: risk management Policy and Insurance Program Management Exposure and Asset Management

No data scientist on staff? 6 alternative sources of data expertise

I saw the following quote last week in one of the daily news feeds I subscribe to:

“We have data science needs all over the place.”
–Progressive Group CIO, Ray Voelker

I think we can agree that Progressive is one very forward-thinking leader in the highly competitive world of personal lines insurance, and that Mr. Voelker is one of its fastest paced leaders. He has tons of data at his fingertips as well as access to formidable resources in what Progressive calls its “Business Innovation Garage,” or BIG, which serves as Progressive’s version of Lockheed Martin’s Skunk Works. These guys KNOW what they’re doing with big data. 

If Progressive, of all companies, has data science needs “all over the place,” what about you and your company? As the risk manager, you have enormous amounts of data that are critical to getting your job done. You have financial data, operational data, claim and claimant data, property data, litigation data and so much more. In effect, you are sitting on a mountain of inestimable value. But how do you tap into that value?

Topics: risk management data management Data Security Policy and Insurance Program Management

Why Every Big Business Needs a Risk Management Information System

According to an article in Risk Management Monitor, "Companies are Less Prepared for Risks Than They Were in 2011," a recent report demonstrates that corporations all over the world are less prepared for a variety of different kinds of corporate risks than they were a few years ago. Some of these kinds of risks include political and regulatory changes, damage to a company's reputation or brand, and business interruption. One major reason cited by this article is the general economic slowdown during the Great Recession and its aftermath.

Topics: risk management data management Policy and Insurance Program Management insurance renewal management