The US wakes up the first Monday after the catastrophic Houston flooding and risk managers will face questions on how to act. The phrase “Think Globally, Act Locally” rings true as most of the risk management actions will be locally focused in the Gulf Coast, but the negative impact on asset valuations will be felt across all US companies. Undoubtedly, our country’s priority is to support and protect the people along the Gulf Coast. However, let’s focus on risk management decisions that drive the economic impact to a company’s business and their employees’ and customers’ lives. Here are typical questions that the Board of Directors and Senior Management should be asking of their Risk Management teams.
1) Are all employees safe and have we acted on the worksite contingency plan?
2) What is our customer care policy and what is the communication plan for changes that must be made in our customer service network?
3) What changes in debt collection, insurance payments, and lending will be instituted and how will it impact the customer, income statement, brand, and our regulatory compliance process?
4) Do we have proper geographic risk management reporting? How long before we have accurate risk assessments of the impact to our employees, customers, and our financials?
5) What are the forecasts for delinquency rates, recovery rates, write-off rates, and customer service staffing requirements?
6) How has the company adjusted its models since these episodic events are NOT included in regulatory macroeconomic conditions and are underweighted in historical data?
Hurricane Harvey is the first real test of risk management leadership after the Great Recession of 2008.