From the November 2007 issue of Treasury & Risk magazine

Silver AHA Award in Enterprise Risk Management

In 2003, Dallas-based paper products manufacturer Kimberly-Clark decided to dramatically increase the deductibles on multiple lines of insurance coverage. While the choice substantially lowered premiums, it also significantly increased the risk of losses that would now have to be paid internally. To manage these heightened exposures, the company's risk management department introduced the Quality of Risk Program, an ERM strategy that helped quantify and prioritize threats to its business. "We were self-retaining a lot more risk and needed to find enhancements to our programs to help us mitigate these exposures," explains Ray Van Eperen, vice president of property-casualty risk management.

The ERM process began with a thorough evaluation and scorecarding of the more than 200 Kimberly-Clark operations globally with asset values exceeding $5 million. To enhance the process of site inspections, the department was joined on visits by members of the company's global security and internal audit organizations. "We benchmarked the operations by assigning a point system determining how well each managed claims, equipment, facilities, natural hazards and the business itself," Van Eperen says.

The project has been a booming success. Operations with relatively low scores have implemented the best practices of higher-ranked colleagues. As of October, the average Quality of Risk score--70% at the onset of the ERM strategy--was 81.8%. While the return on investment from the program is difficult to quantify--some sites required expensive capital improvement projects like the installation of sprinklers--the company's insurance carriers have taken notice. "Our premiums are trending well below the average market renewals," Van Eperen says. "For the risk management department to achieve success, we must collaborate daily with other teams."

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