CONFERENCE PRESENTS Property Loss Control Critical to Maintain Efficient Operations OR Additional Work for Unforeseen Gain Brian Proctor, Risk Manager, Capital Power Corporation David Thompson, Operations Vice President, FM Global

Setting the Stage: Business Basics Business Raw products Outside Services Finished Products / Services

Setting the Stage: Business Basics Costs Buildings Equipment People Suppliers Sales / Customers $$ Value $

Risk Management : Protecting the Value of your Business BUSINESS People Buildings Equipment Are all elements of the business equally Important to a well functioning Business?

Risk Management : Protecting the Value of your Business People BuildingsEquipment

Looking at the Loss Prevention Components PeopleEquipmentBuildings Safety Programs Emergency response Training Audits Succession Planning Efficiency Studies Maintenance Programs Emergency response Training Inspections Capital requirements Maintenance Programs Contingency planning Operator Training Inspections Life studies Performance monitoring When Times are tough where do we cut? What risks do we assume when we sacrifice programs and procedures?

What is a Highly Protected Risk? A highly protected risk (HPR) is a location at which all reasonable physical and human element loss prevention measures have been implemented to protect buildings, equipment and contents from all losses including those caused by natural hazards and change is being managed proactively to maintain this status.

Where is your Business Today? Level I Level II Level III Purchase Insurance No Formal Loss prevention programs Inspection services report on conditions Generally Non -HPR Corporate Risk Management Strategy -Formal Loss Prevention Programs -Corporate evaluations to ensure compliance - External evaluators (FM or Broker) - Generally account is HPR Company Wide Risk Management Strategy -Change management policy -Site level self audits of Loss Prevention Programs - Loss prevention Inspectors consult rather than evaluate - Superior HPR Highly Protected Risk (HPR) Management Levels

What are the benefits of an HPR risk? Operational Cash Flow Plus Growth Opportunities Offset by Financial Risk Suppliers Sales / Customers $$ Value $ What is Value? Business

Managing Financial Risk Managing Financial Risk The Risk Quality Tie-in

Managing Financial Risk Managing Financial Risk The Risk Quality Tie-in

Managing Buildings? Managing Buildings? New Construction managed New Construction managed Contractor Management Contractor Management Maintenance of Fire Protection Equipment Maintenance of Fire Protection Equipment Inspect Fire Protection Equipment Inspect Fire Protection Equipment Manage Impairments Manage Impairments Housekeeping Housekeeping Emergency response Emergency response TRAINING & EDUCATION TRAINING & EDUCATION

Managing Equipment? Understand your Processes Understand your Processes Understand your Critical Objects Understand your Critical Objects Understand Interdependencies Understand Interdependencies Preventative Maintenance Preventative Maintenance Operator Training Operator Training Contingency Planning Contingency Planning Life Studies Life Studies

How do you figure out where you stand? Assessment of current conditions Assessment of current conditions In House evaluations? In House evaluations? Outside evaluations? Outside evaluations? Scope of Assessment Scope of Assessment Fire? Fire? Natural Catastrophe? Natural Catastrophe? Equipment Hazards? Equipment Hazards? Breadth of assessment Breadth of assessment All Facilities and processes All Facilities and processes Strategic facilities and processes Strategic facilities and processes Inside only Inside only Supply Chain exposures Supply Chain exposures

So you’ve done all that …. You know where you stand…. You are on the path to HPR The Tough Question Where does this path End? Are you there? If you are Congratulations… If you are not you have a journey to make Because… Assessment without Action is Bureaucracy

What is HPR for you? What is your risk tolerance? What is your risk tolerance? What are the business consequences of a loss? What are the business consequences of a loss? These questions should help define your focus and actions. These questions should help define your focus and actions. Not all Risks are Created Equally

So you now know 1) where you are 2) where you want to Go You need a vehicle…. How do you get there?

Getting Corporate Support for Property Risk management Stakeholders Stakeholders Corporate Management Corporate Management Site Management Site Management Employees Employees Risk Management Risk Management

Corporate Management Opportunities Opportunities Understand decision making Understand decision making (Use the right Language for your Culture) Reliability Reliability Profitability Profitability Share Value Share Value Safety Safety Share industry news that supports your initiatives Share industry news that supports your initiatives Be Innovative Be Innovative

Corporate Management Challenges Challenges Convincing Management that Loss Control adds Value Convincing Management that Loss Control adds Value Deal whenever possible with proven solutions Deal whenever possible with proven solutions Pre-planning of new construction Pre-planning of new construction

Site Management Opportunities Opportunities Understand Local decision making process Understand Local decision making process Plan and communicate inspection protocols Plan and communicate inspection protocols Make sure they understand expectations Make sure they understand expectations Before, During and After inspections Before, During and After inspections Have exit interviews so no one is surprised when report issued Have exit interviews so no one is surprised when report issued Attend and facilitate inspections whenever possible Attend and facilitate inspections whenever possible Prioritize issues Prioritize issues Be a Resource for the Site Be a Resource for the Site You ARE Corporate and You ARE there to help

Site Management Challenges Challenges Convince Management that Loss Control adds Value Convince Management that Loss Control adds Value Recognize they are busy people and have other competing priorities – safety, environment, internal audit Recognize they are busy people and have other competing priorities – safety, environment, internal audit

Employees Opportunities Opportunities Education and Communication are key Education and Communication are key They need to Understand the Hazards They need to Understand the Hazards They need to Understand their Role They need to Understand their Role They need to be supported and supportive They need to be supported and supportive They need to know their efforts are appreciated They need to know their efforts are appreciated

Employees Challenges Challenges Apathy can destroy the best laid corporate plans Apathy can destroy the best laid corporate plans Momentum is difficult to create and harder to maintain Momentum is difficult to create and harder to maintain Success takes both management and employee buy-in and commitment. Success takes both management and employee buy-in and commitment.

Risk Management Risk Management Opportunities Opportunities Know what your Objectives are Know what your Objectives are Be realistic with your Objectives Be realistic with your Objectives Learn from the past – Do your homework! Learn from the past – Do your homework! Know your Peer Group outside your company Know your Peer Group outside your company

Loss Control – A Risk Manager’s Perspective Establish Your Credibility Learn your business and the language Learn your business and the language Get to know the plants, equipment types and technology Get to know the plants, equipment types and technology Work closely with the plant managers throughout the year Work closely with the plant managers throughout the year

A Risk Manager’s Perspective Pre Site Visits Ensure lots of advance notice, schedule of attendee’s, duration of visit and agenda sent ahead of time Ensure lots of advance notice, schedule of attendee’s, duration of visit and agenda sent ahead of time Try for consistency with loss control representatives from broker and insurers – results are fewer repetitive questions and pictures Try for consistency with loss control representatives from broker and insurers – results are fewer repetitive questions and pictures Ensure the loss control representatives are trained in your business. Ensure the loss control representatives are trained in your business.

A Risk Manager’s Perspective Site Visits Make sure arrival of personnel is coordinated, on time and any security issues have been taken care of before you arrive Make sure arrival of personnel is coordinated, on time and any security issues have been taken care of before you arrive Document ‘action’ items by all parties and ensure follow up with an upon return to office – no gaps. Document ‘action’ items by all parties and ensure follow up with an upon return to office – no gaps. Ensure exit meetings are conducted with the appropriate personnel in the room Ensure exit meetings are conducted with the appropriate personnel in the room

A Risk Manager’s Perspective Report Review and Distribution Review reports and compare to exit meeting notes to ensure accuracy of recommendations along with designated course of action Review reports and compare to exit meeting notes to ensure accuracy of recommendations along with designated course of action Reports to plant manager, corporate management and your broker’s loss control engineer along with priority rankings and comments – include any additional material Reports to plant manager, corporate management and your broker’s loss control engineer along with priority rankings and comments – include any additional material Don’t lose the momentum of the visit – the longer you wait to distribute the reports, the less chance in succeeding with implementation of the recommendation Don’t lose the momentum of the visit – the longer you wait to distribute the reports, the less chance in succeeding with implementation of the recommendation

A Risk Manager’s Perspective Follow ups Ensure periodic follow ups are made with plant management. Works as a good reminder Ensure periodic follow ups are made with plant management. Works as a good reminder Focus on the recommendations that all involved believe in. Support plant management in the budget process Focus on the recommendations that all involved believe in. Support plant management in the budget process Let’s admit - Some recommendations are not feasible and are not cost effective (need to be able to demonstrate a return for the monies spent). Work together for a reasonable alternative Let’s admit - Some recommendations are not feasible and are not cost effective (need to be able to demonstrate a return for the monies spent). Work together for a reasonable alternative

A Risk Manager’s Perspective Selling to Senior Management Understand the concepts that drive decision making within your organization Understand the concepts that drive decision making within your organization Understand the budgeting and budgeting approval process Understand the budgeting and budgeting approval process Must be able to convince Senior Management that loss control adds value to the organization Must be able to convince Senior Management that loss control adds value to the organization Incorporate the human safety element in the conversation – people are generally perceived as more important than property Incorporate the human safety element in the conversation – people are generally perceived as more important than property

A Risk Manager’s Perspective Selling to Senior Management (con’t) Be innovative – implement scorecard systems Be innovative – implement scorecard systems Be willing to present at plant manager meetings Be willing to present at plant manager meetings Become involved on advisory committees Become involved on advisory committees Share industry loss information with management Share industry loss information with management Find a Champion and work with them – help them in selling concepts (such as strategic spares) Find a Champion and work with them – help them in selling concepts (such as strategic spares)

A Risk Manager’s Perspective Construction Loss control really starts here! Establish standards in the bid documents. Easier to implement FM standards at this stage Loss control really starts here! Establish standards in the bid documents. Easier to implement FM standards at this stage Risk improvements more cost effective at this stage than trying to retro-fit an operating facility Risk improvements more cost effective at this stage than trying to retro-fit an operating facility Project management goals will always be different than operational management. Know which battles you want to win going into the project. Communication and $$’s will be key. Project management goals will always be different than operational management. Know which battles you want to win going into the project. Communication and $$’s will be key.

A Risk Manager’s Perspective Roadblocks in our Business Focus has been moved from reliability to profitability. Focus has been moved from reliability to profitability. Examples include extending maintenance outages, pushing machinery and equipment to their limits Examples include extending maintenance outages, pushing machinery and equipment to their limits Any cost benefit analysis on loss control initiatives must demonstrate that the expenditure will have a positive impact on the bottom line Any cost benefit analysis on loss control initiatives must demonstrate that the expenditure will have a positive impact on the bottom line

Property Loss Control QUESTIONS David Thompson Vice President, Operations FM Global ; Brian Proctor Manager, Insurance Risk Management Capital Power Corporation ;

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