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CHICAGO — One of the main components of enterprise risk management is to ensure business continuity, according to an industry risk expert.
“The risk that an institution will be unable to fulfill its mission as a result of its failure to adapt to the changing needs of its stakeholders and operating environment is where a risk manager’s value comes into play,” said Randy F. Jouben, Washington-based risk management director of hamburger chain Five Guys Enterprises, L.L.C., at the Risk & Insurance Management Society’s Enterprise Risk Management conference in Chicago.
He said when he came onboard at Five Guys in 2010 as its first risk manager, his main objective was to prove how he could add value to the organization. One example of how he did that was by reviewing their supply chain.
“Almost everything we sell at Five Guys you can buy at the supermarket, but the one item that is proprietary is our rolls,” Mr. Jouben said. “If a store doesn’t have bread, it can’t open. One of the first projects I completed was in the bread distribution. Both bakeries we used were on the East Coast, and in places where both facilities could be knocked out by the same big storm.”
They needed a secondary city someplace else, away from the East Coast. “The contingency plan we now have is to use the place we have in Kansas. We got contingent business insurance for all of our bakeries, which could provide income for expediting the moving of our inventory from point A to place B, in order to stay in business,” he said.
To find out how much profit would be lost for each day of a store being closed for business, Mr. Jouben figured out how much profit the store brought in annually and divided that number by the number of days it was open in the year. Then he went through the process of purchasing business insurance for Five Guys. “Contingent business insurance was a lot less than the loss of revenue would have been to be closed. This is how I added value to my risk manager position at the company,” he said. He recommended reading the company’s profit and loss reports or making a friend in the finance department to know the financial model of the organization.
Another way to add value, he added, is to be involved in the aftermath of a disruption to business operations. “At Five Guys, we don’t have drive-thrus,” he said. “Some of our customers have tried to create them for us by driving into the buildings.” The construction management that came in to fix the buildings didn’t understand how to work with the insurer, which resulted in one of the stores remaining closed for six weeks during repairs, Mr. Jouban said. The next time an accident occurred at another store, Mr. Jouban was involved between the insurer and the construction company to work through the repair and payments. “Here is another place where the risk manager creates value when something goes wrong,” he said.
A federal judge has refused to dismiss a claim filed by the U.S. Equal Employment Opportunity Commission against a restaurant chain over the issue of its requirement that job applicants sign mandatory arbitration agreements.