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Risk manager has right tools for the job


Reproductions of classic automobiles, proudly arranged in a tight but orderly diagonal display, dominate the bookshelf tops in Daniel H. Kugler's office at Snap-on Inc.

Sparkling finishes accentuate the signature body designs captured by these meticulous reproductions, forged as part of various product promotions by Pleasant Prairie, Wis.-based Snap-on, a manufacturer and distributor of professional auto tools and equipment. The only design deviation from the original full-scale vehicles that is evident in these reproductions are the Snap-on license plates.

For the robust and affable Mr. Kugler, the director of corporate risk management at Snap-on, the collection reflects more than his veneration for a bygone era in automobile design and a genuine affection for anything Snap-on.

It also is a reminder of the company's customers-professional automobile technicians-and the company's stated commitment to "delight" them with products and services.

But technicians-Snap-on's preferred term for mechanics, because they use sophisticated software and diagnostic equipment to service vehicles powered as much by computer chips as by mechanical devices-comprise only one customer group for Mr. Kugler.

His customers also include the nearly 4,700 franchised Snap-on dealers in 150 countries who drive their tool-laden Snap-on vans to each of their auto technician customers every week. These independent dealers generate about half of Snap-on's more than $2 billion of annual revenue.

There also are Snap-on's 14,000 employees-designers, engineers, factory workers, marketing and sales staff and corporate officers and staff.

And there are the various Snap-on units and facilities worldwide. Snap-on's 120 legal entities have physical locations in a total of 29 countries.

But, unlike the classic automobile designs reproduced in his collection, Mr. Kugler takes a forward-looking approach to risk management at Snap-on.

With the support of supervisor Denis J. Loverine, Snap-on's treasurer, Mr. Kugler said he likes to "go to the edge" in servicing the risk management department's customers. Referring to Mr. Loverine, Mr. Kugler noted: "I tell him you can see a lot better from the edge."

Mr. Kugler shared that philosophy in accepting the 2002 Risk Manager of the Year Award recently. Ten independent judges selected Mr. Kugler for the 25th annual award because of the multipronged risk management program he has fashioned to not only protect Snap-on, its employees and its franchisees but also transform the company's risk management department from a cost center to a profit center.

By forming an in-house insurance agency to place numerous coverages for dealers and using Snap-on's Bermuda-based captive to fully reinsure a dealer inventory program, by funding the company's general liability and workers compensation self-insured retentions through the captive, and by implementing a workplace safety and workers comp initiative, Mr. Kugler has accounted for around $21 million of savings and other contributions to Snap-on's bottom line since 1993.

Overall, between 1993 and 2000, Snap-on's total cost of risk, as defined by the Risk & Insurance Management Society Inc., shrunk 39.6% per $1,000 of revenue, to $7 from $11.58, according to Snap-on risk management. By comparison, the cost of risk for other companies with $1 billion to $2.5 billion of revenue dropped 27.3%, to $7.12 from $9.80, during the same period. Among all survey respondents, the cost of risk fell almost 32.5% to $5.20 from $7.70.

Those are just a few of the highlights of Mr. Kugler's risk management program. He also:

c Developed a property/casualty insurance, benefits and personal lines insurance program for Snap-on's franchised dealers. More than protecting Snap-on from any vicarious liabilities, the program is designed to help new dealers get their businesses rolling quickly and resolve claims quickly for all dealers.

c Established a team to self-administer corporate general liability claims. The move has enabled Snap-on risk management to minimize losses by working quickly and amicably with claimants, who typically are customers who have improperly used their tools. It also has allowed the risk management department to keep better tabs on losses and nearly eliminate third-party administrator costs.

c Created a fleet management program designed to minimize auto claims as well as better control Snap-on's leasing costs.

c Is in the process of rolling out a new security system that he and his corporate security manager designed to better safeguard Snap-on employees and company assets and quickly respond to unauthorized Snap-on tool sales, which could threaten dealers' livelihoods.

"Today, we feel very confident that our assets are covered and our people are protected" through the security and workers comp initiatives that Mr. Kugler has implemented, Mr. Loverine said.

Award judge Gary R. Griffith, the chairman and chief executive officer of retail brokerage Summit Global Partners Inc. of Dallas, applauded Mr. Kugler for the breadth of his risk management program.

"Dan and everything he has done at Snap-on is just an exemplary example of total risk management solutions," Mr. Griffith said.

"It's size, quality and depth that I think as I look at Dan's accomplishments," he said. "Dan certainly comes across as someone who eats and sleeps risk management."

Friends, peers and business associates, replete with anecdotes, concur that Mr. Kugler is indeed hard-driven.

There are stories of how he calls into the office while on vacation. A risk manager at another organization recalls the time Mr. Kugler phoned her at home one evening to finalize a risk management education program while also preparing a barbecue for his son's Little League baseball team.

Mike McLean, Snap-on's broker for corporate property/casualty insurance, recalled opening e-mails that Mr. Kugler sent him the previous midnight.

"Dan is one of the hardest-working, one of the most devoted risk managers I know. He's a maniac when it comes to working," said Mr. McLean, a director with Aon Risk Services of Illinois Inc. in Chicago.

"He just eats, sleeps and drinks Snap-on," he said about Mr. Kugler, who typically sports a company logo on his shirt and varsity jacket.

But noting Mr. Kugler's involvement in coaching youth sports for his children and his volunteer work with a local children's organization, Valerie C. Walters, director of global risk management of Linthicum, Md.-based CIENA Corp., said, "His priorities are not skewed by any means." Ms. Walters co-nominated Mr. Kugler for the Risk Manager of the Year award.

Ms. Walters, who has worked with Mr. Kugler on various professional education projects, also noted, "He's very dedicated to that."

Debra L. Rodgers, director of risk management for the North American operations of Saint-Gobain Corp. of Valley Forge, Pa., co-nominated Mr. Kugler for the award in part for the same reason.

"The reason I thought Dan was a particularly good nominee and was chosen is that he gives back to risk management," she said.

Ms. Rodgers, who chairs the RIMS Education Committee, noted that Mr. Kugler is one of the organization's most highly rated instructors. "People want to hear him speak," she said.

"He's one person I can always count on. He never says no," Ms. Rodgers said. "He wants all of us to do well."

The impetus for Mr. Kugler's risk management efforts at Snap-on as well as his dedication to risk management education is simple but powerful, he explained. "I really enjoy what I do. I wouldn't want to do anything else right now."