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Julie DeSantis, Sony vp, risk management, tested in 2011

Posted On: Apr. 15, 2012 12:00 AM CST

As vp, risk management for Sony Corp. of America, Julie DeSantis and her risk management team were put to the test in 2011.

“It was a very challenging year last year,” Ms. DeSantis said.

Sony's PlayStation Network in North America and Qriocity online services in Japan were hacked last April, exposing more than 100 million customer accounts that included identity and financial data. The breach has led to numerous claims against the company.

Zurich American Insurance Co. has sued Sony, alleging that it is not obligated to cover the company for lawsuits and investigations related to the hacking because Sony's primary commercial general liability policy and its excess policy with Zurich do not qualify for such coverage, according to court documents.

Ms. DeSantis and Sony said they were unable to comment on the PlayStation data breach due to pending litigation.

But last year's cyber attacks reportedly will cost Sony $175 million in damages, including information technology and legal costs, and costs associated with retaining customers.

“All of our clients face different challenges in any given point in time, and I think Julie certainly has had to face a great deal of challenges in 2011,” said David J. Liston, managing director and New York metro partnership leader at Marsh Inc. in New York. “Claims can come up at inopportune times, but being able to remain focused on the day job, running the programs, seeing things through efficiently, and also dealing with crises as they unfold, are just another example of what makes Julie stand out in her profession.”

A digital camera factory was submerged by floodwaters in Thailand in October, which also halted production at a semiconductor plant because of supply shortages.

As a result of direct damage from the Thai floods, Sony incurred expenses of $114 million for repair, removal and cleanup costs, and $59 million of business interruption-related costs, according to Sony's consolidated results for its 2011 third quarter ending Dec. 31.

The earthquake and tsunami in Japan in March 2011 forced Sony to halt production at 10 factories, including a Blu-ray Disc plant that was entirely overrun by waves from the tsunami.

Sony incurred costs of $66 million for repair, removal and cleaning. Of those charges, $16 million have been offset by insurance claims that are deemed probable, the company said in its consolidated results for the 2011 first quarter ending June 30.

“We did have significant claims for the U.S.,” Ms. DeSantis said. “They were very complex, very sensitive given the situation of the local people, and a lot of coordination was needed.”

Ms. DeSantis noted that supply chain concerns under her purview are different in that, for example, they can involve a record company that may rely on foreign countries for its product and is not directly involved in the loss control and management of the supply chain.

“It's been a significant undertaking in coordination and also securing the data because business interruption or contingent business interruption claims take much longer,” she said. “We're actually still working through those claim issues on both of them, and it's taking time.”

To tackle supply chain risks, Ms. DeSantis and her team do annual formal requests of vendor listings of Sony's top suppliers and analyze each one to see if there are any similarities or symmetry.

“We're more involved to ensure that we have the adequate insurance to cover our supply chain,” she said. “So through that data and that analysis, we're able to generate some type of limit that we think we should maintain as a company.”

The London unit of Sony DADC US Inc., the company's optical disc manufacturer, suffered a complete loss after rioters in August set fire to the distribution center. “We had property damage in London in the riots,” Ms. DeSantis said. “You can't predict, you can't plan for it.”

Ms. DeSantis said that her team discusses emerging risks a couple of times a year, leaning on her broker and insurer relationships for material, products and data to assist in planning for those unexpected risks.