From World Trade Center ashes arises a new approach
Posted On: Apr. 10, 2016 12:00 AM CST
Building a risk management program and department from scratch is no easy task. But building one after your new employer has sustained one of the highest profile losses in U.S. history — the destruction of the World Trade Center towers during the terrorist attacks of Sept. 11, 2001 — presents additional challenges.
Larry Silverstein, chairman of New York-based Silverstein Properties Inc., vowed to rebuild on the WTC site on which he had signed a 99-year lease only six weeks before the attack. He contacted architects two weeks after the attack to begin discussing plans, which included building multiple structures on the site. He was soon involved in complex litigation over insurance coverage as well.
But the company did not have a formal risk management approach.
That led to the hiring of Shari Natovitz, now senior vice president and director of risk management at Silverstein Properties, in 2005. How Ms. Natovitz, who had spent much of her career on the brokerage side of the business, met those challenges has earned her a place on Business Insurance's 2016 Risk Management Honor Roll®.
“The initial and biggest challenge, which needed to be addressed before tackling the development of a risk management program for the World Trade Center, was creating a risk management department and getting the buy-in from the entire organization,” said Ms. Natovitz, who had come to Silverstein Properties from USI Insurance Services L.L.C. “We needed to move from a transactional purchasing approach to a much more professional and procedural way to approach risk that included partnering with our broker and the markets.”
The process “wasn't just buying insurance. It's getting everyone to understand that insurance is not the only risk mitigation tool, and the process would not be going to the "Insurance Store' and buying off-the-shelf policies,” she said. “This approach is an ongoing process, and it continues even 10 years later.”
She also had to convince a skeptical insurance marketplace that it should welcome Silverstein's business. The markets simply didn't know Silverstein, she said, so she had to “reintroduce the company” to underwriters. Along the way, she built partnerships, which involved showing underwriters the steps Silverstein had taken to improve itself as a risk.
Her efforts have won her plaudits at her employer.
“She's brought an understanding that risk management isn't just about buying insurance,” said Mickey Kupperman, vice chairman of Silverstein. “It's a much broader issue, and she sensitized us” to everything. “We have a very sophisticated continuity program, our construction sites have a very strict focus on safety, and she's basically opened our eyes to the real meaning of risk management.”
Ms. Natovitz noted that Silverstein viewed risk management as just insurance purchasing, and that the company's lenders determined the purchases.
“The idea of proactively engaging and protecting the company was a new concept, but the concept gained traction department by department, or project by project as the department demonstrated value added,” she said. “Our staff realized that engaging with the risk management department has positive results such as broader coverages, cost savings, and safety and loss prevention successes.”
“She's a very skilled practitioner of the art,” said Mr. Kupperman. “She makes sure we're well protected — things like cyber insurance and our Internet security.”
Mr. Kupperman said Silverstein considers Ms. Natovitz an important part of its management team and said she has integrated the risk management way of thinking into everything the company does.
“When we have a kickoff meeting or project, Shari is part of the group that sits in on it. We are sensitized to the fact that she's got to be in the loop,” Mr. Kupperman said.
“I think what I'm most impressed about with Shari is her commitment to making Silverstein successful,” said Ray Blackton, executive vice president at Willis Towers Watson P.L.C. in New York and Ms. Natovitz's client advocate.
“She wants it to be a very quality response” that makes sure that Silverstein hasn't been exposed to something on her watch, Mr. Blackton said.
That was the case in 2014, as Congress wrestled with reauthorizing the federal government's terrorism insurance backstop created by the Terrorism Risk Insurance Act of 2002 in response to the attacks of Sept. 11, 2001. While many observers believed lawmakers would renew the program before its Dec. 31, 2014, sunset, Ms. Natovitz took no chances and worked out a contingency plan.
When Congress adjourned two weeks before the sunset. Ms. Natovitz and her brokers put together a program that extended Silverstein's coverage after TRIA's lapse and guaranteed protection until lawmakers took up reauthorization of the program as their first order of business in 2015.
Not all the risks that Ms. Natovitz confronts are as critical as terrorism, but she brings the same thorough approach to them. For example, Silverstein properties are often sought as production sets for movies or television programs, which raises Silverstein's profile and generates revenue. But Ms. Natovitz has to assure that those who create the risk — which often means independent contractors working for a production company — assume the risk as well.
As Ms. Natovitz sees it, risk management requires reinforcement.
“Like anything, the message needs to be repeated over time,” she said.