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The Risk Management Department

The Risk Management Department at Cooper Manufacturing was established in the 1980s as the company began rapidly acquiring other companies. The department reported to the CFO and was responsible for coordinating protection of company assets through loss prevention programs. Each manufacturing division was responsible for losses up to a self-insured retention level to incentivize loss prevention and claims management. Risk management was also integrated into the due diligence process for acquisitions and divestitures. However, the original focus was on financial and business risks rather than human assets, which was about to become a bigger issue.

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Evans Oduor
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110 views2 pages

The Risk Management Department

The Risk Management Department at Cooper Manufacturing was established in the 1980s as the company began rapidly acquiring other companies. The department reported to the CFO and was responsible for coordinating protection of company assets through loss prevention programs. Each manufacturing division was responsible for losses up to a self-insured retention level to incentivize loss prevention and claims management. Risk management was also integrated into the due diligence process for acquisitions and divestitures. However, the original focus was on financial and business risks rather than human assets, which was about to become a bigger issue.

Uploaded by

Evans Oduor
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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THE RISK MANAGEMENT DEPARTMENT

Background
In 1946, shortly after the end of World War II, Cooper Manufacturing Company was created.
The company manufactured small appliances for the home. By 2010, Cooper Manufacturing had
more than thirty manufacturing plants, all located in the United States. The business now
included both small and large household appliances. Almost all of its growth came from
acquisitions that were paid for out of cash flow and borrowing from the financial markets.
Cooper’s strategic plan called for global expansion beginning in 2003. With this in mind and
with large financial reserves, Cooper planned on acquiring five to six companies a year. This
would be in addition to whatever domestic acquisitions were also available. Almost all of the
acquisitions were manufacturing companies that produced products related to the household
marketplace. However, some of the acquisitions included air conditioning and furnace
companies as well as home security systems.
Risk Management Department
During the 1980s, when Cooper Manufacturing began its rapid acquisition approach, it
established a Risk Management Department. The Risk Management Department reported to the
chief financial officer (CFO) and was considered to be part of the financial discipline of the
company. The overall objective of the Risk Management Department was to coordinate the
protection of the company’s assets. The primary means by which this was done was through the
implementation of loss prevention programs. The department worked very closely with other
internal departments such as Environmental Health and Safety. Outside consultants were brought
in as necessary to support these activities.
One method employed by the company to ensure the entire company’s cooperation and
involvement in the risk management process was to hold each manufacturing division
responsible for any specific losses up to a designated self-insured retention level. If there was a
significant loss, the division must absorb the loss and its impact on the division’s bottom-line
profit margin. This directly involved the division in both loss prevention and claims
management. When a claim did occur, the Risk Management Department maintained regular
contact with the division’s personnel to establish protocol on the claim and cash reserves and
ultimate disposition.
As part of risk management, the company purchased insurance above the designated retention
levels. The insurance premiums were allocated to each division. The premiums were calculated
based upon sales volume and claims loss history, with the most significant percentage being
allocated against claims loss history.
Risk management was considered an integral part of the due diligence process for acquisitions
and divestitures. It began at the onset of the process rather than at the end and resulted in a
written report and presentation to the senior levels of management.
A New Risk Materializes
The original intent of the Risk Management Department was to protect the company’s assets,
especially from claims and lawsuits. The department focused heavily upon financial and business
risks with often little regard for human assets. All of this was about to change.
The majority of Cooper’s manufacturing processes were labor-intensive assembly line processes.
Although Cooper modernized the plants with new equipment to support the assembly lines with
hope of speeding up the work, the processes were still heavily labor intensive.
Ergonomics in the Workplace
Ergonomics includes the fundamentals for the flexible workplace variability and
compatibility with desk components that flex from individual work activities to team
settings. Workstations provide supportive ergonomics for task-intensive environments.
Outside the discipline, the term “ergonomics” is generally used to refer to physical
ergonomics as it relates to the workplace (as in, e.g., ergonomic chairs and keyboards).
Ergonomics in the workplace has to do largely with the safety of employees, both long
and short term. Ergonomics can help reduce costs by improving safety. This would
decrease the money paid out in workers’ compensation. For example, over five million
workers sustain overextension injuries per year. Through ergonomics, workplaces can
be designed so that workers do not have to overextend themselves and the
manufacturing industry could save billions in workers’ compensation. Workplaces may
either take the reactive or proactive approach when applying ergonomics practices.
Reactive ergonomics is when something needs to be fixed and corrective action is taken.
Proactive ergonomics is the process of seeking areas that could be improved and fixing
the issues before they become a large problem. Problems may be fixed through
equipment design, task design, or environmental design. Equipment design changes the
actual, physical devices used by people. Task design changes what people do with the
equipment. Environmental design changes the environment in which people work but
not the physical equipment they use.

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