Risk Management

Best of 2006: Risks and Benefits

Toxic detritus and terrorism continued to haunt finance chiefs this year, while the new pension law provided relief on the employee benefits front.
CFO.com StaffDecember 26, 2006

Risk management, you’d think, isn’t the best topic to ponder during the holiday season. Terrorism, toxic waste, political and governance perils — they don’t sit well under the tree. But maybe finance chiefs can take solace in the fact that terrorism hasn’t hit these shores since 9/11 and that most forms of property/casualty insurance is relatively cheap. With any luck, the top risk management stories of the year that we offer below can help spur creative thinking about how to avoid some those perils — and spawn a relatively low-hazard 2007.

More cheerful — from the point of view of employers, at least — are the prospects for employee benefits. While avoiding the more burdensome requirements that had been proposed, the new Pension Protection Act makes cash-balance plans an alluring substitute for traditional pension plans and makes 401(k) more attractive by allowing mutual fund companies to provide more advice.

Health-care cost inflation, although still a worry, continued to settle down over the past year. True, the Financial Accounting Standards Board will require companies to put the funded status of their pension plans on the balance sheet. But on the whole, things are looking up on the benefits scene.

Seasons greetings. And may all your risks end up yielding benefits.

Risks & Benefits: Risk Management

Coming Distractions
If these eight risks are not on your radar screen, they will be soon.

How Regulation Drives up Insurance Costs
Why should companies care who regulates their insurers? Because, say corporate risk managers, state-by-state regulation causes paperwork to soar, complicates taxes, increases legal risk, and costs more.

How to Bungle Political Risks
A survey finds that most senior executives consider overseas perils a low priority, even when they have investments and operations abroad.

Defending Against Backdating Suits
Lawsuits related to options backdating are on the rise, and directors and officers should consider both defense and insurance strategies as investigations turn into restatements.

Who’s Controlling the Controller?
While debate goes on over internal control requirements for public companies of all sizes, private companies face control risks that range from overly-complex spreadsheets to the controller who decides to shun the IRS.

Risk Management: More Talk Than Action
Enterprise risk management is typically the CFO’s job, according to a new survey that says companies are still struggling to put effective systems in place.

Risks & Benefits: Employee Benefits

Can 401(k)s Replace Pensions?
Many employees can earn as much retirement income with a 401(k) as they can with a traditional defined-benefit plan, a pro-employer advocate asserts.

Pension Act Tilts to Cash-Balance Plans
But employers still might want to shun old-style defined-benefit plans for the comfort of a 401(k).

HSAs May Not Deliver Company Savings
A new study on health savings accounts says these 401(k)-like vehicles may not provide the medical spending relief some executives expect.

Sprucing Up the 401(k)

With other retirement vehicles in dire shape, plan sponsors are rethinking their defined-contribution offerings.

FASB Rule Puts Pensions on Balance Sheet

The board will start requiring publicly traded companies to state the underfunded or overfunded status of their pension and benefit plans on their financials at the end of fiscal years ending after December 15.

Risks & Benefits: Insurance

Serenity Now!

Board members worried about compliance-related lawsuits may want to revisit their D&O policies.

Property Insurance’s Uneven Price Blip
Except for companies in storm-prone areas like Miami, the increase in premiums will likely be short-term.

Insurers Seek Freedom from States
Insurance executives tell Congress that having a single federal regulator, or at least the option of one, could result in lower premiums than they can offer under the current 50-state system.

A Tale of Two Insurance Markets

Overall, commercial premiums dipped for companies that don’t really need hurricane or earthquake insurance.

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