With Walmart, the bargains aren’t the only things that are supersized. With 1.6 million associates working in more than 3,500 facilities, the company proves that big risks across several lines of insurance come with the territory. Max Koonce, senior director, risk management and CLM Fellow since 2010 explains how the company takes an active role in managing its risks.
Q. What is Walmart’s approach to managing risk?
A. Our first overreaching goal is to determine what our risk exposure is. We rely heavily on data and analytics to help us through that process. After that, it breaks up into three distinct yet coordinated, with the first being risk minimization. As a company, we work very closely with our operations, safety, and risk control teams to ensure we have a safe place for our associates to work and our customers to shop.
After that, we analyze our total cost of risk, or TCOR, from the perspective of the company. This evaluation and analysis determines how we best implement an insurance coverage program that meets the company’s needs and objectives.
Third is our claims management process. We have a significant in-house operation, which includes a wholly owned TPA subsidiary, Claims Management, Inc. We have 600 associates in that organization who are responsible for the claims management process. We manage approximately 34 states in-house for workers’ comp, and we farm out the remaining 16 states to other TPAs who we manage very closely. On the general liability side, we manage claims in 49 states with a few one-offs and one state managed through outside administrators.
Q. What are your biggest exposures?
A. Our greatest exposure from a risk standpoint is our workers’ comp program. We have the same challenges that the industry is facing right now: How do you manage it more effectively; how do you ensure that your injured associates understand the process; and how do you ensure a focus on return to work and functional ability? Our program must take all these points into consideration while striving to not only address them but also make sure that we provide the best support possible for our injured associates throughout the process.
Q. What kinds of claims do you see?
A. We see the gambit of property-casualty claims that arise out of a retail operation. Our claims range from your typical product claim to completed operation claims out of our Tire–Lube Express operations. We likewise see the occasional claims out of the operation of our transportation division/trucking fleet, and with the operation of our stores, distribution centers, and clubs, we see our share of general retail operation claims from customer as well as associate work-related injuries.
Q. Describe a risk-related success.
A. The company’s operations teams in conjunction with our safety/risk control teams have done a tremendous job over the last several years of lowering our accident frequency. That is most readily apparent in the safety record of our trucking fleet. Our drivers are extremely conscious of how they operate their vehicles, always focusing on safety while ensuring they are great ambassadors for the company in terms of how they operate their vehicles on the road. We have a tremendous safety record over the last several years, which is a great success.
Q. Have you ever taken a risk and turned it into an opportunity?
A. When Hurricane Katrina occurred, Walmart did a phenomenal job of not only focusing on getting our operations back up as soon as possible, but also focusing on our associates and the community and making sure they were taken care of. Subsequent to that event, the company re-emphasized its focus on business continuity, applying enhanced resources to ensure that we have plans and processes in place while evaluating all aspects of the business from an ERM standpoint.
Q. What is your day-to-day work life like?
A. My overarching focus is to help ensure that our division is prepared to support the company’s business today and into the future from a risk management standpoint. We must continually evaluate our exposures while making sure our programs, processes, and policies support risk minimization and appropriate claims management. Data analytics is a significant component, not only from the standpoint of company retail operations but also from our claims operations and the results we are experiencing, to ensure the appropriate direction.