A Time For Reflection

Thursday, December 20, 2012 - 08:54

The events of the immediate past serve as lessons to corporate counsel that will enable them to help their companies navigate through an uncertain future. “Sandy” demonstrated how climate change can bring a great city and its surroundings to a standstill, which further illustrates the need to plan and rebuild for the future in a way that anticipates the devastating impact that just a few hours of hurricane activity can cause.

The election brought home the point that we are a diverse society; it highlighted the need for politicians to consider the modern reality of a broader constituency. For example, it pointed up the need to solve the issues growing out of immigration in a way that will unleash the talents of those whose status is still uncertain. In this issue, we present relevant insights by Bo Cooper of Fragomen, Del Rey, Bernsen & Loewy, LLP: “…in the wake of November’s election, immigration reform gained momentum, overnight, far beyond what even the strongest reform advocates were hoping for.” Mr. Cooper also points out that “the single driving force behind this new momentum is the Latino vote.”

In other areas, by creating uncertainty, the approach of the fiscal cliff has already caused businesses to delay their investments, and as a result, it has slowed job growth. Here, I note the remarks in this month’s issue of tax expert Raymond Kelly of Marcum LLP, who stated “Since the election, the reality is setting in that there needs to be some coming together: eventually, everyone has to give something.”

The broader point for business is that it should not be exposed to the threat that our divisive political system may plunge our economy back into recession or, by setting the stage for a similar crisis in the future, will cast a continuing pall over future growth. Corporations have a great stake in addressing the problems brought home by each of these developments. This newspaper has emphasized that every company needs an Enterprise Risk Management Plan (ERMP) so that it is better able to respond to events like Sandy.

Among the many components of effective ERMPs is adequate insurance coverage, which can be complicated to determine. And it is even more complicated to understand and enforce the terms of coverage when catastrophic situations arise and claims need to be filed. This month’s article by Rhonda D. Orin and Daniel J. Healy of Anderson Kill & Olick, P.C. provides some perspective about how insurance companies view these issues: “To most of us, a hurricane is a singular event …. Not so, however, for the insurance industry. Insurance companies see a hurricane as a series of unrelated events – wind, rain, high water, waves, storm surges and so on.”

Beyond providing for adequate insurance coverage, effective risk management planning should be aimed at avoiding foreseeable issues in the first place. Some of the problems arising from Sandy would have been mitigated if, for instance, more power lines were underground, shorelines were better protected, weakened trees were culled, public transportation was better prepared, and sandbags had been placed around vulnerable buildings. What Sandy taught us is that an ERMP should address not only what a company itself can do but also what a company should advocate that government do as a partner in mitigating future catastrophes.

A consensus seems to be emerging that immigration issues can only be resolved by appropriate legislation. A path to citizenship should be provided not only for people who have, in fact, lived the American dream but also for those who have been educated here and have developed talents that can enable our economy to remain strong in an increasingly competitive world. Serious discussions are now taking place with respect to averting the fiscal cliff, another issue requiring broad-based cooperation from our policymakers. By the time you receive our print issue, you will know the outcome.  

Rather than waiting for events to drive their corporations to take positive steps toward developing ERMPs, it is up to corporate counsel to see that the lessons learned from recent events are integrated right now into governance and risk-management strategies.


                               Al Driver,