CONTACTS 

SUBJECTS
Locate Decision Maker, Construction (DPB)
Bonding Companies
Time - Too Busy Being Busy
Not Enough Time to Succeed
Marsh & McLennan, Johnson & Higgins

1207 -    ..
1208 - Summary/Objective
1209 -
120901 - Followed up work at ref SDS 11 line 59, ref SDS 6 line 47.
120902 -
120903 - Called Rick Stinson       415 981 6700
120904 -
120905 - Rick discussed Communication Metrics with John yesterday and they
120906 - decided this support is not needed at this time.  We considered
120907 - various dimensions of risk management and scenarios for JHMM to
120908 - consider.
120909 - ..
120910 - Submitted ref DIT 1 line 30 to John, transmitting these
120911 - understandings and the discussion with Bradley, ref SDS 12 line 71.
120912 - Asked John about speaking to PMI on risk management, per reasoning for
120913 - CG USACE SPD, to speak on preparations for El Nino at ref SDS 13 line
120914 - 91.
120915 -
120916 -
120917 -
120918 -
1210 -
1211 -
1212 - Discussion
1213 -
121301 - Welch Proposal for Enhanced Risk Management Being Discussed
121302 - ..
121303 - Rick said he got a call from John yesterday about my visit and
121303 - our letter ref DIP 3 line 30 that submits the article, ref OF 2 line
121304 - 8, on executives not having enough time to think (i.e., plan and
121305 - analyse) due to increased work load and the negative impact of
121306 - Information Technology on management productivity.  This reflects
121307 - Bradley's comment also today, that John liked the report on
121309 - Communication Metrics, ref SDS 12 line 103.
121310 -
121311 - The article points out that failure to give adequate attention to
121312 - known risks due to insufficient time is a major source of loss and
121313 - failure.
121314 -
121315 -
121316 -
121317 -
121318 - Busy Schedule Increases Importance of Risk Management
121319 -
121320 - Rick said Johnson and Higgins and Marsh McLennan have a thousand
121321 - issues at this time, and so their exposure on contractor performance
121322 - seems relatively low.
121323 -
121324 - This perspective reflects the changing business climate where
121325 - reengineering, including mergers and constant changing of Information
121326 - Technology, has created conditions where fewer managers are chasing
121327 - more information.  It requires the injection of business intelligence
121328 - into the equation to ensure a proper balance between decisions and
121329 - thinking, i.e., planning, organization and analysis, so that critical
121330 - considerations do not go unnoticed due to the press of other matters.
121331 -
121332 -
121333 -
121334 - Effective Risk Management Requires Vigilance (Intelligence)
121335 -
121336 - I noted accepted management theory, well known to insurance people,
121337 - that recognizes small matters, left unattended because of focus on
121338 - seemingly larger problems, are the source of the greatest disasters in
121339 - human affairs. The paper published by the Project Management Institute
121340 - last year entitled "New World Order Needs Old Time Religion" cites
121341 - Aristotle's observation over 2000 years ago:
121342 -
121343 -        The least initial deviation from the truth is multiplied later
121344 -        a thousandfold.
121345 -
121346 -    .., ref OF 1 line 36.  Today, contractors call this "Murphy's Law"
121347 -    when they call their insurance company to report unexpected
121348 -    disaster.  By then it is too late.  Only proactive investment in
121349 -    business intelligence can dig out of the system day by day and fix
121350 -    those little deviations that lead to failure.  The U.S. Army Corps
121351 -    of Engineers reported that Communication Metrics provides effective
121352 -    business intelligence, ref DRP 1 line 113.
121353 -
121354 -
121355 -
121356 - Welch Can Provide Vigilance While JHMM Focuses on Big Issues
121357 -
121358 - One approach would be for Johnson & Higgins, Marsh & McLennan to use
121358 - Welch for contractor audits and to assist their contractors in
121359 - formulating appropriate strategies to meet the demands of markedly
121360 - increased risk in the business environment, as related to John in our
121362 - discussions and correspondence, ref DIP 3 line 59.
121363 -
121364 - This can be accomplished by a very modest investment of dollars and
121365 - time, but yield significant dividends for contractors, while also
121366 - protecting JHMM as they focus on the large number of prominent issues
121367 - cited by Rick this morning.
121368 -
121369 -
121370 -
121371 - Inchoate, Insidious Change Poses the Greatest Risk
121372 -
121373 - Executives need reminders to pause and think carefully about risks
121374 - that arise from two sources, one well known, and the other insidious:
121375 -
121376 -      1.  Building Boom with high unemployment, ref SDS 2 line 52.
121377 -
121378 -          This risk is well known, but creeps up on the market because
121379 -          it is disguised as prosperity.
121380 -
121381 -      2.  Information Overload due to growing influence of Information
121382 -          Technology that impairs effective management, as submitted to
121383 -          John yesterday, ref DIP 3 line 45.
121384 -
121385 -          This risk is hidden because it is presented as change to
121386 -          improve productivity.  Since it has the opposite effect,
121387 -          people are acquiring tools of self-destruction by allocating
121388 -          precious resources to create business processes that cause
121389 -          management by guess and gossip.
121390 -
121391 -      These two factors compound the risk of errors of omission and
121392 -      commission, that lead to conflict, dispute, loss, failure.
121393 -
121394 -
121395 -      Investing Sunshine Profits
121396 -      Industry Seminar on Risks of Building Boom and IT
121397 -
121398 -      An idea I did not suggest, but that may be an appropriate means
121399 -      of communication, would be for Johnson & Higgins to sponsor,
121400 -      possibly with the AGC and/or other sureties, a seminar to focus
121401 -      attention on the need for contractors to increase their margins
121402 -      and to develop the capability to solve information overload by a
121403 -      system of business intelligence. Communication Metrics could be
121404 -      one solution.
121405 -
121406 -
121407 -
121408 - J&H Reduced its Bonding Business, Has Only a Few Large Contractors
121409 -
121410 - Rick advised that some years ago, a former J&H employee left the firm,
121411 - and took with him a lot of this business.  As a result, they have only
121412 - a few General Contractors, and these are very large.  Influencing
121413 - these customers requires careful political planning and skill.
121414 -
121415 - This reflects Rick's point that JHMM exposure in this part of the
121416 - business is low.
121417 -
121418 - I asked about the location of the person who took this large number
121419 - of accounts.  Rick is unsure.  He heard possibly Lake Tahoe.  I
121420 - forgot to ask for this person's name.
121421 -
121422 -
121423 -
121424 - Large Contractors Need Oversight and Guidance by Sureties
121425 -
121426 - I mentioned the meeting with Mark Miller at Turner on their need for
121427 - management support, ref SDS 10 line 66, without citing the name of the
121428 - contractor.  Turner is one of the world's largest contractors.  This
121429 - meeting, ref SDS 10 line 68, notes of which were submitted to John
121430 - yesterday, ref DIP 3 line 38, illustrates the help contractors need
121431 - from their bonding agents to recognize the demands of a higher risk
121432 - business environment.  Contractors have a thousand things that seem
121433 - more important than fixing little deviations in understandings that
121434 - occur each day.  Insurance companies can point out the advantage of
121435 - using business intelligence to discover these little deviations and
121436 - fix them before they grow big enough to get on the list of the
121437 - thousand things the executives are working on.
121438 -
121439 - Rick did not indicate that he saw the notes of the meeting with
121440 - Turner.  We considered the dynamics of competitive bidding that
121441 - pressures contractors to avoid budgeting for prudent management
121442 - support, and prevents them from obtaining it when problems begin to
121443 - emerge.
121444 -
121445 - The difference between budgeted earnings and actual earnings is the
121446 - potential for Communication Metrics to add value and to protect the
121447 - interests of investors and insurers.
121448 -
121449 -
121450 -
121451 - Sureties Routinely Influence Contractor Response to Risk
121452 -
121453 - In the same way that sureties proactively help contractors recognize
121454 - the need for better safety measures, the same influence can encourage
121455 - budgeting for better management to make the investment in business
121456 - intelligence needed to realize the earnings essential for success.
121457 -
121458 -
121459 -
121460 - JHMM will Notify Welch of Future Need for Support
121461 -
121462 - Rick suggested that we let these ideas rest for awhile.  Johnson &
121463 - Higgins, Marsh & McLennan will contact Welch at a future time about
121464 - implementation.
121465 -
121466 -
121467 -
121468 -
1215 -