Recalls, renewals and wrecks: WSU learns the risks

BY STEFFEN STROUP | Evergreen reporter

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One of the largest retailers in the world often must handle unique and diverse risks. The retailer: Costco.

The company features a risk management team led by Dellanie Fragnoli, assistant vice president of risk management and the speaker for the 2014 Walton Lecture, presented by the Carson College of Business.

Fragnoli, whose lecture was titled “What I did on Summer Break: Recalls, Renewals, and Wrecks,” said if Costco were a company, it would be the 15th largest in the world.

She said Costco is all about volume, which increases exposure when it comes to recalls of products.

There are more and more recalls recently because of the nature of global sourcing. With products coming from all over the world, Fragnoli said you don’t always know what you’re getting.

This is one way strategic communication and risk management is used at Costco.

She gave two examples of what she called “wrecks” or crisis situations where the risk management team needed to be involved. Both of the examples were from last summer, and both happened within five days of each other.

The first happened on July 25, 2014, in London, Ontario in Canada. A woman had backed her car into the exit of a Costco warehouse and injured several members.

Their immediate reaction was to cooperate with the police investigation and bring local Costco legal counsel on sight to document the scene and protect any evidence. They also brought in a forensic engineer and an accident reconstructionist to preform investigations.

Although Fragnoli repeatedly praised Costco employees and warehouse managers, she said that this was a situation where the risk management division had to step in and take control of operations from the managers.

Five days later, on July 30, Fragnoli was on her way to a vacation site at Lake Chelan. Before she lost cell phone service and internet connection, she received a phone call telling her a plane had crashed into the parking lot of a business delivery site in San Diego.

“I thought I was being punked,” she said.

Luckily the pilot landed the plane in a section where no one was injured, which was challenging in such a densely populated area.

Because Costco does not have a PR department, the risk management team is heavily involved in monitoring social media after crisis events.

Fragnoli had some takeaways from the “wrecks” over the summer, including that risk managers have to be flexible and should possess an innate curiosity for the variety of situations you will encounter.

Al Sorensen, owner operator of Pioneer Insurance and a WSU instructor, said experience is important in the risk management field.

“You always see something new, and you cannot prepare for everything,” Sorensen said.

He added risk management has become huge for companies in the last few years, and WSU is one of the few schools to have a risk management program.

Michael J. McNamara, Mutual of Enumclaw/Field and distinguished professor of insurance at WSU, said Fragnoli’s lecture was the best they have had. McNamara teaches a risk management course at the university, and said Fragnoli was very well prepared.

“It is nice to have classroom material reinforced by an industry professional,” McNamara said.

The college of business will also hold an Insurance Industry Professionals Night in Todd Hall room 430 at 5:00 p.m. tonight. There, a panel of professionals will discuss career opportunities in risk management and insurance.