Magazine article Risk Management

Sharing Our Sandbox: Commonsense Advice from an Aviation Risk Manager

Magazine article Risk Management

Sharing Our Sandbox: Commonsense Advice from an Aviation Risk Manager

Article excerpt

Someone a great deal wiser than I (which probably encompasses most of the planet) once observed that all we really needed to know in life was passed on by our mothers, usually just before our first day of kindergarten. It usually went something like this: "Now listen carefully, Timmy, make certain you look both ways before crossing the street, be sure to share your cookies and, above all, remember to play nicely in the sandbox with the other children." As a working risk manager, that advice is still some of the best I've gotten on how to do my job. But as a working aviation risk manager, it's as difficult a task as I've ever undertaken.

In dealing with risk managers and brokers representing my employer's clients, it often seems (figuratively) that other little brats have been intent on having their parents run me down, eating my cookies, dumping pail after pail of sand directly on my company's pointy little head and asking me to clean up the mess.

Actually this is not terribly surprising, coming as it does from risk management -- a profession that can only be described as a collection of professional worrywarts. Aviation risk managers tend to deal repeatedly with three issues that the rest of our learned colleagues do not find in their breviaries: Chicken Little perceptions of risk; uneven risk management experience; and disputes about where liability should rest combine to make aviation risk management more complicated and confrontational than it needs to be. In this article, I'll treat each of these areas, hopefully in a way useful to aviation and nonaviation risk managers alike, and discuss the particular ramifications and pitfalls I've found in working with aviation risk.

The Sky Isn't Failing

Notwithstanding the fact that the numbers say it is incredibly safe, people still have a strong gut reaction to the word "aviation." Something about all that metal and fuel and flesh in thin air brings visions of massive losses and glaring headlines to the front of most nonaviation, risk managers' minds.

The fact that those sorts of losses tend to be a function of the airline or high-end charter industries, and that the majority of aviation operations really do not present risks that far out of line with the rest of industry (OK, so most potential losses in any industry are already out of line), seems lost on our brothers and sisters in the trenches, who can seem singularly unwilling or unable to grasp the basic concepts involved.

My views may be a bit jaundiced by the fact that my company is both the manufacturer of our aircraft and the largest operator of those aircraft. And because more and more aviation companies tend to be involved in nontraditional projects such as putting large, expensive loads on large, expensive buildings, attitudes tend to ossify beyond the ability of the most simple and salient facts to penetrate. I now know what Truman meant with his little sign -- the buck really does stop here. Add the fact that our aircraft are often involved in construction projects, and the problems associated with dealing with our clients' liability concerns are often monumental.

Aviation insurance, and the risk factors that one uses to assess potential loss, shares many things with its maritime cousin. Aviation still tends to be a somewhat specialized, and some might say obscure, branch of the insurance industry. Unlike maritime -- where various conventions and laws have changed little since the days when wealthy dilettantes wagered their inherited funds in Mr. Lloyd's coffeehouse and companies that send things by sea or engage vessels expect some risk -- clients of aviation companies routinely demand coverage for all manner of risks.

Newer attitudes have allowed the end-user to demand a higher level of protection than most industries would even consider granting. There are certain agreements, like the Warsaw Convention, that protect companies involved in sending cargo by providing limitations on liability for damage, but these depend on no finding of negligence. …

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