Magazine article Risk Management

Scot Schwarting: Whirpool Corporation

Magazine article Risk Management

Scot Schwarting: Whirpool Corporation

Article excerpt

Looking after risk at Whirlpool Corporation is no small affair. With 97,000 employees in 74 countries, more than 70 manufacturing and technology centers, and operations in 170 countries, there is plenty to do for Scot Schwarting, director of risk management for Whirlpool in Benton Harbor, Michigan, and a 2017 Risk Manager of the Year Honor Roll recipient.


The world's largest major appliance maker, Whirlpool saw 2016 net earnings of $928 million on sales of approximately $21 billion. The company's scale defines many of Schwarting's challenges. "We're in nearly every country and have 97,000 employees, so there is a rich diversity of cultures and backgrounds, geographies, even time differences," he said. "As a global organization with the span that Whirlpool has, to try and manage through all of that you have to build a tool set which allows you to use the right tool and create the value proposition."

From Risk Management to Resilience

Since joining Whirlpool in 2007, Schwarting has lowered costs and raised standards and awareness at the company through a comprehensive risk management program reaching far beyond simply satisfying the company's insurance needs.

His influence impacts the entire company. Overall, he has lowered the total cost of risk at Whirlpool by 53% while also reducing balance sheet reserves by $30 million. As part of his enterprise risk management function, Schwarting interviews leaders from across the company to assess functional risks and then presents his overall findings and opportunities to Whirlpool's executive finance committee. Alongwith internal audit, legal and compliance, this process identifies the company's top 10 risks for its annual 10k report to the SEC.

He has expanded the use of Whirlpool's captive in Bermuda to help take a long-term view at controlling the company's total cost of risk, including: a program of fering property insurance to Whirlpool's third-party logistics providers; reinsuring marine cargo programs; a surety portfolio; and providing excess workers compensation, all of which generated $3 million in prof it and has grown annually by 14%, while also using the captive to access foreign domiciled reinsurers.

As a large manufacturer, physical facilities rank high among the company's assets and must be protected adequately from risks and threats, which means more than just buying insurance. "If something happens, I can replace a building with insurance," Schwarting said. "I can't replace market share or customer goodwill."

For example, when he saw the company's Brazilian operations accounting for more and more of company cashflow, Schwarting saw a growing exposure. "During the financial crises, emerging markets were doing well--Brazil, India and China," he said. "They were generating the cash for the organization. As I watched where the cash was coming from, more and more of it was coming from overseas and, in particular, Brazil had almost a 40% market share for home appliances, all made in three facilities. Something that was a $300 million insurable risk suddenly ballooned to a $1 billion risk. I had to do something."

One answer was to protect the manufacturing facilities--and thus cashflow and market share--from catastrophic fire damage by installing modern sprinkler systems. Beginning in 2015, the company began a seven-year, multi-million-dollar program--dubbed Project Waterflow--to fit the three critical Brazilian plants with the new systems.

Although the project had been previously recommended and pitched to management, it was Schwarting's holistic approach, quantification of the growing exposure and internal collaborations that drove the project forward. "It's not an insurance project and it's not a loss prevention project," he said. "It's a business resiliency project that protects shareholders."

Bringing in partners from around the corporation was instrumental in Schwarting's success with the sprinkler project. …

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