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During the due
diligence process of a potential merger or acquisition, one of the
most often overlooked or inadequately performed segments is the risk
management review.
Property and
casualty insurance and risk management are vital areas of review.
They may impact the sale price, the purchase agreement or, in
extreme circumstances, the completion of the merger or acquisition.
The Risk
Management Assessment
There are two
areas of risk management due diligence that are vital to the
structuring of a transaction.
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The
uncovering of undisclosed and / or unanticipated exposures and
liabilities that an acquiring organization may otherwise unknowingly
assume in a merger or acquisition. |
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A complete review and determination of the competency of the
acquiring and acquired organizations with respect to their
risk management programs and the various current and
historical insurance policies, uninsurable exposures, risk
transfer mechanisms, employment or employee related
liabilities and the policies and procedures for selecting
agents, brokers or other service providers. This will
uncover possible ways to improve the risk profile and
achieve cost savings after the merger or acquisition is
completed. |
The review is
conducted by evaluation and analysis of the following:
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The
organizational structure of both the acquiring and acquired
companies.
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The
competency and effectiveness of the risk management process in the
involved organizations. |
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All
accrued claim or loss reserves on the balance sheet.
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Claim payments and the funding methods used.
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Methods of alternative risk financing.
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Directors & Officers (D&O) Liability, General Liability, Workers
Compensation, Environmental Liability and related coverage or other
risk reducing mechanisms. |
We Are Independent and That is Important
Because of the crucial decisions that arise from a merger or
acquisition due diligence, it is vital that independent thought and
analysis be conducted by all parties involved. Independence creates
lack of bias, and avoids actual or perceived conflicts of interest.
When The ALS Group is engaged advocacy for our clients is
uncompromised because we do not sell insurance and all engagements
are fee based. Furthermore, we will refuse any assignment that
could impair our independence or objectivity. We are not owned by
or do not have any interest in any insurance company, agent or
broker whose services could come under review during the due
diligence process.
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