For the majority of my career I have been helping companies develop and manage risk management policies and procedures.  These companies include banks, insurance companies, and Fortune 500 companies.  I have done this from both consultant perspective, as well as by developing products to try to encourage more due diligence by lenders specifically.  However, until recently, the economy had been so good, that environmental risk management was often an afterthought and was just a "check-box" in the entire risk management process.  In addition, there were very few companies/individuals that were offering any consultation/assistance to companies to develop and implement policies for companies.   

However, we at ORMS are hearing from more and more clients that they are unhappy with their existing environmental policies and need help with them from an expert that has been in the field and that has real life experience in providing this type of service.  I will use lenders as our first example.  We have been hearing from lenders nationwide that they need a better way to manage their risk.  While they haven't run into a lot of issues over the past years, they are now facing issues on their loans that received very limited due diligence on the front end.  In fact, many have used what is often referred to as "file filler" due diligence to give the impression that due diligence was completed...even though many users aren't even aware of how to interpret the information.  

The good news is that many of them have begun to consider this and many have put "stop-gap" measures to try to manage their risks on holes in their policies.  However, many of their policies are very inconsistent and have gaps in both procedures, and more importantly, knowledge with what to do with the information that they get. 

The key to effective risk management is not just looking at white papers and articles (it helps of course), but actually working with experts with real world experience and consulting. In addition, if the proper policies are designed and implemented, the risk management process actually gets easier because the entire organization tends to communicate the details to each other regularly which avoids surprises.  So, even though you might be adding a step to the process, putting a good policy and procedures in place actually reduces risk, time and cost for lenders.  And if you can work with individuals that have "Been there. Done that.", you can feel more comfortable that they have the expertise to provide your organization with experience and credibility.   

I have been reading quite a bit regarding the economy lately.  Wow...is that depressing.  Double dip recession, gulf oil spill, commercial real estate collapse, unemployment issues, small business lending down, record high debt, etc.  While I do not like to dwell on the negative, those are a couple of the not so fun phrases/concepts that I came across.

Understandably, I think the general feeling in the press and within many of our peers seems so negative that it is tough to be positive.  However, learning more about our clients (both current and prospective), developing more strategic partnerships and trying to assist all of these folks manage through these tougher times in the most efficient and cost effective manner possible has proven very beneficial.  We have been actively helping lenders, environmental consultants, and many other risk management professionals explore and develop new processes, solutions and strategies to best react to this economic time.

In many ways, since companies are often resistant to hiring due to the uncertainties in the economy, ORMS' business model has been received quite favorably by allowing for expertise and industry knowledge without the long term capital investment.  We have so many great partners and relationships in the industry, it has allowed us to match the right solutions to our clients which helps generate trust and deeper relationships.  This has included sales, marketing and other strategic consulting, as well as traditional risk management programs.  It has also resulted in many more opportunities for us which we are quite grateful for.  We are trying to make the old adage "Making Lemonade out of Lemons" for both our company and for our clients work.  I will post some examples of this in the future.

If we can help our clients via our products, services, and partnerships, we will for sure turn this situation into a positive one.  What are you doing in the current economic environment to make "lemonade"?  Let us know if we can help. 

Attached is an article explaining how the new financial legislation is going to possibly discontinue the current Home Valuation Code of Conduct (HVCC) and establish a new process to ensure that appraisals are done by qualified, uninfluenced professionals.  For those that follow the real estate industry, you know that the HVCC has been very controversial not because of its intent, but rather its implementation.  In a nutshell, many Appraisal Management Companies have used the program to create models where the appraisers are either underpaid or unqualified.  This has led to the controversy.  However, the concept is a solid one which I would argue should be added to this legislation for environmental risks.

I presented at the CT Appraisal Institute meeting and prior to my presentation, the president of the CT AI discussed a bill that requires these AMC's to be registered.  This makes sure that the people that run the AMC's are qualified to do it.  But at least it was put together to keep better tabs on the implementation of the process.  Right now, environmental risks are done in a haphazard way from bank to bank.  Often, environmental professionals and companies are chosen based on the likelihood that they will not raise major issues in their studies.  Often it is due to lenders having influence over the process.

The financial industry is making monumental changes to its regulatory efforts...why not add environmental to this process at this point?

What do you think?

http://www.dsnews.com/articles/financial-reform-legislation-calls-for-hvcc-replacement-2010-06-30

I just returned from the Environmental Bankers Association meeting in Virginia.  Once again, it was a well thought out, solid conference with great speakers and great networking.  One thing that has emerged recently is the emergence of energy/sustainability issues vs. the traditional environmental contamination/risk management topics.  It is creating a sort of conflict right now.  For instance, when does the transition officially occur within the risk management function within lenders.   This was a big topic of the open forum at the conclusion of the conference.

I would argue that it isn’t an either/or but just another issue that we as risk managers need to keep track of and make sure we are learning more about green issues while not losing track of our roots.  As a company, ORMS needs to make sure we are helping our clients with the things that are important to them.  Right now, I would argue that traditional environmental issues are still the top priority for lenders but energy and sustainability is gaining momentum.  Some of our clients care more about energy so we address these issues for them.  That is the great thing about establishing an extensive network.  It keeps your prepared to help at a moment’s notice.

Time will tell when/if an official transition occurs.  When it does (and yes I do believe it is a when), make sure you are prepared to help your clients get through it.

“Traditional community banking, where long-term relationships matter more than statistical models, remains the future of banking in America. You recognize the need to take care of your long-term customers by dealing fairly with them in the good times, and by extending credit to them in the hard times.”  – Sheila Bair, FDIC (March 19, 2010)

As a topic of discussion, I thought this quote from the leader of the FDIC at this year’s Independent Community Bankers of America (ICBA) conference was very much like what any company should strive to be to both their customers and employees.  In many ways, community banking is a perfect microcosm for business in general.  If we as businesses and people followed this version of the “Golden Rule”, how great would our companies be?  Let’s analyze this in two parts – good times vs. hard times.

Well, for the longest part of the last decade, we were part of a great economy.   Therefore, it was easier to offer more to customers and employees.  Times were good and generosity seemed plentiful.  Bonuses were favorable, benefits were good and attitudes typically were positive.  In my opinion, this is when it was easy to run a company and deal with your employees.  Because of the opportunities that existed, if you lost an employee, you were able replace them. But at least employees were typically free to choose if they wanted to be where they were.

However, in the recent past, we saw a tougher economy and fewer options for employees.  Basically it has been a “buyers’” market for companies.  What remains to be seen is what happens when the economy recovers which, according to many economists, appears to be happening.  I am sure we will see.

Either way, the quote by Ms. Bair is indicative on how businesses should be run.  While it is inevitable that change is always going to happen, managing your teams and clients should not change.

It is my sincere hope that ORMS is able to live under this mantra during both good times and tough times.  Based on my past experience and feedback from friends, colleagues and employees, this is attainable.  In my numerous discussions with community banks throughout the country, they continue to promote this atmosphere and win over more and more clients.  I look forward to working with our customers and employees under this mantra as we continue to grow by making our clients’ lives easier by helping with their property and environmental issues.

Well, I know the rule with blogs are they should not be used to talk about your company (and they won't typically in the future) but I seem remiss by not at least commenting on Outsourced Risk Management Solutions LLC (ORMS) and what we are hoping to do for our clients. As you can see from our tagline [Due Diligence. Done Simply. Done Right.], ORMS is focused on helping with Due Diligence issues on commercial real estate. We have focused our initial efforts primarily on Community and Regional Banks because they were the entities that have indicated the greatest need for our help. Most of our efforts are dedicated to environmental due diligence at this time, but we are able to help with a variety of issues including procuring information, property condition assessments and appraisals and other property due diligence needs.

So I thought it might make sense to break down the tagline to better describe ORMS:

Due Diligence.

Now more than ever, commercial real estate is under tremendous scrutiny by investors and regulators. In fact, in two recent surveys, over 65% of lenders noted being asked about their environmental policy in their annual exam.  In addition, in meetings with lenders throughout the country, they are also indicating more scrutiny on CRE.  This is an indication that regulators are more focused on real estate policies and due diligence than in the past.

ORMS was founded to work on behalf of lenders to help them manage this exact issue. While it is clearly a niche area in the lending world, lenders acknowledge that there are too many vested interests and too much uncertainty in the current models. Most community and regional banks don’t have expertise on staff (nor do they want to hire it).

Done Simply.

With a simple click of the mouse or phone call, the due diligence process can be taken off of you or your staffs’ plates and be handled by industry veterans, all the while keeping your organization's risk tolerance in mind. Studies have shown that it can take 2.5 hours or more per transaction for a loan officer to deal with the environmental due diligence process in the “typical” way. ORMS’ web-based system simplifies the ordering, the deliverable and the management of your property due diligence programs and reports. In short, ORMS simplifies the whole process for you.

Done Right.

The founder of ORMS has over 20 years of practical experience in the due diligence field. This includes leadership positions held at Fleet Bank, Environmental Data Resources, Marsh USA, and Travelers Insurance, all in a risk management capacity. In fact, while at Fleet, the entire environmental due diligence policy for our small business services group was rebuilt to include environmental screening tools, environmental insurance, and new risk thresholds all based on research and experience within banks. In addition, while at EDR, Derek Ezovski managed the Lender Services and Environmental Consultant divisions and helped to build and oversee the implementation of over 700 subscriptions to a new, innovative product that allowed banks to screen properties for environmental issues.  However, we were not able to integrate with the lenders and provide true business consulting services, which is what ORMS can do for our clients.

Please keep posted to our blog...it will try to keep everyone updated on the CRE and lending world in a unique and informative way.