Throwing Down the Gauntlet: Brandishing a New Value Creation, Risk Attenuation Paradigm for the Delivery of Sophisticated Risk Management Services

 

Ralph Waldo Emerson is credited with the observation, “Build a better mousetrap … and the world will beat a path to your door.” With all due respect, Emerson’s intellectual firepower notwithstanding, the Concord Sage apparently had very little business experience. Indeed, not only is the assertion rarely, if ever true; neither is the inverse likely to be true, viz., - “Build an inferior mousetrap and the world will never buy it.”

 

The skeptics will likely argue that consumer purchasing behavior will be mediated more by a translation layer of sales and marketing activity than by the intrinsic quality of the product. Surely, this reality is not news to seasoned business players. Consumers are often persuaded to buy inferior products and, further, some excellent products are never (or rarely) purchased because of a poor sales and marketing platform.

 

A new homily is presented here and asserted to be true, in the Emersonian tradition, viz., “A superior consulting engagement which is too complicated for the consumer to understand …will not be purchased unless the provider guarantees the engagement’s performance (results).

 

Why is this necessarily true? The modern corporation – at least those with at least moderate market presence and financial success – have established somewhat disciplined practices that inhibit their personnel from making major purchases which they cannot demonstrate to their colleagues are superior to competing service offerings. The inability to describe and explain why a preferred consulting engagement is superior to another is a “kiss of death” for the proponent. Middle managers and senior executives understand this reality. If they do not understand a complex service – even though it promises superlative results – they cannot allow themselves to champion the provider’s offering.

 

To be sure, the understanding deficit is not about de minimus gray matter or lack of intrinsic capability. The contemporary executive is stretched beyond sane limits today by the magnitude of her responsibilities and the reach of her functionality domains. Time becomes a precious commodity and allocating three or four hours to fully grasp a new concept may devastate the temporal budget.

 

Regardless how much a prospective client wants to buy the offering – the deal cannot be closed based on pure trust … devoid of understanding. The burden for the provider, then, is to craft some kind of warranty or indemnification or guarantee that transfers the risk from the client to the provider. The performance guarantee becomes the missing link - that allows the prospective client to relax and anticipate a splendid provider performance – knowing that a sturdy safety net is in place to cushion any misstep.

 

The ad hoc Decision Audit is the first complex consulting engagement delivered with a product performance indemnification – a warranty-like performance guarantee that not only pays for its own deficiency – should it occur – but also pays for any collateral damage that the referenced deficiency causes. To operationalize the financial ability to fund this indemnification – Fiduciary Guaranty Corporation of America has secured indemnification support from two A-15 insurance firms.

And, importantly, FIG’s ad hoc Decision Audit is not only the first performance guarantee for a complex consulting engagement – it is also the first of several to be offered under the Fiduciary Guaranty banner. Each of the major corporate functionalities – legal, financial accounting, human resources (selection, placement, training & development, termination & outplacement, compensation, performance evaluation), sales & marketing, information technology and capital formation – is the subject of a distinct consultative practice deliverable to the client with a performance guarantee supported by an insurance or related risk-attenuation mechanism.

The delivery of these engagements is sequenced based on the unique needs of the client – but always commencing with the corporate governance package – built around the ad hoc Decision Audit. The governance of the corporation at the senior leadership level must be optimized first … because the superior decision making capability thus achieved becomes a primary enabler optimizing the other functionalities referenced.

This constellation of FIG risk management programs mimics the comprehensive risk-attenuation ambitions of most Enterprise-Wide Risk Management (ERM) programs in place (or under construction) today.

Initial conversations with prospective clients have elicited a recurring question. Given the inherent desirability of the concept - how can you afford the cost of, essentially, insuring the results of your engagements as well as absorbing the costs of delivering the engagements … and still turn a profit as a business operation?

 

The bundle of services included in each specialized consulting engagement has been designed to address clearly delineated variables and to achieve specific, objective results. FIG has made the commitment to service only those functionalities for which its professional personnel is conferred with signal expertise, a thorough understanding and a field tested solution-repertoire to fulfill the defined mission.

 

This question is a simpler variation on one that was asked by millions of people around the world on July 20, 1969. How in the world did the Americans put men on the moon? Now that was a challenging task. Identifying, quarantining or minimizing ambient risk as it manifests in the boardroom and is distributed throughout the commercial operation – a relative piece of cake.