Ethan Fowler & Luke Minear
On March 28, CRMER Student Fellows were able to welcome the Senior Director, Supply Chain Management, Quality Systems at McDonald’s, Justin Ransom PhD. Justin began the foundation of his education with a B.S. in Agriculture Communications and Marketing at Texas Tech. He then moved a bit north, to Michigan State University where he receive his M.S. in Animal Science. Following his time at Michigan State Justin moved to Colorado to complete his education with a PhD in Animal Science and Food Safety from Colorado State University.
Justin’s main talking points throughout the learning seminar were largely about supply chain management and how it affects our lives. He stressed the 3 stool business model which includes an equal shared responsibility between suppliers, owner/operators, and the head corporation. This method is partially behind what has helped McDonald’s become such a competitive and successful corporation. He also talked about how this point in history can be defined as the ‘Age of the Customer.’ For many of us Student Fellows this was a new and interesting concept on the current interaction between sellers and buyers in the market place. Justin explained that by understanding this relationship model, McDonald’s is building for the future.
The most interactive part of the seminar was the open floor discussion. This was an amazing opportunity to talk with one of the world leaders in supply chain management. His insight into the business world was something far more educational than a traditional classroom setting. We discussed a wide range of topics from the past, present, and future strategies for business. We would like to thank Justin Ransom for making this opportunity possible.
Mike Bernard, Director of Capital Planning and Finance for Union Pacific, met with the CRMER Risk Management Fellows on the afternoon of Tuesday, March 22nd. Bernard started the conversation by briefly talking about a movie, “Unstoppable”. The story in the movie was based on a real railroad accident that resulted in significant loss. Since the beginning of established business, the possibility of failure has always been an inherent risk for companies. Union Pacific takes into account many factors in their Enterprise Risk Management (ERM). Union Pacific has built a thorough system to identify, assess, analyze and manage risks. Potential events or situations that might threaten the success and longevity of the business are considered as risks, such as terrorism, cyber-attacks, cheap crude oil prices, debt crisis and climate change.
Enterprise Risk Management (ERM) is defined as a consistent and structured process across the whole business for identifying, assessing, deciding, and responding on threats and opportunities that affect the achievement of its objectives. ERM is affected by people at every level in the organization; it is applied in a strategy setting and top-down approach that aligns risk appetite and strategy. Two key factors of ERM are gross impact and likelihood of occurrence.
Reputation has been considered a major factor of Union Pacific’s structure. Bernard commented that “it takes years and years to build reputation, but only takes five minutes to destroy it.” This leads to the discussion of the levels and significance of risks because the ranking of enterprise risks changes over time. Some top historical ERMs include safety, security, service reliability, regulation and politics, economic and financial factors. With the change in environment, top current ERMs contain terrorism, significant economic shift, federal statutory risk, international political risk, rail safety, severe weather impact and customer or commercial risk.
Many recent failures include the European and U.S. debt crises, city of Detroit, Kodak, BP deep water horizon explosion and many others. Mr. Bernard challenged us to think about whether or not all risks are bad. We learned that risks can be opportunities to succeed and that avoiding risks is avoiding the chance to succeed. Bernard mentioned that the intelligent pursuit of rewarded risk forms the foundation of any successful business enterprise. Oil price is a great example as the oil industry boomed last year and then oil price crashed this year. Union Pacific is the largest consumer of diesel in the world so the oil price fluctuations plays an important role in Union Pacific’s ERM portfolio.
Risk assessment of enterprise risks contain both quantitative and qualitative factors. Financial, reputational, speed of onset and frequency can all be noted as high, medium or low to assist the ERM decision making. Bernard brought up the example of two different hurricanes that landed in Houston. The first time caused Union Pacific’s activity in Houston shut down for 13 days, and the second time only for 3 days because they were well-prepared to prevent destruction from extreme weather. Bernard emphasized the importance of accurate monitoring systems and suggested to prepare early for risks.
Bernard mentioned some ERM lessons learned through experience. I think one of his most memorable comments is to expect the unexpected and plan for it. We always make assumptions and some of them are usually incorrect; Bernard asked us to challenge even our most basic assumptions. We took away from his lessons that extreme events happen more often than we think and we should always remain agile.
Some of the risk management Student Fellows asked Bernard questions and he enlightened us with great conversation. He discussed the ongoing analysis and implementation of an automatic stop system preventing trains from unexpected events. Bernard explained the advice of making front line operators aware of the risks and risk management through education, simulation and real world experience.
Learning the perspective of an industry-experienced and leading professional like Mike Bernard on enterprise risk management opened our eyes. The workshop brought more fresh ideas and confidence to risk management Student Fellows to pursue a career in risk management. Diverse factors of ERM trained us to think about business in a more integrated and global environment with economic, financial, climate, safety, politics and many other elements. After attending this guest speaker event Fellows will be striving to apply Bernard’s lesson of “challenging even our most basic assumptions.”
Renée Laird, Founder & President Tallgrass International, Shares Experience & Advice with Student Fellows
On Monday March 7, 2016 the Student Fellows had the opportunity to listen to Renée Laird, Founder and President of Tallgrass International Ltd., speak about her career and lessons she learned from her work and life experiences. Renée Laird grew up in Rooks County, in western Kansas; she attended Kansas State University and graduated with a Bachelor of Science in Agricultural Economics. Following graduation, Renée obtained a job with Koch Industries in Wichita, Kansas, where she worked as a trader. While at Koch, she learned a great deal about risk and how to manage it. Through her experience in managing price risk, this built the foundation for her moving forward. After Koch, Renée moved to New York to work as an Executive Director for Rabobank International. While at Rabobank International, Renée oversaw multiple facets of the business that further developed her expertise in risk management. The events of 9/11 ultimately compelled Renée to leave Rabobank in New York and move back to the Midwest for a trading and management role at a global broker/dealer and futures commission merchant in Chicago. While at Fimat/Newedge, she managed a global business line as Global Head of Agricultural Commodities and OTC, as well as having direct oversight of the Chicago office as General Manager. After Newedge, she headed up a commodities trading advisor as CEO, where she oversaw the strategy for restructuring, growing, and implementing infrastructure and teams leading to a doubling of assets under management for the hedge fund. The Student Fellows were interested in hearing how Renée’s professional career took her to lead businesses across the United States and globe. In every position Renée has worked in her career thus far, it was evident to the Student Fellows that she took it upon herself to accept challenges and opportunities to learn new skills. With the variety of titles Renée has held, she has gained experience in many sectors of business including management, business strategy, budgeting, marketing, consulting, and sales. The knowledge gained through her career led Renée to establish Tallgrass International Ltd., which focuses on business and management consulting. Renée currently serves as the Founder and President of Tallgrass International Ltd.
While Renée’s resume showcases her impressive ability to manage risk in the professional world, she was also able to speak about her personal life and what she has learned in managing personal risk. Renée spoke of the challenges of being a female in the industry, being away from her home and family, and how life is not always a fairytale. The Student Fellows were delighted to hear about Renée’s personal life and her growing up in western Kansas. Renée’s roots share similarities to a handful of the Student Fellows of the Center, growing up on the family farm in a small midwestern community, being a member of 4-H, and eventually attending Kansas State University.
Listening to Renée gave the Student Fellows a different perspective on the industry as she has worked in a variety of executive positions allowing her to speak about the different challenges associated with each new job. In addition to learning from Renée the skills imperative for being an informed decision maker, Student Fellows also appreciated Renée’s guidance for the Fellows’ future careers and personal lives including: know the culture of a company, find a mentor, speak up, take risks, challenge yourself, network, be curious, and always stay connected to your roots.
The Student Fellows would like to extend a thank-you to Renée Laird for taking time out of her busy schedule to visit with us, answer our questions, and share with us her personal and professional life experiences.
Kayode Martins Ajewole
On March 2nd, the CRMER Student Fellows met with Rob Stitt, President and Founder of Community First National Bank. Rob graduated with a degree in Management from Kansas State University in 1986. With his experience in the banking industry as a former bank employee and later as a founder, he was able to have a great discussion with the CRMER Fellows on the risks involved in banking.
As the meeting started, Rob first spoke about his early years after leaving college. He discussed how he took a great risk he never thought he could do, resigning from the post of Credit Analyst in one of the commercial banks and co-founding a new bank from scratch. He founded Community First National Bank 15 years ago, and he emphasized the challenges involved in running the commercial bank. Community First National Bank got approval to open in March 2000, but officially opened in February 2001. The first major challenge he faced was how to raise capital. Rob also noted that most vital risk mitigation strategy involves having the right people working for you. He started his bank with six employees, and even with the bank’s growth Rob still believes in the culture of hiring like-minded people. The Community First National Bank is into different banking activities, but its major focus is on loans.
This was a very interactive discussion, with a variety of questions asked, and Rob responded with detailed answers. He also noted that most people in the banking industry learn more in their first year of the job than in their entire career. As a credit analyst, you are in position of decision making and you also bear great responsibility for most of the risks involved. A credit analyst lends money to people, and he/she has to make sure that he has all the necessary information that can assure him/her that the loan is for the right person.
Rob also highlighted the challenges faced by banks nowadays. Staying ahead of regulation is a big risk to the bank. He noted that over-regulation has made it more difficult to do business. Over-regulation affects the entire commercial bank industry, as it limits people getting into banking. There are about 34 percent reduction in numbers of commercial banks compared to when Rob started operation in 2001 (8,080 commercial banks then). Another challenge is finding good staff, especially in the ever changing business environments. Also, keeping up with changes in technology pose a big risk to banks. The most important aspect of being an entrepreneur is that they takes risk on their own, but with this risk comes rewards. Rob told the group that he started saving after college, and his savings gave him the advantage of being able to put over $100,000 into the bank at the outset.
Before the end of the interactive lecture, Rob went into detail on the biggest risk involved with loan portfolios. Each borrower has to be treated different because of their diverse background. He also helped the group realize that there are a lot of good entrepreneurs, but that they often lack accounting skills. Some lucrative businesses file for bankruptcy because of bad business management practices. As a lender, Community First National Bank works with their borrowers to limit financial mishap.
Rob’s message goes beyond banking alone, including general business advice, and how to survive in business. He advised that Student Fellows should pay attention to their credit reports, develop good communication skills, find a mentor in the fields they are going into, and always seek out opportunities to network.
Amanda Marchesini & Rachel Zimmerman
On Thursday, February 18, the Center for Risk Management Education and Research Student Fellows visited Innovative Livestock Services, Inc. in Manhattan, Kansas. Lee Borck, Chairman of both ILS and the Beef Marketing Group Cooperative, provided dinner and lots of insight into risk management strategies for ILS and his experience in the cattle industry. Lee is a 1970 Kansas State University graduate with a degree in Agricultural Economics, and he has been inducted into the Cattle Feeders Hall of Fame and recognized as a K-State Outstanding Stockman and Kansas Stockman of the Year.
Innovative Livestock Services is a stocker cattle feeding company with feedyards across Kansas and Nebraska that have a capacity of 170,000 head, over 32,500 acres of cropland, and headquarters in Great Bend, Kansas. The Manhattan office is where the risk management portion of the company is located, and we started the evening with a tour. The lower level features a room of desktop computers where employees manage hedged positions, watch live cattle sales, and ensure that every transaction has a corresponding hedge.
A company like ILS that feeds cattle is subject not only to price risk in the cattle market, but also to price risk in inputs’ markets, like the corn that is used for feed. Lee told us that for his company, the most effective way to keep risk properly mitigated is telling the risk management vice president to not worry about the margin calls and only focus on keeping positions hedged. He emphasized the importance of having a strong risk management team and trust between those who make risk management decisions and those who manage the finances of the company.
To cap off the visit at ILS, Lee shared with the Student Fellows the story of how he got to the position that he is at today. Born and raised in Kansas, Lee attended college at Kansas State University. After college, Lee worked for a farm credit association before working for a feedyard in Larned, KS. Lee worked his way up the ranks in the feed yard to become the manager, and he developed partnerships with other feed yards. The partnership, called Beef Marketing Group, helped their group of smaller feed yards compete with larger feed yards. Lee has expanded ILS to be in control of a wide range of things, including a pet food company. ILS continues to be a driving force in agriculture and Lee has been the visionary behind it all.
Michael O’Laughlin and Mathew Kaiser