CRMER Fellows Finish Chicago Trip with Aon

The Student Fellows’ final industry visit on the Chicago trip was on Friday, September 11 with Aon Risk Solutions, which is a division Aon plc.

Ann Gariti, Managing Director of Sales at Aon Risk Solutions, greeted the group and gave a brief overview of Aon’s business.

Gariti then arranged for a panel of Aon Risk Solutions employees to come in and talk with the Fellows about their careers. Brendan Cronin, associate broker, spoke first about his work within crisis management specific to political risk with the agency.

Britt Woodbury, account specialist, followed up with the work she does. Woodbury was able to give the fellows a feel for how many people work with each client and what jobs are given to each staffer.

CRMER Fellow, Nick Scherrer, economics major, said that he was thankful to visit Aon because they are titans of the industry.

“This gave an in-depth perspective of the ins and outs of commercial broking, there are so many things available job wise for us students coming out of college,” Scherrer said. “It was great to visit Aon because when studying econ it is often more about how to think instead of how to apply it and this visit really gave insight on application.”

With varied experience, the panel provided insight about careers with Aon Risk Solutions. Following these conversations, the group had an opportunity for a casual Q&A over lunch. The Fellows finished their visit to Aon with a trip to the 80th floor of the Aon Center for spectacular views of the Chicago skyline.

The Fellows would like to extend thanks to Aon Risk Solutions, Ann Gariti, and the members of the panel for their time, insights, and hospitality which they most graciously shared with the Student Fellows.

Aon Center 2015

CRMER Student Fellows outside Aon Center courtyard Chicago, IL

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Chicago Trade Floor First Stop on Chicago Trip for Fellows

Thursday, September 10, CRMER Student Fellows visited CME Group at the Chicago Board of Trade facilities in downtown Chicago, Illinois.

The Fellows were led on a tour through the CME Group’s now consolidated trading floor, where the Fellows experienced the historic, but now unused trading floor used for traditional grains “outcry trading” in the traditional grains and livestock pits for futures and options and in the financial products’ pits.

While once-robust floor trading has dwindled, CME Group remains the world’s leading derivatives marketplace through electronic trading. Because of this, next to the now less packed outcry floors, are booth spaces available that people can rent to do their trading online. Brenda Tucker, CME Group Executive Director, Client Development and Sales, showed the Fellows around and expressed that people could be at home in their pajamas trading but they choose to come to the floor for the atmosphere oftentimes.

Following the visit on the trade floor, the Fellows took taxis to another CME Group location that focuses on the online aspect of trading, the environment was vastly different and definitely gave insight into how trading is changing. One interesting aspect was a Thinking Lab that the fellows got to visit. It was almost entirely covered in white boards – the walls, the tables, and more. The lab is used by persons in the company to brainstorm. The lab wall had principles to encourage the staffers. These included: embrace challenges, persist in face of setbacks, effort – path to mastery, learn from criticism, and find lessons in the success of others.

We very much appreciate CME Group’s commitment to education through their support to the Center. The Fellows at the Center for Risk Management, Education and Research really enjoyed visiting the CME Group and interacting with the persons on the floor.

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A Visit With President Kirk Schulz

This past Tuesday, April 14, the Center for Risk Management Education and Research (CRMER) Student Fellows had the distinct privilege to spend part of the evening with influential guest, Kansas State University President Kirk Schulz. President Schulz has now been at the helm for six years and his efforts can easily be recognized for K-State’s success and growing vision. Today, he is a major reason the CRMER was launched and became a reality as well as an opportunity for Kansas State students.

President Schulz speaking to the CRMER students and Advisory Council

President Schulz speaking to the CRMER students and Advisory Council

The CRMER students, were also accompanied by the Center’s Advisory Council members. Who also, listened and engaged with President Schulz about the kinds of risk K-State and other Universities may encounter.

Apart from President Schulz’s good humor he brought to the table different perspectives on dynamic risks most of us have not considered. For K-State, and all universities, there is a huge responsibility to preserve and build a credible reputation that is perceived from the student body, faculty, as well as the general public. The reputation of a University is something that takes hard work and many years to build, while on the contrary, a reputation can be compromised by a single negative event—ultimately redefining a University.

President Schulz considered the reputation of a University to be the hinging point that could potentially birth more risk. Today, a broken reputation could lead to a decrease in incoming students, financial funding for the University or discomfort from people involved. For example, President Schulz shared how influential social media can be towards the well-being of a University and the vital role proper procedures play in resolving an unclear situation that could be circulating. This reputational risk as a whole can be prevented and regulated through proper courses of action instilled before a matter actually occurs.

From there, President Schulz wrapped up his time with the CRMER students by elaborating further on the importance of preparation and the ability to reevaluate current risk procedures in place for risk that K-State might encounter. No matter what facet of industry someone is involved with there is always going to be risk that was not accounted for. To President Schulz’s advice, preparing procedures that are upheld with integrity and are able to handle situations unaccounted for is pivotal for the success of any business. For K-State, this means being proactive and on their toes for any form of risk that may jeopardize the universities reputation.

After President Schulz’s departure, the CRMER students as well as the Advisory Council, participated in constructive dialogue concerning what we learned from President Schulz along with ways the Center could improve and the success we have earned to recognize.

Many of the students who were present that evening had a unanimous consensus that President Schulz spoke on forms of risk we were not expecting. He helped us to understand the gamut of risk present in our world today—such as reputational, social media risk, and unaccounted risk. Risk for President Schulz is much more than the tangibles and is nothing to be taken lightly.

Overall, this was an educational evening bringing to light more areas of risk we may have not considered. As a group of CRMER student fellows, we thank President Schulz for his valuable time on Tuesday and we owe him our gratitude for his support of the Center. Our appreciation also goes out to the Advisory Council and their genuine efforts to see students grow in knowledge and understanding for the rising importance of risk management.


Student Fellows and Advisory Council members socialize before the President's arrival.

Student Fellows and Advisory Council members socialize before the President’s arrival.

After President Schulz met with Student Fellows and the Advisory Council, we discussed his presentation and how we can guide the Center to strive in moving forward and improving even more.

After President Schulz met with Student Fellows and the Advisory Council, we discussed his presentation and how we can guide the Center to strive in moving forward and improving even more.

Student Fellows and the Advisory Council take time for a group picture.

Student Fellows and the Advisory Council take time for a group picture.

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CattleFax: Cattle Market Analysts

Randy Blach, CEO of CattleFax, took the time to meet with the CRMER Risk Management Fellows on the morning of Thursday, March 12. Although several risk management fellows were forced to miss the presentation due to pre-Spring Break midterms, those present engaged in an exciting discussion of future trends in the cattle market. Blach explained the role of CattleFax in the beef industry; provided a cattle market outlook; and left the group with some words of wisdom.

CattleFax serves as an industry leader in market analysis through a vast array of market data and information on the beef industry that dates back several decades.  Through theircattlefax massive data collection and expert analysts, CattleFax provides its members with market reports and forecasts to help them make critical management decisions. Blach emphasized that without over-regulation, the market provides clear signals that make forecasting possible. In Blach’s words, “markets are more predictable than ever because we have more data than ever.” Cattlefax translates this data into meaningful, easy to understand reports that members can act upon.

Anybody following the beef industry knows that 2014 was a record setting year in terms of prices and profit margins for much of the cow/calf and cattle feeding sectors of the industry. However, the higher the market rises, the higher the risk in prices swings. Thus, a sound risk management strategy is crucial, even in the good times.

Cattlefax and many other market analysts now believe that we saw prices peak at the end of 2014. Several factors play into that conclusion. Last year, the markets were out of alignment with normal profit margins and now they are beginning to normalize. Blach also emphasized that markets are beasts of momentum. The cattle market used up its powerful momentum last fall, forcing the market into what Blach describes as a contraseasonal market. In this contraseasonal market, no spring rally is expected. However, Cattlefax believes that increased supply this summer will cause a shift in leverage in favor of packers. This will return the market to its seasonal trends.

Blach also expressed concern over the impact that Avian Influenza may have on the cattle market. As Blach put it, “Markets hate uncertainty.” If the loss of poultry export markets leaves an over-supply of domestically available poultry, the decrease in price of poultry to the U.S. consumer could decrease the domestic demand for beef.

Blach urges that everyone involved in the industry form a disciplined process for making market decisions. Several factors that should be included in this process are supply/demacowsnd trends; seasonality; money flow; spreads; and basis. He made it clear to never overlook basis, because that’s what is actually being traded. When looking at seasonality, he rationalized repeating market trends as a result of people repeating themselves in management and practice.

Finally, the Risk Management Fellows were left with some words of advice regarding the development of a good relationship with your banker; because the value of credit in the longevity of a business should never be underestimated. Stepping away from financial advice, Blach urged students to always keep improving their communication skills.

Perhaps most importantly, Blach stressed that in order to reach their full potential people must be teachable, accountable, and willing to bury their ego, regardless of the success they’ve experienced.

Thanks to Randy Blach and Cattlefax for all that they do to support the CRMER and its student fellows.

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Union Pacific: Enterprise Risk Management

On Wednesday March 4th, Mike Bernard, Director of Capital Planning and Finance for Union Pacific, met with the CRMER Risk Management Fellows  to discuss the many factors that go into Union Pacific’s enterprise risk management policy (ERM). Since the beginning of established business, a major risk for companies has always been the opportunity for failure. Union Pacific (UP) has established a continuous process to identify, assess, manage, and control potential events or situations that might threaten the longevity of the company.

The level of risk associated with certain events fluctuates over time and environments. The number one risk for UP is safety.  Included in that is the transportation of union pacifictoxic inhalation hazard materials (TIH), such as anhydrous and chlorine gas. However, the recent oil industry boom from fracking technology has created another rising risk. Without enough pipeline capacity, much of the crude oil produced in the U.S. is transported by rail. The primary threat from hauling oil and other hazardous materials is the possibility of a dangerous mishap that could endanger both UP employees and the public.

Yet, with this new risk, comes new opportunity. The oil fields require fracking sand, pipe, and equipment that is transported by UP. This has caused a shift in UP’s primary routes. Originally a major East-West railroad, North-South routes have become crucial to meet the demand of the oil fields. Business in connection with the oil industry now accounts for 6% of UP’s revenue.

Bernard listed several other threats included in UP’s ERM, including: Terrorism (associated with both TIH and economic impact); Oil price fluctuations (UP is the largest consumer of diesel in the world); work stoppages (the labor strike at west coast ports caused huge disruptions in rail and other shipping industries across the supply chain); the European economy; the U.S. debt crisis; regulation; etc. In response to all these scenarios, UP has protocols and procedures aimed at preventing and mitigating their potential damage; even as specific as using technology to measure the quality of bearings as the train rolls down the tracks.

Bernard mentioned that a major component of risk is the velocity of risk. The more time available to prepare for risk, the less potential for damage. Thus, correct monitoring systems can never be underestimated. The ability for a company to remain adaptable and agile can also steer businesses from disaster.

To demonstrate the effectiveness of UP’s ERM strategy, Bernard gave the example of two different hurricanes that affected Houston, a major hub for UP. Hurricane Rita struck 100 miles north of Houston in 2005, before their current ERM plan was in place. As a result, UP’s Houston activity was shut down for 13 days.  By the time Hurricane Ike directly hit Houston in 2008, UP’s ERM was well in place and the hurricane only caused a 3 day shutdown.

Yet again, listening to the perspective of an industry leading professional on the subject of risk management proved a great opportunity for the Risk Management Fellows. Especially interesting was gaining perspective on all the different economic, environmental, and industry elements that impact the railroad industry every day. As Mike Bernard put it, “expect the unexpected.”

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MetLife-Risk Management Techniques and Challenges

The 2015 CRMER group had their first off-campus visit on Friday, March 3rd in Kansas City, Kansas. The group was invited to meet with several key figures from MetLife at their KC headquarters. Once there we received a wonderful presentation that provided us with an overview of MetLife and their agricultural investment department. In addition, the CRMER group was treated to an opportunity to speak with a panel consisting of: Jack Espenmiller, Kevin Hershberger, Brian Culpepper, Barry Bogseth, and Peter Headley. This provided the group with an in-depth look at how MetLife actively ensures its investment risk is properly managed.


The 2015 CRMER Group visiting MetLife headquarters in Kansas City, Ks

Agricultural is one of the key sources for MetLife to invest in secure, fairly liquid assets and maintain a predicted return. MetLife utilizes its deep credit expertise to grow its already 12 billion-dollar Ag portfolio, and with 97 years of experience it has a myriad of loans. That’s one way it limits and controls some of its risk; diversity. MetLife focuses on three areas of Ag loans: agriculture production sector, food and agribusiness sector, and the timber sector. In the agriculture production area they mainly make loans to large CAFOs (confined animal feeding operation), large dairy farms, and row crop farms. In the food and agribusiness area its key interests are packing plants, grain mills, processing plants, and large cooperatives. And in their final sector, timber, they loan to timber mills and lumber processing plants. This geographic and enterprise diversity helps insulate MetLife from large shocks to their investments. Another risk management technique that was discussed was internal checks and balances. MetLife has monthly portfolio reviews to check for discrepancies or warning signs that an investment may be in danger. They use these to maintain their structured investment regiment and allow for warning signs to present themselves.

Following the presentation and breakdown of their risk management techniques, the panel also provided the CRMER group with some insight into how the “Great Recession” effected the company, their thoughts on equity investing, and how they handle international challenges.

As with many companies the “Great Recession” had a negative impact upon MetLife, but unlike many of its competitors MetLife was able to weather the storm with more dignity and strength. The company’s greatest challenge moving forward will be addressing the impact of the Dodd-Frank Act. This in turn led the discussion to equity positions in their investments, which the panel quickly concluded wasn’t likely in the foreseeable future. Only in extreme cases, even in the past, were equity positions taken, and often that was caused by a default on the loan. Now with the Dodd-Frank Act in place the required capital holdings would make it very difficult for MetLife to justify most investments of that nature. The final question discussed was the challenges that MetLife faces as a global company. The panel touched upon the importance of understanding a country’s culture, estimating political groups effects on the country’s economy, government policy and trade agreement stability, and lastly they discussed exchange policies and their impacts.

MetLife has made a name for itself by becoming an insurance giant. With over 100 million customers in more than 50 countries, the company faces monumental challenges related to the company’s longevity and continued prosperity. To help ensure its continued success the company must continue to seek out investments, which will allow it to utilize its funds to reinvest them in calculated risks. With a company of this magnitude the risk management program must be very disciplined and highly diversified. It was a wonderful opportunity for the CRMER group to receive a brief education of how MetLife tackles their challenges.

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CHS Visits CRMER Student Fellows

CHS FoundationOn Monday, February 16th the Risk Management Fellowship played host to Patrick Hessini, Vice President of Transportation and Distribution for CHS, Inc. Hessini, a K-State graduate of Industrial Manufacturing and Systems Engineering, oversees 600 employees for the international commodity cooperative based out of the Minneapolis area. With over 11,000 employees across 24 countries and customers in 65 countries, CHS deals in the production and distribution of energy, grains, and foods on a global scale. Specifically, Hessini and the Risk Management Fellows discussed the business structure of CHS and how the company manages the risk and volatility associated with supply chains.

CHS takes pride in its cooperative status; with farmers, ranchers, and local co-ops making up the company’s owners and customers. A major goal of CHS is to help grow the businesses of their customers. CHS itself is comprised of 14 business units from agriculture and energy, to finance and transportation that collaborate to better accomplish the objectives of the company and its customers. This business structure also helps spread the company’s risk over multiple industries and economic environments. CHS also uses forward contracting and futures strategies, along with a fiscally conservative business model to handle its global risk.

CHS Speaker

Hessini explained that transportation and distribution contributes a great deal of volatility and risk for continued business success. Designing logistical plans to cope with infrastructure issues pose a major challenge for ensuring timely and efficient movement of goods. He went on to add that U.S. manufacturing growth; changes in international trade balance and routes; and political issues have had a major impact on transportation demand. A few examples of current events that have had, and will have, a major impact on the dynamics of the distribution industry include the Ukraine-Russia crisis; the updating of the Panama Canal; China’s slowing economic growth; and labor disputes in west coast ports. All of these events have altered the cost, demand, or efficiency of transportation routes enough for distribution companies like CHS to reevaluate how goods are moved from place to place.

To deal with this ever-changing environment Hessini described how important it is for CHS to forecast before high demand seasons; analyze all elements of the supply chain; and create options with business partnerships before they’re needed. Furthermore, CHS implements what-if analysis and scenario planning to develop strategies to deal with potential challenges. CHS also utilizes optimization models to determine the best solution to these challenges. The Transportation and Distribution department of CHS is comparable to a “supply chain control tower,” concludes Hessini.

I’m sure I speak for all of the Risk Management Fellows when I say that it was a pleasure to hear how a K-State graduate manages such a major component of a leading company like CHS, Inc. We all look forward to meeting with CHS again.

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