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Risk Fusion Saves Client Money
A paper manufacturer with operations in various foreign countries had traditionally managed its diverse exposures on a stand-alone basis without consideration to the cost these separate risk management approaches incurred.
Since the client was experiencing increased volatility due to the fluctuations of several foreign currencies and short-term interest rates, the costs to hedge these essentially uncorrelated risks were increasing commensurately.
Marsh demonstrated how Risk Fusion( could combine traditional, insurable risks such as property, automobile, general liability and workers' compensation with financial risks such as interest rate and currency fluctuation to take advantage of the natural hedges between un-correlated risks to produce a combined program resulting in lower costs and volatility. This program not only reduced the client's costs by 20% over their previous hedging and insurance programs, but reduced volatility by more than 50%. The program also served as a platform with which to handle other future uncorrelated risks.
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