Nov 6

Cannabis Risk Management and Insurance Matters

 

CANNABIS-NIZ

 

RISK MANAGEMENT & INSURANCE MATTERS

 

I recently went in search of credible evidence to support the folklore pertaining to Cannabis being found on the grave of the undisputed ‘wisest man on earth’, King Solomon. Voila! I came across information about a 2006 excavation in Jerusalem, which revealed a quantity of whole Cannabis plants, unearthed, from what scientists believe, is King Solomon’s tomb in Mount Zion. Not only does this add weight to the growing body of evidence that biblical folk used Cannabis for its psychoactive properties and their rituals, it joins the dots all the way along the Solomonic Line, started when Queen Makeda begat (I love that word!) a son with King Solomon, Menelik I. It is a lineage traced to Emperor Haile Selassie I, icon of the Rastafari faith.

 

I say all of this, not because these historical facts relating to my namesakes form the rationale for my natural evolution into the area of managing risks and securing insurance protection for the famed sacred plant and its byproducts, but because it certainly makes for a good introduction n’est pas/nuh true?

 

 

Anyway, a group of archaeologists, led by a Hongen Jiang (University of the Chinese Academy of Sciences), discovered thirteen (13) Cannabis plants that were still largely intact after millennia underground. “In a first for funerary marijuana, the plants were found lying like a burial shroud atop the body of a man who had died in his early-80s. Their roots lay below the man’s hips and the tips — which had been trimmed to remove the flowers — extended up around his face”. So it seems the hallowed herb didn’t merely grow on Solomon’s grave…he was wrapped from head to toe in it! Clearly not a ‘buck up’ as we would say.

 

WHY CANNABIS?

 

 

 

My fascination with the cannabis plant didn’t start yesterday. Having had close and longstanding ties with members of the UK and then Jamaican Rastafarian communities, my ‘overstanding’ of the sacramental use of Cannabis has naturally given rise to a foundation knowledge of and sincere respect for the sacred herb. Previous Blogs have made mention of dear naturopath and energy healing friends that have shared their knowledge and wisdom relating to the natural healing capabilities of our bodies, endocannabinoid system and its inbuilt receptors for Cannabis. One might say that in addition to The Almighty including the Cannabis plant in the fauna of our lands, we were also intricately wired to receive its benefits as part of our natural healing. I don’t want to get too med-tech here, so feel free to research further for greater understanding.

 

In spite of my 37 years in the Risk Management and Insurance industry (UK & Jamaica), I have maintained a characteristic penchant for seeking out holistic, outside the box solutions to a diverse range of problems. Could be my ENFP personality type…perhaps? So, rather than winding down for (very early) retirement, the buzz surrounding the Cannabis industry worldwide has inspired me to re-saddle, seat up and invest my professional expertise in this growing market. Pun intended.

 

Licensed Cannabis retailers, cultivators/processors, distributors and vertically integrated organisations in the Jamaican marketplace have been my first point of service focus, however, the whole world will be on the ganja train in the not too distant future, so I predict a growing demand for RM & insurance specialists to guide the multitudes, many of whom are new to the world of business, much less its risks. Even the British Government has loosened its stiff upper lip, adding Cannabis to the pharmacopoeia of medicines available to patients on the National Health Service (NHS), effective 1st November 2018!

 

WHAT IS RISK MANAGEMENT?

 

 

 

Let me back up a little. Risk Management, in simple terms, is the comprehensive identification of risks a particular operation/business is exposed to, the implementation of preventative/mitigating measures (where possible), the consideration of risk absorption/self-funding, then the appropriate transfer of risks that could severely impact the business e.g. through insurance placements. The formula may sound simple enough (or was so totally boring that you tuned out), but from my experience, organisations guided through the process by a seasoned professional in the field, run less risk of missing exposures to risks that might be right under their noses. The proverbial ‘wood for the trees’. My further caution at this point is for the engagement of a holistically steered, technically competent, yet creatively inspired practitioner that operates beyond the ticking of boxes. Do! One that both knows what to look for and what (sometimes) ‘silly’ questions to ask. The Cannabis industry takes us all into brand new pastures…let’s not do this by rote.

 

RISK MANAGEMENT EVOLUTION

 

 

 

I cut my teeth in the discipline of Risk Management by force to be honest. It was during the Local Government Risk Management revolution in England (90’s), when authorities across the country were ‘forced’ to find better solutions to ‘ground up’ insurance programmes, through a monopolistic insurance provider, MMI (Municipal Mutual Insurance), which finally went belly up. It was simple maths, the annually escalating premium costs couldn’t keep pace with the minefield of legal claims that were emerging in the borough councils. The sexual abuse of children in the Social Services care homes was one particular risk explosion that changed the local government insurance landscape. I was already in the hot seat as an Insurance Officer when the decree to introduce the brand new concept to thousands of departmental directors and staff was passed. Overnight (well, after specialist training), we emerged as Risk Managers & Insurance Officers, charged with spreading the gospel of Risk Management to sometimes reluctant heads of Education, Social Services, Leisure, Environmental Health, Housing, Highways etc. departments. All with their very diverse services and peculiar risk exposures. Some insurance officers panicked, but the adventure-freak in me dived right in and was excited to ride the new Risk Management wave. It was no longer business as usual.

  

CANNABIS RISK MANAGEMENT

 

 

 

The fundamental principles of Risk Management will of course apply to the Cannabis industry as they do with most others, however, the newness of so many players to the differentially legislated sector, means that unprecedented risk exposures (that will continue to evolve) must be identified and holistically viewed, to plug any gaps in security, best practice processes/international standards e.g. G.A.P., protection and in due course, insurance.

 

It is imperative that the usual parameters of Risk Management review are set down and expanded to incorporate all risk possibilities, including Physical, Financial (Pecuniary), Legislative, Human and Energetic…yes, ENERGETIC. We are after all dealing with a natural living plant that will be transformed to support the health of natural living human beings…both energetically comprised and potentially compromised.

 

 

Newcomers to the industry, unless it is critical or compulsory, insurance policies should ideally be considered after a thorough survey, meetings with key stakeholders and the establishment of your risk tolerance levels. It’s not wise to put an-off-the-shelf policy in place without determining its suitability for your peculiar exposures. The insurance sector worldwide has, to be honest, tended to move at dinosaur pace in regards to modernising scopes of policy covers over the years, preferring to stay closer to the Lloyds Coffee Shop (embryonic birthplace of our insurance industry) models of policy wording. An opportunity now presents itself for forward thinking insurers to underwrite more creatively tailored polices for the Cannabis businesses mushrooming around the globe. Take the risk!

 

WHO ARE THE JAMAICAN PLAYERS?

 

  

 

Currently in Jamaica, the main licensed players include persons/companies in the categories of Cannabis growers, manufacturers, dispensers, researchers, medical practitioners distributors/exporters. Other legally recognised players are for another story. Each branch of the sector comes with its own particular risks, which must be carefully and methodically explored. Tracking the journey from the seed to the consumer across company divides and multiple processes, means that a bird’s eye view is needed to weed out (sorry) contractual overlaps and fill gaps in risk responsibilities.

 

LET’S LOOK AT JUST ONE OF THE RISK AREAS…CYBER RISKS!

 

 

 

Dispensaries: The cannabis industry, like so many others, utilises technological systems to support operations in a number of areas e.g. POS (Point of Sale) or ERP (Enterprise Resource Planning).

 

Regardless of the safeguards built into your systems, there is always a clever youngster somewhere that has reached the peak of their cyber hacking career and is looking for greener pastures. Along comes the lucrative Cannabis industry.  Reports in the US market of some pretty serious cyber hacking situations are a cause for concern. Just ask MJ Freeway, a company recently subjected to an attack that caused two weeks of server outage. Breaches in your cyber-defenses can arise through a number of channels, affecting areas as unexpected as transportation and delivery information.

 

Robust cybersecurity is a must as a preventative measure, though insurance covers for the aftermath of those unstoppable hacks, may be needed. These cyber-ninjas are proliferating at a rapid rate, with each new wave of bored genius teenagers.

 

What if one of these youngsters could shut down the most vulnerable part of your Cannabis retail system? They might change prices through your POS system. Or ask your system provider to talk you through the levels of security they have in place to protect your data, their servers, and the privacy of your patients.

 

Growers: Whether you are a grower only or a Cannabis dispensary that has vertically structured to grow your own cannabis, don’t be naïve. Your systems can be breached directly or even indirectly via other operational seemingly obscure systems. Case: Target’s POS system was breached through its HVAC system (the store’s heating and cooling system). Through that network the cheeky hacker gained access to the store’s POS system and consequently customer information. Imagine one of your competitors hiring hackers to mess up the heating/cooling/lighting settings within your operations, destroying your crop by throwing off the delicate growing cycle. Ok, don’t imagine it; just make a mental note to tighten up cyber controls where you can. I mentioned your competitors, but you might find an internal team member that decides they have a beef (tofu, for my fellow vegetarians) with you and throws the proverbial spanner in the networks.

 

Bottom line, ensure your systems are optimally protected and that integrated platforms (that will allow a hacker to hop from one to the other) have equally high levels of cybersecurity, leaving no gaps in the integration process that could leave your information vulnerable.

 

Access restrictions at varying staff levels is also advisable to minimize infiltration from without and foul play from within. Monthly cybersecurity checks at management level are one way to heighten vigilance in this vast area.

 

 

SERVICES OF A CANNABIS RISK MANAGEMENT CONSULTANT

  

Whether you are in the Cannabis business already or teetering on the brink of jumping in, it’s never too early to start the process of looking at your risk exposures. My mother used to say ‘too late, too late shall be their cry’…I’m not sure where the dramatic phrase came from, but it certainly hastened my steps to cut procrastination and take the relevant course of action. Be proactive in taking your steps towards implementing your Risk Management Programme.

 

Effectively communicating the philosophy to your team members should also form a part of the Risk Manager’s charge. A persuasive presenter that can break the information down into non-stress inducing levels is key. Buy-in and commitment of all staff is a vitally important Risk mitigation factor, as it only takes one person forgetting to log out of your POS portal, in a public space, to throw your business doors wide open to cyber risks! I’m not trying to scare you in a Trump-esque way, just raise your awareness. 

 

WHAT ABOUT THE OTHER RISKS?

 

 

  

Now I could continue with a list and description of other Cannabis industry risk exposures, but I think it will be more fun if we ‘walk the floor’, then sit together over a coffee or red wine and compile a comprehensive list of risks that face YOU in particular! No two enterprises are exactly alike and the industry is brand new, so why approach the process from a pre-prepared, tick-boxed template? With a clean slated, birds-eye vantage point, we can work together to create the best Risk Management and Insurance solutions for our fledgling Cannabis industry and perhaps your entity in particular. 

 

SOLOMONIC WISDOM

 

 

 

Whether inspired by the Solomonic connection to the sacred herb or the vast opportunities emerging in the once legal, then illegal, now partially legal Cannabis industry, I am excited to be alive and witnessing the attention being bestowed on the plant that has been called ‘The healing of the nation’. Evidence now points to the fact that our wise King Solomon, or at the very least the bones of a male from that era and area, was laid to rest in a Cannabis shroud. I trust that the plant will continue to heal minds, bodies and elevate the souls of humankind. Finally, may social conscience lead (or ‘jook’) those positioned to benefit financially from the Jamaican market, so that they will pay homage and due regard to the stalwart farmers that kept the Jamaican Cannabis flag flying high over the years. Take it from me, there is enough room for all to ‘eat a food’.

 

C. MAKEDA SOLOMON ACII, CIP

 

CANNABIS RISK MANAGEMENT & INSURANCE CONSULTANT

 

Dec 7

SO, YOU ARE A DIRECTOR?

 

DOES YOUR COMPANY HAVE DIRECTORS AND OFFICERS?

 

Board of Directors

 

The board of directors, the president, treasurer, and other officers of your organization are the brains of the company, right? So, are they fully aware of the increasing personal financial liability that they face? Lack of awareness or ignorance are not sufficient pleas if you, as a Director, find yourself in breach of the law. You might find that your house (even if it’s in your spouse’s name ‘for convenience’ ;)) has to be sold off to pay the penalties arising.

 

Now that I have your attention, let’s look into this risk together (as I’m a Director too!)

 

THE LAW

 

Youxi

 

Ten years have passed since the new Companies Act 2005 came into effect (February 1st) in Jamaica. The pre-existing act was enforced in 1965. I can remember the slight nervousness that flickered amongst company directors as increasing responsibilities, costly penalties and more onerous liabilities were placed in their laps. The insurance sector became a-buzz with professionals exploring the income potential for a relatively new class of insurance that would surely be snapped up by a significant number of companies to protect their directors from personal penalties. A decade later…what’a gwaan? Have we become complacent, Directors? Have we dropped the ball insurers/brokers? Are we dangerously treating the risk the way we treat hurricane risks…”it won’t hit Jamaica”?

 

THE WHO

 

i-didnt-know

 

 

The Companies act speaks to the responsibilities of ‘Officers’ as well as Directors, so the net is somewhat wider than you might think. An officer could be defined as anyone who was a director, a secretary, or a manager of the company.

 

RULES & REGISTRATION:

 

There a number of compliance related rules and regulations under the 2005 Act which an organisation can breach/fall foul of. For example, the rules for filing documents were shifted, requiring notice of registered office (i.e. location); notice of company secretary and particulars of directors to be given at the time of registration of the company.

 

LEGAL LIABILITY:

 

Liability

 

 

While a duty of care by directors and officers was always present under the 1965 Act, it became codified (put in a more orderly, systematic way) under the 2005 Act. Directors and Officers have a duty of care to act honestly and in good faith, in the best interest of the company; to exercise the care, diligence and skill that a reasonably prudent person in comparable circumstances would.
The duty of care is owed to the company, but the interest of the shareholder, employees and the community in which the company operates may also be taken into account. Wide enough responsibility for you?

 

As a Director/Officer, you are expected to make decisions and take actions that protect all the above from loss, harm or damage…based on your level of ‘expertise’ brought to (expected for) the role. But what if it goes wrong?

 

INSURANCE TO THE RESCUE!

 

D&O insurance

 

A Directors’ and Officers’ Liability Insurance policy, with carefully scrutinized wording is the order of the day, allowing Directors’ to breathe a little easier.

 

Call it a safety net, this valuable insurance product allows companies to attract top-level director talent as the potential board members know their personal assets are protected!

 

Recent research by a UK insurer, ACE, highlights the fact that Directors & Officers Liability and Cyber Risk Insurance are two of the top four emerging risks for UK businesses. Jamaica too has many directors and (in my opinion) an underestimated cyber risk exposure (who said ‘scammer’?). Add cross global trading and jurisdictions within which a Jamaican company director can be held accountable widens further still.

 

Director & Officers Liability insurance is designed to cover the risk of the individual liability of a director or officer from lawsuits (and some regulatory actions) taken out against them by shareholders, regulators and even members of the wider community alleging wrongdoing on the part of the board.

 

SCARED YOU OFF…DON’T BE?

 

Scared

 

Back in 2005, Chief Executive Officer of the Office of the Registrar of Companies (ORC), Judith Ramlogan, encouraged persons not to be deterred from either becoming directors or from retaining their position as directors of companies in light of the new, more onerous legislation. I agree, but Directors have to make an informed decision, knowing and understanding their full exposure to the risks. Regulators around the world are taking a much more aggressive stance with companies that fall short on having adequate controls or for non-compliance with legislations. Be an informed, protected and productive Director!

 

Want to know more?

Call  me on 978 6618 / 978 6049 or email me on cdsolomon@sarifaja.com

 

Jun 1

“INSURANCE TOO TIEF”

Small Print Image1Small Print Image 2

 

For far too many years I have heard members of the insuring public, on two different continents, talk about the ‘small print’ in insurance as if they truly believe is deliberately added to policies to do them out of making a claim under the policy. Like a trap!

 

The truth is that an insurance policy is a contract like any other contract, with detailed terms and conditions written into it. Nothing is ‘hidden’, however, customers continue to be ‘shocked’ and ‘vexed’ when the terms of the policy are outlined to them, usually after a claim is made that is not covered. That is when you hear the cries of “insurance too tief!!!”

 

Why does this keep happening?

 

When we break it down, what we are really witnessing is a lack of adequate explanation by the insurance ‘experts’ to the lay customer, at the point of sale. Think about it…Insurance professionals study for years to understand the scope of cover under each class of policy, so it is unrealistic for us to expect the average policyholder to fully understand their policy…big or small print!

 

That is where your insurance broker comes in (or if you choose to insure directly with a company, your Insurer). Remember, using a broker costs you no more than going direct to an insurance company! The benefit of using a Broker is that we represent YOU, the client, just as an appointed Lawyer would. It is our purpose to find you the best insurance provider, to secure the most competitive premium AND to make you aware of the pertinent components of the policy you are buying. We translate the technical jargon to ‘plain talk’, while ensuring that the more detailed ‘technical’ wording (read: small print) is favourable to you.

 

If you only want the cheapest premium and don’t want ‘no long argument’ (brief explanation of policy cover 🙂 ), you may just miss out on hearing about the ‘small print’. When you appoint a ‘good’ broker, you benefit from choices of all the insurance companies, competitive premium, the right cover for your needs AND there should be no surprises at the point when a claim arises.

 

Like all good relationships, communication is key, so ‘mek wi reason likkle’. We want to get to know you as you should seek to know us. When you know the real deal about insurance, you will relish being another one of our satisfied customers and will confidently send the next person you hear say…”Insurance too tief!” to our doors (or online platform!).

 

Each one teach one! 😉

 

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