Measurement of Success

Corporations employ a myriad of different measurement tools to gauge success.  Each measurement has some validity in addressing the ultimate goal of success.  Unfortunately, each measurement exhibits certain drawbacks and inconsistencies, which can be counter-productive toward other measurements.

The ultimate measure of success for a company engaged in the manufacture, distribution or insurance of a product is the reduction of risk associate with that product.  This is a difficult measurement to quantify; thus the company uses any or all of the following:

1.  Financial:  The accountants measure success by employing the Statement of Financial Accounting Standards No. 5 Accounting for Contingencies.  Specifically, the accountants accrue by a charge to income of an estimated loss from a loss contingency.  In some circumstances the accountants will also set up a reserve for loss contingencies.

2.  Actuarial:  An actuary reviews prior claim history data and, using the collective risk model, estimates the amount of unpaid liabilities for product liability losses for current and prior years, including a provision for claims incurred but not reported (IBNR); estimates unpaid expenses associated with the investigation and defense of the unpaid claims; and predicts the amount of losses and expenses for product liability claims in the future.

3.  Claims Management:  Claims managers work toward:

a)  reducing claim count; and

b)  reducing overall cost by reducing settlement amount per case or reducing amount of expenses per case.

4.  Litigation and/or Trial Lawyers:  Endeavor to win the lawsuit or settle the matter for a minor sum; and

5.  Product Safety Department:  Ensures the design, marketing and manufacturing an ever-safe product.

Product Liability Solutions, LLC can assist you and your company in the development of these various parameters to measure the effectiveness of your risk management program, and enhance your profitability.

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