Rich Sarnie doesn't spend much time thinking about the highfalutin concept of "enterprise risk management" being touted eagerly by management consultants nationwide, and for that he makes no apologies.

Why should he? In the seven years he has been at Iselin, N.J.-based multinational Engelhard

Corp., a surface and materials science company best known for its innovative work with catalytic converters, Sarnie has made employee and plant safety and security a priority and the lynchpin of his overall risk management program. In doing so, he has demonstrated that workers and supervisors matter as much to overall good governance and stakeholder value as, say, how a company's financial statements are aggregated and reported. He's engaged in ERM of sorts but ERM as defined by Sarnie.

Results to date have been impressive: In each of the last five years, global insurable property claims have been zero--no small achievement, given that previously Engelhard reported an average of one to two losses annually, each well in excess of $1 million.

"It's incredible if you think about what we've been able to do so far," says Sarnie, 41, a Boston native who's Engelhard's director of risk management, insurance and security and oversees those concerns for 100 locations, including 45 manufacturing plants in countries ranging from Brazil to South Africa and China.

But that achievement alone isn't enough to satisfy Sarnie, who has also concentrated on reducing personal injury losses and workers' compensation claims. With just 6,000 employees worldwide, percentage reductions don't look as dramatic as in the property arena, but they're happening anyway.

"With injuries, we're absolutely making progress, but we're not seeing the remarkable decreases that we've had in the property area. Nevertheless, we're downward trending below average as we benchmark in these areas. It's a good story.

"You have to continue to work at it," he adds. "When something happens you have to learn from it, apply it and feed it back into the system. It's not just 'we'll keep plugging away,' that's not acceptable to me."

His goal? "No losses, no losses of any sort," Sarnie explains. "Do I think it's attainable? Yes. Is it going to take a lot of work? Yes. But if you don't have a goal of zero losses then what's the point? So until I get there I'm not going to be happy."

His prior record would suggest that his "no losses" policy is attainable. At Friendly Ice Cream Corp. in Wilbraham, Mass., for instance, he reduced injuries for the 30,000-employee company by 30 percent in less than two years. At ProSource Distribution Services, a Coral Gables, Fla.-based Fortune 500 national food distributor, workers' comp and liability costs declined 35 percent in 24 months and lost-time injuries fell a staggering 75 percent.

Finally, at Dallas-based OxyChem, a chemical manufacturer, his plant became the first in the southwest part of the state to earn the Star award from the Occupational Safety and Health Administration for excellence in plant safety in the early '90s.

A HOLISTIC THINKER

Outside the safety and security arenas, Sarnie's concerned about the overall cost of risk financing.

Beginning in 1999, he pushed for the creation of a captive, Vermont-based CTN Assurance Co. (formed in 2002, after Sarnie made numerous board presentations). Now he handles terrorism coverage and, more generally, casualty, workers' comp, general and auto liability through the captive.

"We formed a captive because of reduced capacity with property insurance," Sarnie writes in Captives 101: Managing Cost and Risk, published by the Tillinghast business of Towers Perrin last August. "We were well on the way when Sept. 11 happened and would have otherwise been exposed to ... coverage gaps for our physical properties around the world."

Understanding that "the world is a riskier place with your traditional insurance being more restrictive and not covering your needs," Sarnie continually questions what kind of risk programs might be run through the captive.

"Rich understands that risk is more than buying insurance and views it in a much more holistic way than many," says Chris A. Varin, senior vice president at Marsh (Vermont) who manages the captive for Sarnie. "He calls with ideas about what we can do with it that aren't in the mainstream. I might have to say 'No, there's a regulatory requirement that will keep you from doing it,' but if he thinks it might lend itself to the captive, he's quick to call and vet the idea. And he's happy to dismiss it if it's not going to work."

At Sarnie's suggestion, Engelhard was one of the first multinationals to run its TRIA (Terrorism Risk Insurance Act) insurance through the captive. It was also Sarnie's idea to handle surety bonds via CTN Assurance. "You're essentially guaranteeing your own performance, so why would you want to give a third party money to do this?" he asks.

The captive and other risk financing ideas aside, there's no doubt his safety and security efforts are his most innovative. In an era when workers drift further from corporate management, Sarnie has created an unusual but real bonhomie between his insurance companies and their engineers and his own plant executives and employees.

That's due in large part to a respect Sarnie has earned from his three primary partners--brokers Aon and Marsh, and carrier Zurich North America--for getting into the trenches with engineers and plant employees.

"I wouldn't call what he's doing unique, but he has probably the closest relationships with engineers of anyone I know," says Jon Sargent, a risk engineering consultant with Zurich North America in New York. "He's comfortable with them and goes to both our domestic and international engineering meetings, sitting down with engineers who work with his facilities."

Adds Varin: "There's a hands-on element to him, enough to understand the themes and issues and become an expert. At the same time, he's careful not to do everyone else's job, instead giving the support needed to get the job done."

The benefit for Engelhard's senior executives and stakeholders is that Sarnie has been able to prevent insurance premiums from skyrocketing--even after Sept. 11--and is now watching them fall at a significant clip as the market softens.

"Even after Sept. 11 we did not see the increases in the hard market that others did," he says. "Ours ranged between 5 percent and 10 percent, going along with the market whereas, for others, increases were in the triple digits. And now that the market is stabilizing, our rates are dropping anywhere from 10 percent to 30 percent."

FROM THE GROUND UP

It's not surprising that Sarnie looks at effective risk management as something that begins in the trenches. That's how he got his own career launched, one that has had a far greater emphasis on security and safety than traditional risk management.

Armed with a B.S. in chemical engineering from the University of Massachusetts Lowell and an MBA from Western New England College, he became corporate safety engineer at Friendly Ice Cream in 1985 and has stayed in the milieu of safety and security ever since. Between 1990 and 1993, he even managed his own plant for OxyChem.

"I've always wanted to get into management, but I've known as I've done that that I would keep my experiences with plants, safety and security front and center," Sarnie says.

"As I've designed my safety and loss processes at Engelhard, it has definitely been with these past experiences in mind."

Notably absent from his credentials is any risk-specific certification from groups such as the National Alliance for Insurance Education, to which he belongs. (Along the way he has acquired other credentials, becoming a board-certified safety professional (CSP) and a Professional Engineer (PE) in Massachusetts.)

Calling himself "not your typical risk manager," Sarnie says he has no interest in acquiring professional risk certification from any group. He gets his most beneficial information contacts from membership in the trade and lobbying group the Manufacturers Alliance/MAPI, he says, where he belongs to its Risk Management Council and can exchange ideas without vendors being present.

"I'm not pursuing certification because I prevent losses first," Sarnie says. "Our philosophy is that risk management isn't just about buying insurance. Those risk managers who spend most of their time as insurance purchasers will soon find themselves dinosaurs."

Sarnie's lack of focus on insurance may have been what has made him attractive to management at Engelhard.

"There was a change in culture with the company and my boss, treasurer-turned-CFO Mike Sperduto, deciding they wanted to be proactive and preventive in risk, not reactive," Sarnie says. "Today I spend no more than 20 percent to 25 percent on traditional insurance issues."

His background also explains Sarnie's ambivalence toward ERM--at least ERM where traditional risk management departments take the lead.

"I hate the phrase 'enterprise risk management.' I much prefer, if anything, the term 'holistic risk,' " says Sarnie. "I don't think there's a need for a chief risk officer. The CRO is the CFO. Why would you create an ERM program when you've already got it covered through functions like treasury, credit and accounting?"

ASSESS AND ASSIST

For the moment, the key to Sarnie's success remains his preventive efforts embodied in his "Assess and Assist" program, a concept formulated while he was at OxyChem and launched almost as soon as he joined Engelhard.

Through this program, coveting both casualty and property risks, Sarnie wants to ensure his plant employees work together as a team with engineers sent by brokers Aon and Marsh and carrier Zurich.

"When I was plant safety manager at OxyChem, I used to have insurance inspectors show up at the door, and I'd say, 'This is a waste of my time, I'm going to make it better when I get into corporate management,' and that's exactly what I'm doing at Engelhard," Sarnie says.

What he doesn't want is Engelhard plant employees looking at these inspectors as the enemy--and the inspectors treating the plant employees with disrespect. "I have multimillion-dollar facilities, the people who run them are professionals, and they should know where the problems are. I provide a resource to help them solve the problem."

Also not acceptable: engineers simply ticking off items on a checklist on what's OK and what's not OK at a plant. "Anyone can go in and find problems," Sarnie says. "I want people who can help solve problems instead of just identifying them."

He adds: "My plant executives and employees shouldn't feel that the guy coming in is zipping in and out, feeling that they can't say what their issues are or feeling that they have to hide them. We want the insurers' engineers to say: 'Here's how we can help you with these issues.' I ask the plants for feedback on what they think is good about my Assist and Assess program and what needs to be improved, and I pass that directly on to the insurers."

Sarnie derisively refers to the traditional method of plant inspection as "seagull management," says Zurich's Sargent. "He's talking about seagulls who fly toward the boardwalk, leave their mess all over the place and fly out."

To help energize the process, he personally approves each of the engineers who visits his plant and doesn't allow the insurers to substitute people without his say-so. He also tells the insurers' engineers exactly what he expects of them before they go into his plants. "I sit down with every engineer scheduled to visit with us and discuss this with them," he says. "I do this on an annualized basis."

Sarnie has also exported his Assess and Assist program overseas. "Because there's no workers' compensation outside the U.S., you don't see companies doing worker-related safety inspections, you won't find those taking place," he says. "But for us it doesn't matter where the location is Rome, Georgia or Rome, Italy. We provide assistance wherever they are."

COVETING THE A-TEAM

To keep Assess and Assist momentum up, Sarnie has established his "A Team" group of service providers who stand out for the results they produce. "I'm creating a more motivated employee," says Sarnie. "If I was to call one of my A Team members for help and another company called for the same thing, who do you think they'd assist first? Me."

Employees from all of his service providers are eligible to be on the team. He awards the newly named at an annual dinner where they receive a commemorative shirt and plaque that lists the program's tenets: Results, not excuses; be proactive not reactive; do it right the first time; be a leader, not a follower; be decisive; and make decisions as if your own interests are at stake. "I include the last one because their interests are at stake," he says.

Sarnie says he has between eight and 10 A-Team inspectors--about 20 percent of the total. "You might just get on it by a plant person calling and saying, 'This person did a terrific job.' They have to prove they're players."

So far the service providers back Sarnie's approach. "The A-Team concept goes to his style of management, having the right people in place," says Marsh's Varin, who hangs his own A Team placard on his wall. "The program's not entirely unique but a little different with its awards ceremony. There's no financial incentive, but our employees are appreciative and want to be on it.

"One reason is that you're going to see your main competitors at this ceremony, and then you find that he or she's going to be on the team and you're not," Varin says. "In our case one of our Marsh internal magazines publishes a story when we win; I was the runner-up for best of the best in my first year. So we take it seriously.

"You can love or hate what Sarnie's doing. Either way, it's an interesting approach."

Looking forward, Sarnie's actively involved in a number of risk-related ventures. For instance, he's part of beefed-up business continuity reviews and efforts under way, and he's taken the lead in reviewing plant operations--not just what's going on inside but around the perimeter--with terrorism in mind. "We've always been very good at security but have looked again at this and have made changes wherever we think there's a potential weakness," Sarnie says.

Whatever he does in the future, Sarnie's unlikely to lose his bottom-up perspective. "The plants and their employees are the ones that make the money," he says. "I never want to lose track of that."

RELATED ARTICLE: Two feet firmly planted on the ground.

Richard Sarnie loves manufacturing plants. Whether the plant makes ice cream, clothing or automobiles, the plant is where the action is. More often than not, it's the home of where the risks are, but it's also where companies generate their rewards in the form of profit.

There's one kind of manufacturing plant Sarnie likes most, however. It's the one with no accidents. Folks on the plant floor understand that the best. A mistake on the floor can sometimes cost them their .robs. At worst, such mistakes can cost them their lives.

"They live it, they breathe it," says Sarnie, who's worked for the Iselin, N.J.-based chemical manufacturer Engelhard Corp. for the past seven years. "They are having safety meetings. They are having safety committee meetings. They are doing so much about safety. They understand the value of having a safety meeting or of safety training."

But in the plush office environment of the C-suite back at corporate headquarters, that's not always the case, he says. The nitty gritty of assembly line work on the plant floor in the din of heavy machinery thousands of miles away is synthesized into neat folders of office memos, spreadsheets and e-mails.

"When you're n corporate, you hear of safety but it's an office environment and you may or may not understand the importance of safety in the realm of manufacturing--even in your own company--because you are so far removed from it," says Sarnie. "There are so many people in corporate that may never even have been to a manufacturing site to even +(now what's entailed."

He should know. He's been at the safety game n one form or another for more than 15 years, ever since he left the Boston suburb of Brockton, Mass., where he was born in 1963.

When he's not worrying about safety on the shop floor from his global company's headquarters, he's worrying about the well-being of his nine-year-old son and his one-year-old daughter.

After his children come his beloved Boston sports teams, the Red Sox, the Bruins and the Patriots. When it comes to the teams, Sarnie, himself a Little League coach, admits he's "avid, almost a zealot."

These days he doesn't have to worry about the Red Sox or the Patriots, given that last year each led the nation in their respective sports. (He doesn't even have to worry about the Bruins, since the NHL was on strike last season.)

--Cyril Tuohy

LAWRENCE RICHTER QUINN, a Washington D.C-based freelance writer, is a regular contributor to Risk & Insurance[R]. He can be reached at riskletters@lrp.com.