Southern coastal residents know as much about the weather halfway across the globe as they do about the weather in their backyards. That’s because weather systems off the coast of Africa could eventually arrive on our shores in the form of a hurricane. Once the system evolves into a tropical storm, its most-likely storm track is predicted, with the extra feature known as the “cone of uncertainty.” And as the whole nation saw with Hurricane Gustav, everyone in the “cone” is advised to take measures to protect their property.

Due to economic conditions, most companies are now operating in a cone of uncertainty. Revenue growth and profitability are all in question. Inflationary forces of rising prices and declining productivity widen the cone of uncertainty even more. The credit crisis is putting some banks and lenders on the brink of insolvency. Insurance companies are also feeling effects of the sluggish economy. Pressure on property/casualty premiums are forcing companies to look at how they price risks. The declining returns on investments have squeezed the life insurance industry profitability just as products “guaranteeing” certain benefits are being introduced.

The decisions that organizations make when in the cone of uncertainty will determine how much “damage” they will absorb from the economic storm. Rather than merely slashing costs across the board, consider these three elements that enable organizations to deal with the cone of uncertainty more effectively: 1) Stay focused on top-line revenues by working with the distribution system to leverage all sales opportunities; 2) Stay focused on the customer by improving service, quality and productivity; and 3) Identify and eliminate all non-value-added work, versus across-the-board cuts. This three-step approach involves all parts of the organization in a positive way, versus in a reactive and negative way.

One other area warranting attention is aging systems. We all have them—systems that are homegrown or modified beyond recognition. They are expensive to maintain and they make it difficult to adapt to market evolutions and ever-increasing customer expectations. Yet they live on, locking us in to old processes and predictably compounding expense and operational challenges in times like these. Start the process of systematically replacing these systems now.

If you follow these principles, when the current storm passes and you are no longer in the cone of uncertainty, your organization will emerge with positive momentum and will be able to seize the opportunity to grow and flourish.

Ben DiSylvester is chairman of The Robert E. Nolan Co., a management consulting firm specializing in the insurance industry.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

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