Honey Bear

Honey Bear

  • Submitted By: rspreng2
  • Date Submitted: 01/23/2014 6:07 AM
  • Category: Business
  • Words: 351
  • Page: 2
  • Views: 96

In one week, on July 10, 1997, the Finance Committee members of Honeywell Inc.’s board of directors would vote on whether to proceed with a new risk management program. For the past twoyears, members of Honeywell’s Treasury Management Team, in conjunction with insurancespecialists J&H Marsh & McLennan (now Marsh Inc.), auditor Deloitte & Touche, and later withinsurance underwriter American International Group (AIG) had worked to create a new, more cost-efficient method for managing some of Honeywell’s risks. Their proposal, the first of its kind,provided combined protection against Honeywell’s currency risks along with other, moretraditionally-insurable risks, in a multiyear, insurance-based, integrated risk management program.Honeywell had a long history of product innovation; this new proposal would extend its innovationto the financial arena. While a significant amount of time and effort had been invested in developingthis new concept and in simulating program results, the absence of a precedent was a source ofconcern. The Finance Committee’s vote depended, in part, on whether the anticipated savings of theprogram would be realized, and whether the coverage provided by the new contract would beadequate. Because Honeywell viewed the proposed plan as a first step in a firm-wide integrated(sometimes referred to as enterprise) risk management program that would extend to cover all ofHoneywell’s financial and operational risks, the Finance Committee’s decision would establishHoneywell’s risk management strategy for some years to come. II. Business Description Honeywell was a multibillion-dollar, international corporation, employing 53,000 people and managing operations in 95 countries. It was the largest producer of control systems and productsused to regulate heating and air conditioning in commercial buildings, and of systems to controlindustrial processes worldwide, and was also a leading supplier of commercial, military, and spaceavionics systems. Exhibit 1...

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