Risk Management at Crane Currency

A Golden Opportunity

Tim Golden found the thread that ties his career together: motion threads that add distinction and movement in currency and banknotes to prevent counterfeiting.

As corporate risk manager for Crane Currency, a more than 200-year-old, rapidly growing global producer of currency for central banks all over the world, Golden safeguards more than property. He also protects advanced micro-optics technology and the formulas for products that are the sovereign wealth of its customers.

Golden recalls his entry into the risk management field and discusses how he manages property and casualty risks at Crane Currency. Among his responsibilities: overseeing construction, from a property and casualty perspective, of the first commercial banknote printing facility to be built in several decades. Crane is building the new facility to highly protected risk (HPR) standards using FM Approved products in Malta—an island nation between Italy and Africa. Here are excerpts of our conversation.

What led you into the field of risk management?
It's quite an interesting story. My background was in all phases of manufacturing with an international textile company for more than 20 years. In the summer of 2001, that company asked me to join the corporate human resource department to manage an integrated disability management program for U.S. operations.

Then the position expanded to manage our property risk and the FM Global relationship worldwide. I was well-qualified because I'd had experience with FM Global when I was on the manufacturing side and was familiar working with their engineers and client service teams.

In 2006, I was given the title of corporate risk manager—the first time in more than 100 years of the company's existence that they had that position.

What stands out from your early risk management experience?
Back when I first became risk manager in the textile industry, we had an FM Global recommendation on a worldwide basis to increase the density of flow of the sprinkler systems in our warehouse. We had baled fiber—both polyester and nylon—and it was questionable if our sprinkler system was matched to that exposure. There was no hard data from either FM Global or our suppliers, so we actually purchased bales of the product and sent it to the FM Global Research Campus. FM Global agreed to do the test and 20 members of our team, including our CEO, attended the controlled burn. FM Global burned the fibers and developed standards for those materials. FM Global was able to prove that the sprinkler systems we had in those warehouses were sufficient, so we were able to drop all of those recommendations based on science. It really worked out for us.

How did you get into risk management with Crane Currency?
In 2009, I left the textile industry for a job as a public risk manager for a school district in the Albany, New York, USA, area. In 2010, I got a call from a broker working through Crane asking if I was interested in becoming Crane's risk manager.

"I had great mentors and people supporting me along the way in the transition, like our broker, my former treasury director and the FM Global team."

Tim Golden, corporate risk manager at Crane Currency

Why was Crane Currency interested in you?
They were looking for someone with global experience in insurance and risk who had worked with FM Global before because they were an FM Global insured. I have a little bit different background than most risk managers. Most come out of finance, and although I'd worked in a finance department, my background is more manufacturing. I had great mentors and people supporting me along the way in the transition, like our broker, my former treasury director and the FM Global team.

Every job has its challenges, but in risk management, the stakes are especially significant. What is the top risk management concern that keeps you up at night? Safety, safety, safety. The safety of our employees, customers, visitors and business partners.

When our CEO is asked what keeps him up at night, he says, 'Safety.' So if the CEO's chief concern is safety, guess what mine is? It's safety, and rightfully so.

How is risk management at Crane Currency different than in the textile industry?
Crane Currency is considered a forest products company, but we face challenges that are quite different from most of the forest products industry.

The risk fundamentals are the same; however, as a supplier to the Bureau of Engraving and Printing in the United States and central banks around the world, Crane Currency is tasked to provide products that are the sovereign wealth of our customers. This creates unique exposures in the intellectual property arena, transit risk, property and reputational risk.

You can imagine the immense responsibility that goes along with that. We've been doing this since 1879 and it's a really unique business model, not only from a business, but also from a risk management, perspective.

Our customers are putting enormous faith in Crane Currency. In the United States, there is no other capacity to create paper laced with micro-technology for security. It just doesn't exist. We have the intellectual property and processes that Crane Currency has developed for years and years in the evolution of the banknote and ultimately the insertion of security threads into the paper of currency.

The risks are great. From an insurance risk perspective, it's not too bad. But from a property conservation risk perspective, we are the sole supplier to many of our customers, so we need to make sure that our facilities are protected in every way.

What role do cyber hazards play in your business? Is there additional security because of it?
As you can imagine, our intellectual property—from the processing end, design of banknotes, security features and our customers' needs—is cyber- and computer-based. Because of this, Crane has formed two teams to manage our cyber risk—one is a corporate information security team headed up by our chief risk officer and global security director that develops our cyber policies. Then, there is a global committee that I sit on that establishes policies and training criteria. We also share bullet point tips weekly on our internal Crane TV network.

Crane uses a closed-loop online system. All our intellectual property systems are air-gapped. We use two-factor authentication that requires a password along with an ever-changing, system-generated eight-digit code. We also hired an outside firm to try to penetrate our system from outside the gates and they could not get into our system.

In August, the FM Global team came to our Dalton [Mass., USA] facility to discuss our manufacturing industrial controls. We feel good about what we're doing today.

How do Crane Currency's physical risks differ from the rest of the paper industry?
When you look at a typical high-speed paper machine, it's all about uptime—running 24/7 and making a product for a year straight. Think of products like writing paper, tissue paper, newsprint—that machine is dedicated to that process as more of a commodity. That uptime is everything. That's how paper manufacturers measure their profitability. Paper machines don't respond well to being shut down.

We don't have that at Crane Currency. We are at the mercy of what our customers, like the U.S. Bureau of Engraving and Printing, order. But we need to be ready at all times to respond to their orders. We need to be up and running when our customer demands it.

Each banknote itself has different configurations so we need to change out our machines. George Washington's head cannot be on the U.S. five-dollar bill. We're more of a custom order shop. The same is true of our international operations.

What are you doing to manage Crane Currency's risk from a physical protection point of view?
Our facilities and additions are built to HPR [highly protected risk] standards to protect them from both natural and human elements. Crane security teams patrol our facilities and warehouses. Twenty-foot (6.7-meter) chain-link fences with touch sensors, topped with barbed wire surround our facilities. We use closed circuit TV (CCTV) everywhere. There are turnstiles throughout the facility with different levels of security depending on the process.

Armed guards are stationed at all entrance points to our facilities around the clock. In fact, at our facility in Sweden, our guards are considered to be part of the Swedish National Police. They are one of the few security teams that are allowed to be armed in Sweden.

"We have confidence that when we see the FM Diamond, that product has been tested and found suitable under rigorous conditions from an engineering- and science-based approach."

Tim Golden, corporate risk manager at Crane Currency

How do you ensure you are built to HPR standards?
We use FM Approved products. We have confidence that when we see the FM Diamond, that product has been tested and found suitable under rigorous conditions from an engineering- and science-based approach. We know that when we test and inspect these products once they are installed and operational, they have been tested to rigorous loss prevention standards.

We are using only FM Approved products to build a new banknote and currency facility in Malta. The Malta facility will create the additional capacity required to support Crane's rapidly growing business. Malta was selected because it has a well-known history of banknote production, providing Crane access to a skilled workforce. In addition, Malta has a business-friendly environment and is located in close proximity to many of Crane's customers.

During the site selection process, I was tasked to assess the exposure to natural catastrophe events, the local and global insurance budget, fire protection systems and procurement of the insurance.

We are very fortunate with our established relationship on an enterprise basis to be partnering with FM Global on this risk. FM Global was with us from the start of the design phase to the commission of the Malta facility, which will open in Q1 of 2018.

What challenges have you encountered getting FM Approved products to such a remote location as Malta?
Malta presents some unique challenges to us. As an island nation, just about all construction material needs to be imported—mainly from the EU [European Union] and, in some instances, such as the case with our fire pump, from the United Kingdom. Just about all of the material and equipment needs to be shipped in.

Although procurement hasn't always gone as smoothly as we'd like, it was done. The biggest challenge is more on the contractor side of the equation. FM Global's standards are not the normal construction standards used in builds on the island, so a lot of education had to go into this process. Our fire protection engineering firm, FM Global engineers, our fire protection engineer and myself have made multiple visits to meet with the contractors to help them understand what we are trying to achieve.

How did you get the c-suite to agree to construct an HPR facility for property risk protection in Malta?
There was virtually no need to try to convince the c-suite to agree. Our CEO and executive team have endorsed through a written policy that all Crane Currency construction will meet HPR specifications. Of course, questions were asked, options explored and cost factors weighed, but in the end, it was the right thing to do for our business. Since my arrival at Crane in 2010, and prior to that, this policy has been the guidance for all our endeavors.

What value does the FM Global team bring to the Crane Currency relationship?
The value is on multiple fronts. Not only is FM Global helping us during the Malta construction—the after-construction relationship will be just as critical. For example, our employees, including two of our Malta-based employees, will attend SimZone training at the FM Global Learning Center. Our FM Global engineers visit our sites regularly. Our FM Global consultant engineer is often on-site and will be at our new Malta project for the fire pump commissioning and pressure testing of the underground mains.

"I would dare to say that risk control is perhaps the most critical of the three—remember, 'The only good claim is no claim.'"

Tim Golden, corporate risk manager at Crane Currency

As an experienced risk manager, what advice would you give to someone starting their career?
Risk management in the property and casualty arena is not just about financial risk. Risk control and risk mitigation complete the three sisters of this discipline. I would dare to say that risk control is perhaps the most critical of the three—remember, 'The only good claim is no claim.'

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