By Naveen Kumar
Suicide bombers are available for a price in Pakistan to settle personal scores, a police investigation into the killing of a parliamentarian has revealed.
On Tuesday, the crimes investigation department of the Lahore police said it had arrested five people involved in the August 6 suicide attack at the residence of Rashid Akbar Niwani, a Pakistan Muslim League-Nawaz (PML-N) member of the national assembly, which resulted in the death of 26 people and injuries to several more.
Niwani was only playing the honest broker between two friends who had fallen out over a monetary dispute, the police said.
Quoting the police, Dawn reported Wednesday that principal suspect Waqas Hussain and his accomplices Nazar Hussain, Arif Khan, Muhammad Amjad and Saeed Amjad Abbas hired a suicide bomber and explosives expert from Wana town in the restive South Waziristan to kill a man named Ejaz Hussain, with whom he had a monetary dispute.
Waqas Hussain and Ejaz Hussain were one-time fast friends. Waqas started a used-car business after borrowing Rs 2.1 million from Ejaz but could not establish himself and began to suffer losses. He handed over seven vehicles to Ejaz at different times to return the borrowed money, but Ejaz demanded another Rs 5.4 million, the police said.
A dispute developed and both had cases registered against each other.
Ejaz finally took the dispute to Niwani and asked him to settle it. Niwani called both parties to his outhouse in the presence of local notables, listened to them and announced another sitting for August 6.
"Waqas and his father Nazar Hussain went to their relative Arif Khan in Dera Ismail Khan (in the adjacent North West Frontier Province) and informed him about the situation. They decided to kill Ejaz in a suicide attack and Arif asked them to arrange money for the purpose," Dawn said.
Waqas, Nazar and Arif then went to Tank, also in the North West Frontier Province, where they met Wana resident Jaan Muhammad Wazeer and agreed to pay him Rs 1.2 million for the killing.
A day before the August 6 suicide attack, Jaan handed over the suicide bomber and an explosives expert to Arif. The bomber and explosives expert were later handed over to Waqas.
On the day of incident, Waqas confirmed that Ejaz was present at Niwani's house and took the suicide bomber there. The bomber blew himself up near Ejaz, killing him, Niwani and 24 others.
Wednesday, December 24, 2008
How to Handle the Job Offer You Can’t Afford?
By Kayani Bhagat
You must grasp a potential employer’s problems so you can promote yourself as a problem solver worth more than the proposed skimpy pay.
Earlier this year, Mark Cummuta walked away from a chance to become the No. 2 executive of a Chicago technology consultancy—for less than $100,000 (around Rs50 lakh). As the sole breadwinner and father of triplets, Cummuta couldn’t afford a nearly 20% cut in pay, compared with what he was earning as an independent management consultant.
He’s still looking for a permanent position. “Every now and then, I hit myself and say, ‘I should have taken that offer,’” concedes the consultant, who has helped several firms navigate difficult times since 2003.
Unfortunately, Cummuta is hardly unique. More battered businesses are giving new hires less money than they made in their last job. “I am seeing that a lot more,” says April M. Williams, a career coach in Algonquin, Illinois. Puny amounts flabbergast some of her clients.
“As the downturn deepens, an increasing number of job seekers will find themselves getting lower-paying offers,” says Mark Royal, a senior consultant at Hay Group. “We are on the cusp of a trend.”
But excess eagerness to toil for fewer bucks sends the wrong signal. Such applicants often “are really desperate”, says Niki Leondakis, chief operating officer at Kimpton Hotels and Restaurants, a boutique chain in San Francisco.
Jayachandran / MintRather than immediately reject or accept a lowball deal, you should mount a careful counter-attack, experts recommend. You could improve your chances of winning a satisfactory compromise, with trade-offs ranging from a faster pay review to extra perquisites.
Arm yourself with data about the going rate for your position by trolling websites such as www.salary.com, Indeed.com/salary, Salaryexpert.com and Glassdoor.com. You’ll see whether a concern “has poor information about the external market” and rewards staffers below prevailing levels, says Robin Pinkley, a professor at Southern Methodist University’s business school and author of books about pay negotiations.
As part of your homework, you must grasp a potential employer’s problems so you can promote yourself as a problem solver worth more than the proposed skimpy pay. “To negotiate in tough times, you have to be able to create a vision,” says Jim Camp, an author and president of Camp Group, a negotiation-consulting firm in Dublin, Ohio.
A big New York law firm recently agreed to hire an Ohio lawyer for $140 an hour, $40 an hour less than he was earning. The firm blamed tough times. But the attorney knew he could provide important client referrals, recalls Camp, who coached him. “What number would I be paid if I brought a million-dollar client?” the candidate asked firm officials.
“If you’re a rainmaker, the numbers change,” they replied, according to Camp. After further interviews, the firm raised his starting pay to $240 an hour. He began last summer.
A West Coast executive took this tactic a step further. Keen to enter senior management several years ago, she hoped to accept a vice-presidency at a mid-size manufacturer—and keep making over $300,000 a year. But the concern offered less than $200,000, the same cash compensation it gave other VPs.
The woman prepared a PowerPoint presentation for the chief executive, highlighting accomplishments he didn’t know about and describing ways she might bolster customer satisfaction. She says she also sold him on a quarterly bonus plan for herself, linked to measurable milestones needed for the manufacturer’s long-term growth.
The CEO enlarged her package by nearly $25,000. And she racked up bonuses fast enough so that she was paid nearly $300,000 within a year. “It was a win-win for the company,” she notes.
Some job hunters weighing lower offers bargain for alternative rewards, such as flexible hours, extra vacation, special training or a gym membership. Not everyone can long survive on a shrunken paycheque, however.
PeaceKeeper Cause-Metrics, a small cosmetics distributor, offered Stephanie S. Hayano a $50,000 salary to be its chief operating officer starting last January. She previously earned $300,000 a year running Natural Health Trends Corp. The puny pay wouldn’t have covered even mortgages for her three residences. “Unless I was prepared to totally change my lifestyle, $50,000 was not in the cards,” Hayano says.
She assumed the COO title at the New York firm, but gets compensated as a part-time consultant and retains other consulting gigs.
It’s a good idea to assess the long-term career impact of toiling for less. Younger individuals, for instance, might get a valuable opportunity to build their résumés.
That proved true for Sanjay Gupta. In 1994, the 26-year-old senior marketing analyst accepted 10% lower pay when he was transferred to a database marketing job at his employer, FedEx Corp. He and his wife were forced to dine out less often. However, Gupta says that he gained experience “with every facet of marketing”, a critical skill for becoming a chief marketing officer of a big business some day. He achieved that title last March, when GMAC Financial Services named him CMO.
You must grasp a potential employer’s problems so you can promote yourself as a problem solver worth more than the proposed skimpy pay.
Earlier this year, Mark Cummuta walked away from a chance to become the No. 2 executive of a Chicago technology consultancy—for less than $100,000 (around Rs50 lakh). As the sole breadwinner and father of triplets, Cummuta couldn’t afford a nearly 20% cut in pay, compared with what he was earning as an independent management consultant.
He’s still looking for a permanent position. “Every now and then, I hit myself and say, ‘I should have taken that offer,’” concedes the consultant, who has helped several firms navigate difficult times since 2003.
Unfortunately, Cummuta is hardly unique. More battered businesses are giving new hires less money than they made in their last job. “I am seeing that a lot more,” says April M. Williams, a career coach in Algonquin, Illinois. Puny amounts flabbergast some of her clients.
“As the downturn deepens, an increasing number of job seekers will find themselves getting lower-paying offers,” says Mark Royal, a senior consultant at Hay Group. “We are on the cusp of a trend.”
But excess eagerness to toil for fewer bucks sends the wrong signal. Such applicants often “are really desperate”, says Niki Leondakis, chief operating officer at Kimpton Hotels and Restaurants, a boutique chain in San Francisco.
Jayachandran / MintRather than immediately reject or accept a lowball deal, you should mount a careful counter-attack, experts recommend. You could improve your chances of winning a satisfactory compromise, with trade-offs ranging from a faster pay review to extra perquisites.
Arm yourself with data about the going rate for your position by trolling websites such as www.salary.com, Indeed.com/salary, Salaryexpert.com and Glassdoor.com. You’ll see whether a concern “has poor information about the external market” and rewards staffers below prevailing levels, says Robin Pinkley, a professor at Southern Methodist University’s business school and author of books about pay negotiations.
As part of your homework, you must grasp a potential employer’s problems so you can promote yourself as a problem solver worth more than the proposed skimpy pay. “To negotiate in tough times, you have to be able to create a vision,” says Jim Camp, an author and president of Camp Group, a negotiation-consulting firm in Dublin, Ohio.
A big New York law firm recently agreed to hire an Ohio lawyer for $140 an hour, $40 an hour less than he was earning. The firm blamed tough times. But the attorney knew he could provide important client referrals, recalls Camp, who coached him. “What number would I be paid if I brought a million-dollar client?” the candidate asked firm officials.
“If you’re a rainmaker, the numbers change,” they replied, according to Camp. After further interviews, the firm raised his starting pay to $240 an hour. He began last summer.
A West Coast executive took this tactic a step further. Keen to enter senior management several years ago, she hoped to accept a vice-presidency at a mid-size manufacturer—and keep making over $300,000 a year. But the concern offered less than $200,000, the same cash compensation it gave other VPs.
The woman prepared a PowerPoint presentation for the chief executive, highlighting accomplishments he didn’t know about and describing ways she might bolster customer satisfaction. She says she also sold him on a quarterly bonus plan for herself, linked to measurable milestones needed for the manufacturer’s long-term growth.
The CEO enlarged her package by nearly $25,000. And she racked up bonuses fast enough so that she was paid nearly $300,000 within a year. “It was a win-win for the company,” she notes.
Some job hunters weighing lower offers bargain for alternative rewards, such as flexible hours, extra vacation, special training or a gym membership. Not everyone can long survive on a shrunken paycheque, however.
PeaceKeeper Cause-Metrics, a small cosmetics distributor, offered Stephanie S. Hayano a $50,000 salary to be its chief operating officer starting last January. She previously earned $300,000 a year running Natural Health Trends Corp. The puny pay wouldn’t have covered even mortgages for her three residences. “Unless I was prepared to totally change my lifestyle, $50,000 was not in the cards,” Hayano says.
She assumed the COO title at the New York firm, but gets compensated as a part-time consultant and retains other consulting gigs.
It’s a good idea to assess the long-term career impact of toiling for less. Younger individuals, for instance, might get a valuable opportunity to build their résumés.
That proved true for Sanjay Gupta. In 1994, the 26-year-old senior marketing analyst accepted 10% lower pay when he was transferred to a database marketing job at his employer, FedEx Corp. He and his wife were forced to dine out less often. However, Gupta says that he gained experience “with every facet of marketing”, a critical skill for becoming a chief marketing officer of a big business some day. He achieved that title last March, when GMAC Financial Services named him CMO.
How to Handle the Job Offer You Can’t Afford?
By Kayani Bhagat
You must grasp a potential employer’s problems so you can promote yourself as a problem solver worth more than the proposed skimpy pay.
Earlier this year, Mark Cummuta walked away from a chance to become the No. 2 executive of a Chicago technology consultancy—for less than $100,000 (around Rs50 lakh). As the sole breadwinner and father of triplets, Cummuta couldn’t afford a nearly 20% cut in pay, compared with what he was earning as an independent management consultant.
He’s still looking for a permanent position. “Every now and then, I hit myself and say, ‘I should have taken that offer,’” concedes the consultant, who has helped several firms navigate difficult times since 2003.
Unfortunately, Cummuta is hardly unique. More battered businesses are giving new hires less money than they made in their last job. “I am seeing that a lot more,” says April M. Williams, a career coach in Algonquin, Illinois. Puny amounts flabbergast some of her clients.
“As the downturn deepens, an increasing number of job seekers will find themselves getting lower-paying offers,” says Mark Royal, a senior consultant at Hay Group. “We are on the cusp of a trend.”
But excess eagerness to toil for fewer bucks sends the wrong signal. Such applicants often “are really desperate”, says Niki Leondakis, chief operating officer at Kimpton Hotels and Restaurants, a boutique chain in San Francisco.
Jayachandran / MintRather than immediately reject or accept a lowball deal, you should mount a careful counter-attack, experts recommend. You could improve your chances of winning a satisfactory compromise, with trade-offs ranging from a faster pay review to extra perquisites.
Arm yourself with data about the going rate for your position by trolling websites such as www.salary.com, Indeed.com/salary, Salaryexpert.com and Glassdoor.com. You’ll see whether a concern “has poor information about the external market” and rewards staffers below prevailing levels, says Robin Pinkley, a professor at Southern Methodist University’s business school and author of books about pay negotiations.
As part of your homework, you must grasp a potential employer’s problems so you can promote yourself as a problem solver worth more than the proposed skimpy pay. “To negotiate in tough times, you have to be able to create a vision,” says Jim Camp, an author and president of Camp Group, a negotiation-consulting firm in Dublin, Ohio.
A big New York law firm recently agreed to hire an Ohio lawyer for $140 an hour, $40 an hour less than he was earning. The firm blamed tough times. But the attorney knew he could provide important client referrals, recalls Camp, who coached him. “What number would I be paid if I brought a million-dollar client?” the candidate asked firm officials.
“If you’re a rainmaker, the numbers change,” they replied, according to Camp. After further interviews, the firm raised his starting pay to $240 an hour. He began last summer.
A West Coast executive took this tactic a step further. Keen to enter senior management several years ago, she hoped to accept a vice-presidency at a mid-size manufacturer—and keep making over $300,000 a year. But the concern offered less than $200,000, the same cash compensation it gave other VPs.
The woman prepared a PowerPoint presentation for the chief executive, highlighting accomplishments he didn’t know about and describing ways she might bolster customer satisfaction. She says she also sold him on a quarterly bonus plan for herself, linked to measurable milestones needed for the manufacturer’s long-term growth.
The CEO enlarged her package by nearly $25,000. And she racked up bonuses fast enough so that she was paid nearly $300,000 within a year. “It was a win-win for the company,” she notes.
Some job hunters weighing lower offers bargain for alternative rewards, such as flexible hours, extra vacation, special training or a gym membership. Not everyone can long survive on a shrunken paycheque, however.
PeaceKeeper Cause-Metrics, a small cosmetics distributor, offered Stephanie S. Hayano a $50,000 salary to be its chief operating officer starting last January. She previously earned $300,000 a year running Natural Health Trends Corp. The puny pay wouldn’t have covered even mortgages for her three residences. “Unless I was prepared to totally change my lifestyle, $50,000 was not in the cards,” Hayano says.
She assumed the COO title at the New York firm, but gets compensated as a part-time consultant and retains other consulting gigs.
It’s a good idea to assess the long-term career impact of toiling for less. Younger individuals, for instance, might get a valuable opportunity to build their résumés.
That proved true for Sanjay Gupta. In 1994, the 26-year-old senior marketing analyst accepted 10% lower pay when he was transferred to a database marketing job at his employer, FedEx Corp. He and his wife were forced to dine out less often. However, Gupta says that he gained experience “with every facet of marketing”, a critical skill for becoming a chief marketing officer of a big business some day. He achieved that title last March, when GMAC Financial Services named him CMO.
You must grasp a potential employer’s problems so you can promote yourself as a problem solver worth more than the proposed skimpy pay.
Earlier this year, Mark Cummuta walked away from a chance to become the No. 2 executive of a Chicago technology consultancy—for less than $100,000 (around Rs50 lakh). As the sole breadwinner and father of triplets, Cummuta couldn’t afford a nearly 20% cut in pay, compared with what he was earning as an independent management consultant.
He’s still looking for a permanent position. “Every now and then, I hit myself and say, ‘I should have taken that offer,’” concedes the consultant, who has helped several firms navigate difficult times since 2003.
Unfortunately, Cummuta is hardly unique. More battered businesses are giving new hires less money than they made in their last job. “I am seeing that a lot more,” says April M. Williams, a career coach in Algonquin, Illinois. Puny amounts flabbergast some of her clients.
“As the downturn deepens, an increasing number of job seekers will find themselves getting lower-paying offers,” says Mark Royal, a senior consultant at Hay Group. “We are on the cusp of a trend.”
But excess eagerness to toil for fewer bucks sends the wrong signal. Such applicants often “are really desperate”, says Niki Leondakis, chief operating officer at Kimpton Hotels and Restaurants, a boutique chain in San Francisco.
Jayachandran / MintRather than immediately reject or accept a lowball deal, you should mount a careful counter-attack, experts recommend. You could improve your chances of winning a satisfactory compromise, with trade-offs ranging from a faster pay review to extra perquisites.
Arm yourself with data about the going rate for your position by trolling websites such as www.salary.com, Indeed.com/salary, Salaryexpert.com and Glassdoor.com. You’ll see whether a concern “has poor information about the external market” and rewards staffers below prevailing levels, says Robin Pinkley, a professor at Southern Methodist University’s business school and author of books about pay negotiations.
As part of your homework, you must grasp a potential employer’s problems so you can promote yourself as a problem solver worth more than the proposed skimpy pay. “To negotiate in tough times, you have to be able to create a vision,” says Jim Camp, an author and president of Camp Group, a negotiation-consulting firm in Dublin, Ohio.
A big New York law firm recently agreed to hire an Ohio lawyer for $140 an hour, $40 an hour less than he was earning. The firm blamed tough times. But the attorney knew he could provide important client referrals, recalls Camp, who coached him. “What number would I be paid if I brought a million-dollar client?” the candidate asked firm officials.
“If you’re a rainmaker, the numbers change,” they replied, according to Camp. After further interviews, the firm raised his starting pay to $240 an hour. He began last summer.
A West Coast executive took this tactic a step further. Keen to enter senior management several years ago, she hoped to accept a vice-presidency at a mid-size manufacturer—and keep making over $300,000 a year. But the concern offered less than $200,000, the same cash compensation it gave other VPs.
The woman prepared a PowerPoint presentation for the chief executive, highlighting accomplishments he didn’t know about and describing ways she might bolster customer satisfaction. She says she also sold him on a quarterly bonus plan for herself, linked to measurable milestones needed for the manufacturer’s long-term growth.
The CEO enlarged her package by nearly $25,000. And she racked up bonuses fast enough so that she was paid nearly $300,000 within a year. “It was a win-win for the company,” she notes.
Some job hunters weighing lower offers bargain for alternative rewards, such as flexible hours, extra vacation, special training or a gym membership. Not everyone can long survive on a shrunken paycheque, however.
PeaceKeeper Cause-Metrics, a small cosmetics distributor, offered Stephanie S. Hayano a $50,000 salary to be its chief operating officer starting last January. She previously earned $300,000 a year running Natural Health Trends Corp. The puny pay wouldn’t have covered even mortgages for her three residences. “Unless I was prepared to totally change my lifestyle, $50,000 was not in the cards,” Hayano says.
She assumed the COO title at the New York firm, but gets compensated as a part-time consultant and retains other consulting gigs.
It’s a good idea to assess the long-term career impact of toiling for less. Younger individuals, for instance, might get a valuable opportunity to build their résumés.
That proved true for Sanjay Gupta. In 1994, the 26-year-old senior marketing analyst accepted 10% lower pay when he was transferred to a database marketing job at his employer, FedEx Corp. He and his wife were forced to dine out less often. However, Gupta says that he gained experience “with every facet of marketing”, a critical skill for becoming a chief marketing officer of a big business some day. He achieved that title last March, when GMAC Financial Services named him CMO.
How to Handle the Job Offer You Can’t Afford?
By Kayani Bhagat
You must grasp a potential employer’s problems so you can promote yourself as a problem solver worth more than the proposed skimpy pay.
Earlier this year, Mark Cummuta walked away from a chance to become the No. 2 executive of a Chicago technology consultancy—for less than $100,000 (around Rs50 lakh). As the sole breadwinner and father of triplets, Cummuta couldn’t afford a nearly 20% cut in pay, compared with what he was earning as an independent management consultant.
He’s still looking for a permanent position. “Every now and then, I hit myself and say, ‘I should have taken that offer,’” concedes the consultant, who has helped several firms navigate difficult times since 2003.
Unfortunately, Cummuta is hardly unique. More battered businesses are giving new hires less money than they made in their last job. “I am seeing that a lot more,” says April M. Williams, a career coach in Algonquin, Illinois. Puny amounts flabbergast some of her clients.
“As the downturn deepens, an increasing number of job seekers will find themselves getting lower-paying offers,” says Mark Royal, a senior consultant at Hay Group. “We are on the cusp of a trend.”
But excess eagerness to toil for fewer bucks sends the wrong signal. Such applicants often “are really desperate”, says Niki Leondakis, chief operating officer at Kimpton Hotels and Restaurants, a boutique chain in San Francisco.
Jayachandran / MintRather than immediately reject or accept a lowball deal, you should mount a careful counter-attack, experts recommend. You could improve your chances of winning a satisfactory compromise, with trade-offs ranging from a faster pay review to extra perquisites.
Arm yourself with data about the going rate for your position by trolling websites such as www.salary.com, Indeed.com/salary, Salaryexpert.com and Glassdoor.com. You’ll see whether a concern “has poor information about the external market” and rewards staffers below prevailing levels, says Robin Pinkley, a professor at Southern Methodist University’s business school and author of books about pay negotiations.
As part of your homework, you must grasp a potential employer’s problems so you can promote yourself as a problem solver worth more than the proposed skimpy pay. “To negotiate in tough times, you have to be able to create a vision,” says Jim Camp, an author and president of Camp Group, a negotiation-consulting firm in Dublin, Ohio.
A big New York law firm recently agreed to hire an Ohio lawyer for $140 an hour, $40 an hour less than he was earning. The firm blamed tough times. But the attorney knew he could provide important client referrals, recalls Camp, who coached him. “What number would I be paid if I brought a million-dollar client?” the candidate asked firm officials.
“If you’re a rainmaker, the numbers change,” they replied, according to Camp. After further interviews, the firm raised his starting pay to $240 an hour. He began last summer.
A West Coast executive took this tactic a step further. Keen to enter senior management several years ago, she hoped to accept a vice-presidency at a mid-size manufacturer—and keep making over $300,000 a year. But the concern offered less than $200,000, the same cash compensation it gave other VPs.
The woman prepared a PowerPoint presentation for the chief executive, highlighting accomplishments he didn’t know about and describing ways she might bolster customer satisfaction. She says she also sold him on a quarterly bonus plan for herself, linked to measurable milestones needed for the manufacturer’s long-term growth.
The CEO enlarged her package by nearly $25,000. And she racked up bonuses fast enough so that she was paid nearly $300,000 within a year. “It was a win-win for the company,” she notes.
Some job hunters weighing lower offers bargain for alternative rewards, such as flexible hours, extra vacation, special training or a gym membership. Not everyone can long survive on a shrunken paycheque, however.
PeaceKeeper Cause-Metrics, a small cosmetics distributor, offered Stephanie S. Hayano a $50,000 salary to be its chief operating officer starting last January. She previously earned $300,000 a year running Natural Health Trends Corp. The puny pay wouldn’t have covered even mortgages for her three residences. “Unless I was prepared to totally change my lifestyle, $50,000 was not in the cards,” Hayano says.
She assumed the COO title at the New York firm, but gets compensated as a part-time consultant and retains other consulting gigs.
It’s a good idea to assess the long-term career impact of toiling for less. Younger individuals, for instance, might get a valuable opportunity to build their résumés.
That proved true for Sanjay Gupta. In 1994, the 26-year-old senior marketing analyst accepted 10% lower pay when he was transferred to a database marketing job at his employer, FedEx Corp. He and his wife were forced to dine out less often. However, Gupta says that he gained experience “with every facet of marketing”, a critical skill for becoming a chief marketing officer of a big business some day. He achieved that title last March, when GMAC Financial Services named him CMO.
You must grasp a potential employer’s problems so you can promote yourself as a problem solver worth more than the proposed skimpy pay.
Earlier this year, Mark Cummuta walked away from a chance to become the No. 2 executive of a Chicago technology consultancy—for less than $100,000 (around Rs50 lakh). As the sole breadwinner and father of triplets, Cummuta couldn’t afford a nearly 20% cut in pay, compared with what he was earning as an independent management consultant.
He’s still looking for a permanent position. “Every now and then, I hit myself and say, ‘I should have taken that offer,’” concedes the consultant, who has helped several firms navigate difficult times since 2003.
Unfortunately, Cummuta is hardly unique. More battered businesses are giving new hires less money than they made in their last job. “I am seeing that a lot more,” says April M. Williams, a career coach in Algonquin, Illinois. Puny amounts flabbergast some of her clients.
“As the downturn deepens, an increasing number of job seekers will find themselves getting lower-paying offers,” says Mark Royal, a senior consultant at Hay Group. “We are on the cusp of a trend.”
But excess eagerness to toil for fewer bucks sends the wrong signal. Such applicants often “are really desperate”, says Niki Leondakis, chief operating officer at Kimpton Hotels and Restaurants, a boutique chain in San Francisco.
Jayachandran / MintRather than immediately reject or accept a lowball deal, you should mount a careful counter-attack, experts recommend. You could improve your chances of winning a satisfactory compromise, with trade-offs ranging from a faster pay review to extra perquisites.
Arm yourself with data about the going rate for your position by trolling websites such as www.salary.com, Indeed.com/salary, Salaryexpert.com and Glassdoor.com. You’ll see whether a concern “has poor information about the external market” and rewards staffers below prevailing levels, says Robin Pinkley, a professor at Southern Methodist University’s business school and author of books about pay negotiations.
As part of your homework, you must grasp a potential employer’s problems so you can promote yourself as a problem solver worth more than the proposed skimpy pay. “To negotiate in tough times, you have to be able to create a vision,” says Jim Camp, an author and president of Camp Group, a negotiation-consulting firm in Dublin, Ohio.
A big New York law firm recently agreed to hire an Ohio lawyer for $140 an hour, $40 an hour less than he was earning. The firm blamed tough times. But the attorney knew he could provide important client referrals, recalls Camp, who coached him. “What number would I be paid if I brought a million-dollar client?” the candidate asked firm officials.
“If you’re a rainmaker, the numbers change,” they replied, according to Camp. After further interviews, the firm raised his starting pay to $240 an hour. He began last summer.
A West Coast executive took this tactic a step further. Keen to enter senior management several years ago, she hoped to accept a vice-presidency at a mid-size manufacturer—and keep making over $300,000 a year. But the concern offered less than $200,000, the same cash compensation it gave other VPs.
The woman prepared a PowerPoint presentation for the chief executive, highlighting accomplishments he didn’t know about and describing ways she might bolster customer satisfaction. She says she also sold him on a quarterly bonus plan for herself, linked to measurable milestones needed for the manufacturer’s long-term growth.
The CEO enlarged her package by nearly $25,000. And she racked up bonuses fast enough so that she was paid nearly $300,000 within a year. “It was a win-win for the company,” she notes.
Some job hunters weighing lower offers bargain for alternative rewards, such as flexible hours, extra vacation, special training or a gym membership. Not everyone can long survive on a shrunken paycheque, however.
PeaceKeeper Cause-Metrics, a small cosmetics distributor, offered Stephanie S. Hayano a $50,000 salary to be its chief operating officer starting last January. She previously earned $300,000 a year running Natural Health Trends Corp. The puny pay wouldn’t have covered even mortgages for her three residences. “Unless I was prepared to totally change my lifestyle, $50,000 was not in the cards,” Hayano says.
She assumed the COO title at the New York firm, but gets compensated as a part-time consultant and retains other consulting gigs.
It’s a good idea to assess the long-term career impact of toiling for less. Younger individuals, for instance, might get a valuable opportunity to build their résumés.
That proved true for Sanjay Gupta. In 1994, the 26-year-old senior marketing analyst accepted 10% lower pay when he was transferred to a database marketing job at his employer, FedEx Corp. He and his wife were forced to dine out less often. However, Gupta says that he gained experience “with every facet of marketing”, a critical skill for becoming a chief marketing officer of a big business some day. He achieved that title last March, when GMAC Financial Services named him CMO.
How to Handle the Job Offer You Can’t Afford?
By Kayani Bhagat
You must grasp a potential employer’s problems so you can promote yourself as a problem solver worth more than the proposed skimpy pay.
Earlier this year, Mark Cummuta walked away from a chance to become the No. 2 executive of a Chicago technology consultancy—for less than $100,000 (around Rs50 lakh). As the sole breadwinner and father of triplets, Cummuta couldn’t afford a nearly 20% cut in pay, compared with what he was earning as an independent management consultant.
He’s still looking for a permanent position. “Every now and then, I hit myself and say, ‘I should have taken that offer,’” concedes the consultant, who has helped several firms navigate difficult times since 2003.
Unfortunately, Cummuta is hardly unique. More battered businesses are giving new hires less money than they made in their last job. “I am seeing that a lot more,” says April M. Williams, a career coach in Algonquin, Illinois. Puny amounts flabbergast some of her clients.
“As the downturn deepens, an increasing number of job seekers will find themselves getting lower-paying offers,” says Mark Royal, a senior consultant at Hay Group. “We are on the cusp of a trend.”
But excess eagerness to toil for fewer bucks sends the wrong signal. Such applicants often “are really desperate”, says Niki Leondakis, chief operating officer at Kimpton Hotels and Restaurants, a boutique chain in San Francisco.
Jayachandran / MintRather than immediately reject or accept a lowball deal, you should mount a careful counter-attack, experts recommend. You could improve your chances of winning a satisfactory compromise, with trade-offs ranging from a faster pay review to extra perquisites.
Arm yourself with data about the going rate for your position by trolling websites such as www.salary.com, Indeed.com/salary, Salaryexpert.com and Glassdoor.com. You’ll see whether a concern “has poor information about the external market” and rewards staffers below prevailing levels, says Robin Pinkley, a professor at Southern Methodist University’s business school and author of books about pay negotiations.
As part of your homework, you must grasp a potential employer’s problems so you can promote yourself as a problem solver worth more than the proposed skimpy pay. “To negotiate in tough times, you have to be able to create a vision,” says Jim Camp, an author and president of Camp Group, a negotiation-consulting firm in Dublin, Ohio.
A big New York law firm recently agreed to hire an Ohio lawyer for $140 an hour, $40 an hour less than he was earning. The firm blamed tough times. But the attorney knew he could provide important client referrals, recalls Camp, who coached him. “What number would I be paid if I brought a million-dollar client?” the candidate asked firm officials.
“If you’re a rainmaker, the numbers change,” they replied, according to Camp. After further interviews, the firm raised his starting pay to $240 an hour. He began last summer.
A West Coast executive took this tactic a step further. Keen to enter senior management several years ago, she hoped to accept a vice-presidency at a mid-size manufacturer—and keep making over $300,000 a year. But the concern offered less than $200,000, the same cash compensation it gave other VPs.
The woman prepared a PowerPoint presentation for the chief executive, highlighting accomplishments he didn’t know about and describing ways she might bolster customer satisfaction. She says she also sold him on a quarterly bonus plan for herself, linked to measurable milestones needed for the manufacturer’s long-term growth.
The CEO enlarged her package by nearly $25,000. And she racked up bonuses fast enough so that she was paid nearly $300,000 within a year. “It was a win-win for the company,” she notes.
Some job hunters weighing lower offers bargain for alternative rewards, such as flexible hours, extra vacation, special training or a gym membership. Not everyone can long survive on a shrunken paycheque, however.
PeaceKeeper Cause-Metrics, a small cosmetics distributor, offered Stephanie S. Hayano a $50,000 salary to be its chief operating officer starting last January. She previously earned $300,000 a year running Natural Health Trends Corp. The puny pay wouldn’t have covered even mortgages for her three residences. “Unless I was prepared to totally change my lifestyle, $50,000 was not in the cards,” Hayano says.
She assumed the COO title at the New York firm, but gets compensated as a part-time consultant and retains other consulting gigs.
It’s a good idea to assess the long-term career impact of toiling for less. Younger individuals, for instance, might get a valuable opportunity to build their résumés.
That proved true for Sanjay Gupta. In 1994, the 26-year-old senior marketing analyst accepted 10% lower pay when he was transferred to a database marketing job at his employer, FedEx Corp. He and his wife were forced to dine out less often. However, Gupta says that he gained experience “with every facet of marketing”, a critical skill for becoming a chief marketing officer of a big business some day. He achieved that title last March, when GMAC Financial Services named him CMO.
You must grasp a potential employer’s problems so you can promote yourself as a problem solver worth more than the proposed skimpy pay.
Earlier this year, Mark Cummuta walked away from a chance to become the No. 2 executive of a Chicago technology consultancy—for less than $100,000 (around Rs50 lakh). As the sole breadwinner and father of triplets, Cummuta couldn’t afford a nearly 20% cut in pay, compared with what he was earning as an independent management consultant.
He’s still looking for a permanent position. “Every now and then, I hit myself and say, ‘I should have taken that offer,’” concedes the consultant, who has helped several firms navigate difficult times since 2003.
Unfortunately, Cummuta is hardly unique. More battered businesses are giving new hires less money than they made in their last job. “I am seeing that a lot more,” says April M. Williams, a career coach in Algonquin, Illinois. Puny amounts flabbergast some of her clients.
“As the downturn deepens, an increasing number of job seekers will find themselves getting lower-paying offers,” says Mark Royal, a senior consultant at Hay Group. “We are on the cusp of a trend.”
But excess eagerness to toil for fewer bucks sends the wrong signal. Such applicants often “are really desperate”, says Niki Leondakis, chief operating officer at Kimpton Hotels and Restaurants, a boutique chain in San Francisco.
Jayachandran / MintRather than immediately reject or accept a lowball deal, you should mount a careful counter-attack, experts recommend. You could improve your chances of winning a satisfactory compromise, with trade-offs ranging from a faster pay review to extra perquisites.
Arm yourself with data about the going rate for your position by trolling websites such as www.salary.com, Indeed.com/salary, Salaryexpert.com and Glassdoor.com. You’ll see whether a concern “has poor information about the external market” and rewards staffers below prevailing levels, says Robin Pinkley, a professor at Southern Methodist University’s business school and author of books about pay negotiations.
As part of your homework, you must grasp a potential employer’s problems so you can promote yourself as a problem solver worth more than the proposed skimpy pay. “To negotiate in tough times, you have to be able to create a vision,” says Jim Camp, an author and president of Camp Group, a negotiation-consulting firm in Dublin, Ohio.
A big New York law firm recently agreed to hire an Ohio lawyer for $140 an hour, $40 an hour less than he was earning. The firm blamed tough times. But the attorney knew he could provide important client referrals, recalls Camp, who coached him. “What number would I be paid if I brought a million-dollar client?” the candidate asked firm officials.
“If you’re a rainmaker, the numbers change,” they replied, according to Camp. After further interviews, the firm raised his starting pay to $240 an hour. He began last summer.
A West Coast executive took this tactic a step further. Keen to enter senior management several years ago, she hoped to accept a vice-presidency at a mid-size manufacturer—and keep making over $300,000 a year. But the concern offered less than $200,000, the same cash compensation it gave other VPs.
The woman prepared a PowerPoint presentation for the chief executive, highlighting accomplishments he didn’t know about and describing ways she might bolster customer satisfaction. She says she also sold him on a quarterly bonus plan for herself, linked to measurable milestones needed for the manufacturer’s long-term growth.
The CEO enlarged her package by nearly $25,000. And she racked up bonuses fast enough so that she was paid nearly $300,000 within a year. “It was a win-win for the company,” she notes.
Some job hunters weighing lower offers bargain for alternative rewards, such as flexible hours, extra vacation, special training or a gym membership. Not everyone can long survive on a shrunken paycheque, however.
PeaceKeeper Cause-Metrics, a small cosmetics distributor, offered Stephanie S. Hayano a $50,000 salary to be its chief operating officer starting last January. She previously earned $300,000 a year running Natural Health Trends Corp. The puny pay wouldn’t have covered even mortgages for her three residences. “Unless I was prepared to totally change my lifestyle, $50,000 was not in the cards,” Hayano says.
She assumed the COO title at the New York firm, but gets compensated as a part-time consultant and retains other consulting gigs.
It’s a good idea to assess the long-term career impact of toiling for less. Younger individuals, for instance, might get a valuable opportunity to build their résumés.
That proved true for Sanjay Gupta. In 1994, the 26-year-old senior marketing analyst accepted 10% lower pay when he was transferred to a database marketing job at his employer, FedEx Corp. He and his wife were forced to dine out less often. However, Gupta says that he gained experience “with every facet of marketing”, a critical skill for becoming a chief marketing officer of a big business some day. He achieved that title last March, when GMAC Financial Services named him CMO.
Perspective: Free Up Valuable Investment Capital by Reducing Insurance Collateral
By M H Ahssan
Market uncertainty has led to tightening of global credit markets and increased the cost of raising capital.
To make the situation even more painful, real estate developers and apartment owners are likely to face increased insurance premiums. The property/casualty industry has seen a decrease in revenues of between 30 to 40 percent from last year due to lower premium volumes, large catastrophe losses from tornadoes, hail and hurricanes and reduced investment income from the downturn in the stock market.
All of these factors make the amount of capital a company has tied up in collateral with its insurer an increasing concern. But, all is not doom and gloom. By re-evaluating their deductible insurance programs, companies may be able to reduce collateral obligations and free up capital for other uses.
The Collateral Burden
Posting collateral for insurance requirements can pose a serious burden for many companies. Letters of credit deplete their available credit line, so every dollar of credit takes away a dollar of borrowing capacity. In addition, the letters of credit may trigger additional loan covenants, as the aggregate borrowing gets closer to the available credit limit.
Meanwhile, cash that is dedicated toward the collateral requirement is cash that is not being used to pay down debt or reinvest in the company.
The collateral requirement can also limit a company's ability to switch to a new insurance carrier. If a company's insurance carrier is holding more collateral than is warranted based on the remaining liability, this can be used as leverage to keep the company from changing carriers. Rather than adjusting the collateral requirement downward, the carrier will use that redundancy to offset the new collateral needed for the following policy year.
While the prospective new carrier may offer advantageous pricing, its collateral requirement for the first year and the prospect of stacking that requirement for prospective years can overshadow pricing benefits, especially for a company with limited capital availability.
Another consideration in this economic environment is the potential volatility embedded in a deductible program. Although senior management may have been comfortable with the deductible levels in the past, an unexpected increase in the frequency or severity of claims could cause an unexpected increase in the company's self-insured accrual as well.
Think Strategically
There are many ways that corporate risk managers can reduce the amount of collateral dedicated to their insurance programs, thereby gaining additional borrowing capacity for other uses.
In most situations, collateral is a direct result of the structure of a company's insurance program. Here's a classic example of this: A company might choose a $1 million general liability retention per claim, which is estimated to retain a total of $2 million in losses. Under a deductible program, this may call for anywhere between $1.5 million and $2 million in collateral.
The program could be structured as a "self-insured retention," which means the insurance carrier would not be responsible for losses within the retention. As such, the program should not require collateral.
As with any other business relationship, getting to know one another is also important and it has never been more important for collateral decisions and for a company's understanding of the carrier's exposure to risk.
Finally, it is important to know the competitive landscape. An experienced insurance broker should be able to help clients project the amount of collateral any program will incur, not only for the current program, but also for future years.
Because collateral is primarily based on three components—structure, expected deductible losses and financial characteristics—there is no easy rule of thumb as a guide.
Questions insurance buyers should ask their brokers include:
• How did the carrier calculate the collateral requirement?
• How does this compare with your assessment of the deductible losses?
• Should I receive a paid loss credit? If so, how much?
• How are future collateral adjustments determined?
• How do these terms compare with other companies with similar financial characteristics?
Despite the overall credit strain, carriers may be willing to consider trading lower collateral terms for pricing considerations.
Market uncertainty has led to tightening of global credit markets and increased the cost of raising capital.
To make the situation even more painful, real estate developers and apartment owners are likely to face increased insurance premiums. The property/casualty industry has seen a decrease in revenues of between 30 to 40 percent from last year due to lower premium volumes, large catastrophe losses from tornadoes, hail and hurricanes and reduced investment income from the downturn in the stock market.
All of these factors make the amount of capital a company has tied up in collateral with its insurer an increasing concern. But, all is not doom and gloom. By re-evaluating their deductible insurance programs, companies may be able to reduce collateral obligations and free up capital for other uses.
The Collateral Burden
Posting collateral for insurance requirements can pose a serious burden for many companies. Letters of credit deplete their available credit line, so every dollar of credit takes away a dollar of borrowing capacity. In addition, the letters of credit may trigger additional loan covenants, as the aggregate borrowing gets closer to the available credit limit.
Meanwhile, cash that is dedicated toward the collateral requirement is cash that is not being used to pay down debt or reinvest in the company.
The collateral requirement can also limit a company's ability to switch to a new insurance carrier. If a company's insurance carrier is holding more collateral than is warranted based on the remaining liability, this can be used as leverage to keep the company from changing carriers. Rather than adjusting the collateral requirement downward, the carrier will use that redundancy to offset the new collateral needed for the following policy year.
While the prospective new carrier may offer advantageous pricing, its collateral requirement for the first year and the prospect of stacking that requirement for prospective years can overshadow pricing benefits, especially for a company with limited capital availability.
Another consideration in this economic environment is the potential volatility embedded in a deductible program. Although senior management may have been comfortable with the deductible levels in the past, an unexpected increase in the frequency or severity of claims could cause an unexpected increase in the company's self-insured accrual as well.
Think Strategically
There are many ways that corporate risk managers can reduce the amount of collateral dedicated to their insurance programs, thereby gaining additional borrowing capacity for other uses.
In most situations, collateral is a direct result of the structure of a company's insurance program. Here's a classic example of this: A company might choose a $1 million general liability retention per claim, which is estimated to retain a total of $2 million in losses. Under a deductible program, this may call for anywhere between $1.5 million and $2 million in collateral.
The program could be structured as a "self-insured retention," which means the insurance carrier would not be responsible for losses within the retention. As such, the program should not require collateral.
As with any other business relationship, getting to know one another is also important and it has never been more important for collateral decisions and for a company's understanding of the carrier's exposure to risk.
Finally, it is important to know the competitive landscape. An experienced insurance broker should be able to help clients project the amount of collateral any program will incur, not only for the current program, but also for future years.
Because collateral is primarily based on three components—structure, expected deductible losses and financial characteristics—there is no easy rule of thumb as a guide.
Questions insurance buyers should ask their brokers include:
• How did the carrier calculate the collateral requirement?
• How does this compare with your assessment of the deductible losses?
• Should I receive a paid loss credit? If so, how much?
• How are future collateral adjustments determined?
• How do these terms compare with other companies with similar financial characteristics?
Despite the overall credit strain, carriers may be willing to consider trading lower collateral terms for pricing considerations.
Perspective: Free Up Valuable Investment Capital by Reducing Insurance Collateral
By M H Ahssan
Market uncertainty has led to tightening of global credit markets and increased the cost of raising capital.
To make the situation even more painful, real estate developers and apartment owners are likely to face increased insurance premiums. The property/casualty industry has seen a decrease in revenues of between 30 to 40 percent from last year due to lower premium volumes, large catastrophe losses from tornadoes, hail and hurricanes and reduced investment income from the downturn in the stock market.
All of these factors make the amount of capital a company has tied up in collateral with its insurer an increasing concern. But, all is not doom and gloom. By re-evaluating their deductible insurance programs, companies may be able to reduce collateral obligations and free up capital for other uses.
The Collateral Burden
Posting collateral for insurance requirements can pose a serious burden for many companies. Letters of credit deplete their available credit line, so every dollar of credit takes away a dollar of borrowing capacity. In addition, the letters of credit may trigger additional loan covenants, as the aggregate borrowing gets closer to the available credit limit.
Meanwhile, cash that is dedicated toward the collateral requirement is cash that is not being used to pay down debt or reinvest in the company.
The collateral requirement can also limit a company's ability to switch to a new insurance carrier. If a company's insurance carrier is holding more collateral than is warranted based on the remaining liability, this can be used as leverage to keep the company from changing carriers. Rather than adjusting the collateral requirement downward, the carrier will use that redundancy to offset the new collateral needed for the following policy year.
While the prospective new carrier may offer advantageous pricing, its collateral requirement for the first year and the prospect of stacking that requirement for prospective years can overshadow pricing benefits, especially for a company with limited capital availability.
Another consideration in this economic environment is the potential volatility embedded in a deductible program. Although senior management may have been comfortable with the deductible levels in the past, an unexpected increase in the frequency or severity of claims could cause an unexpected increase in the company's self-insured accrual as well.
Think Strategically
There are many ways that corporate risk managers can reduce the amount of collateral dedicated to their insurance programs, thereby gaining additional borrowing capacity for other uses.
In most situations, collateral is a direct result of the structure of a company's insurance program. Here's a classic example of this: A company might choose a $1 million general liability retention per claim, which is estimated to retain a total of $2 million in losses. Under a deductible program, this may call for anywhere between $1.5 million and $2 million in collateral.
The program could be structured as a "self-insured retention," which means the insurance carrier would not be responsible for losses within the retention. As such, the program should not require collateral.
As with any other business relationship, getting to know one another is also important and it has never been more important for collateral decisions and for a company's understanding of the carrier's exposure to risk.
Finally, it is important to know the competitive landscape. An experienced insurance broker should be able to help clients project the amount of collateral any program will incur, not only for the current program, but also for future years.
Because collateral is primarily based on three components—structure, expected deductible losses and financial characteristics—there is no easy rule of thumb as a guide.
Questions insurance buyers should ask their brokers include:
• How did the carrier calculate the collateral requirement?
• How does this compare with your assessment of the deductible losses?
• Should I receive a paid loss credit? If so, how much?
• How are future collateral adjustments determined?
• How do these terms compare with other companies with similar financial characteristics?
Despite the overall credit strain, carriers may be willing to consider trading lower collateral terms for pricing considerations.
Market uncertainty has led to tightening of global credit markets and increased the cost of raising capital.
To make the situation even more painful, real estate developers and apartment owners are likely to face increased insurance premiums. The property/casualty industry has seen a decrease in revenues of between 30 to 40 percent from last year due to lower premium volumes, large catastrophe losses from tornadoes, hail and hurricanes and reduced investment income from the downturn in the stock market.
All of these factors make the amount of capital a company has tied up in collateral with its insurer an increasing concern. But, all is not doom and gloom. By re-evaluating their deductible insurance programs, companies may be able to reduce collateral obligations and free up capital for other uses.
The Collateral Burden
Posting collateral for insurance requirements can pose a serious burden for many companies. Letters of credit deplete their available credit line, so every dollar of credit takes away a dollar of borrowing capacity. In addition, the letters of credit may trigger additional loan covenants, as the aggregate borrowing gets closer to the available credit limit.
Meanwhile, cash that is dedicated toward the collateral requirement is cash that is not being used to pay down debt or reinvest in the company.
The collateral requirement can also limit a company's ability to switch to a new insurance carrier. If a company's insurance carrier is holding more collateral than is warranted based on the remaining liability, this can be used as leverage to keep the company from changing carriers. Rather than adjusting the collateral requirement downward, the carrier will use that redundancy to offset the new collateral needed for the following policy year.
While the prospective new carrier may offer advantageous pricing, its collateral requirement for the first year and the prospect of stacking that requirement for prospective years can overshadow pricing benefits, especially for a company with limited capital availability.
Another consideration in this economic environment is the potential volatility embedded in a deductible program. Although senior management may have been comfortable with the deductible levels in the past, an unexpected increase in the frequency or severity of claims could cause an unexpected increase in the company's self-insured accrual as well.
Think Strategically
There are many ways that corporate risk managers can reduce the amount of collateral dedicated to their insurance programs, thereby gaining additional borrowing capacity for other uses.
In most situations, collateral is a direct result of the structure of a company's insurance program. Here's a classic example of this: A company might choose a $1 million general liability retention per claim, which is estimated to retain a total of $2 million in losses. Under a deductible program, this may call for anywhere between $1.5 million and $2 million in collateral.
The program could be structured as a "self-insured retention," which means the insurance carrier would not be responsible for losses within the retention. As such, the program should not require collateral.
As with any other business relationship, getting to know one another is also important and it has never been more important for collateral decisions and for a company's understanding of the carrier's exposure to risk.
Finally, it is important to know the competitive landscape. An experienced insurance broker should be able to help clients project the amount of collateral any program will incur, not only for the current program, but also for future years.
Because collateral is primarily based on three components—structure, expected deductible losses and financial characteristics—there is no easy rule of thumb as a guide.
Questions insurance buyers should ask their brokers include:
• How did the carrier calculate the collateral requirement?
• How does this compare with your assessment of the deductible losses?
• Should I receive a paid loss credit? If so, how much?
• How are future collateral adjustments determined?
• How do these terms compare with other companies with similar financial characteristics?
Despite the overall credit strain, carriers may be willing to consider trading lower collateral terms for pricing considerations.
Perspective: Free Up Valuable Investment Capital by Reducing Insurance Collateral
By M H Ahssan
Market uncertainty has led to tightening of global credit markets and increased the cost of raising capital.
To make the situation even more painful, real estate developers and apartment owners are likely to face increased insurance premiums. The property/casualty industry has seen a decrease in revenues of between 30 to 40 percent from last year due to lower premium volumes, large catastrophe losses from tornadoes, hail and hurricanes and reduced investment income from the downturn in the stock market.
All of these factors make the amount of capital a company has tied up in collateral with its insurer an increasing concern. But, all is not doom and gloom. By re-evaluating their deductible insurance programs, companies may be able to reduce collateral obligations and free up capital for other uses.
The Collateral Burden
Posting collateral for insurance requirements can pose a serious burden for many companies. Letters of credit deplete their available credit line, so every dollar of credit takes away a dollar of borrowing capacity. In addition, the letters of credit may trigger additional loan covenants, as the aggregate borrowing gets closer to the available credit limit.
Meanwhile, cash that is dedicated toward the collateral requirement is cash that is not being used to pay down debt or reinvest in the company.
The collateral requirement can also limit a company's ability to switch to a new insurance carrier. If a company's insurance carrier is holding more collateral than is warranted based on the remaining liability, this can be used as leverage to keep the company from changing carriers. Rather than adjusting the collateral requirement downward, the carrier will use that redundancy to offset the new collateral needed for the following policy year.
While the prospective new carrier may offer advantageous pricing, its collateral requirement for the first year and the prospect of stacking that requirement for prospective years can overshadow pricing benefits, especially for a company with limited capital availability.
Another consideration in this economic environment is the potential volatility embedded in a deductible program. Although senior management may have been comfortable with the deductible levels in the past, an unexpected increase in the frequency or severity of claims could cause an unexpected increase in the company's self-insured accrual as well.
Think Strategically
There are many ways that corporate risk managers can reduce the amount of collateral dedicated to their insurance programs, thereby gaining additional borrowing capacity for other uses.
In most situations, collateral is a direct result of the structure of a company's insurance program. Here's a classic example of this: A company might choose a $1 million general liability retention per claim, which is estimated to retain a total of $2 million in losses. Under a deductible program, this may call for anywhere between $1.5 million and $2 million in collateral.
The program could be structured as a "self-insured retention," which means the insurance carrier would not be responsible for losses within the retention. As such, the program should not require collateral.
As with any other business relationship, getting to know one another is also important and it has never been more important for collateral decisions and for a company's understanding of the carrier's exposure to risk.
Finally, it is important to know the competitive landscape. An experienced insurance broker should be able to help clients project the amount of collateral any program will incur, not only for the current program, but also for future years.
Because collateral is primarily based on three components—structure, expected deductible losses and financial characteristics—there is no easy rule of thumb as a guide.
Questions insurance buyers should ask their brokers include:
• How did the carrier calculate the collateral requirement?
• How does this compare with your assessment of the deductible losses?
• Should I receive a paid loss credit? If so, how much?
• How are future collateral adjustments determined?
• How do these terms compare with other companies with similar financial characteristics?
Despite the overall credit strain, carriers may be willing to consider trading lower collateral terms for pricing considerations.
Market uncertainty has led to tightening of global credit markets and increased the cost of raising capital.
To make the situation even more painful, real estate developers and apartment owners are likely to face increased insurance premiums. The property/casualty industry has seen a decrease in revenues of between 30 to 40 percent from last year due to lower premium volumes, large catastrophe losses from tornadoes, hail and hurricanes and reduced investment income from the downturn in the stock market.
All of these factors make the amount of capital a company has tied up in collateral with its insurer an increasing concern. But, all is not doom and gloom. By re-evaluating their deductible insurance programs, companies may be able to reduce collateral obligations and free up capital for other uses.
The Collateral Burden
Posting collateral for insurance requirements can pose a serious burden for many companies. Letters of credit deplete their available credit line, so every dollar of credit takes away a dollar of borrowing capacity. In addition, the letters of credit may trigger additional loan covenants, as the aggregate borrowing gets closer to the available credit limit.
Meanwhile, cash that is dedicated toward the collateral requirement is cash that is not being used to pay down debt or reinvest in the company.
The collateral requirement can also limit a company's ability to switch to a new insurance carrier. If a company's insurance carrier is holding more collateral than is warranted based on the remaining liability, this can be used as leverage to keep the company from changing carriers. Rather than adjusting the collateral requirement downward, the carrier will use that redundancy to offset the new collateral needed for the following policy year.
While the prospective new carrier may offer advantageous pricing, its collateral requirement for the first year and the prospect of stacking that requirement for prospective years can overshadow pricing benefits, especially for a company with limited capital availability.
Another consideration in this economic environment is the potential volatility embedded in a deductible program. Although senior management may have been comfortable with the deductible levels in the past, an unexpected increase in the frequency or severity of claims could cause an unexpected increase in the company's self-insured accrual as well.
Think Strategically
There are many ways that corporate risk managers can reduce the amount of collateral dedicated to their insurance programs, thereby gaining additional borrowing capacity for other uses.
In most situations, collateral is a direct result of the structure of a company's insurance program. Here's a classic example of this: A company might choose a $1 million general liability retention per claim, which is estimated to retain a total of $2 million in losses. Under a deductible program, this may call for anywhere between $1.5 million and $2 million in collateral.
The program could be structured as a "self-insured retention," which means the insurance carrier would not be responsible for losses within the retention. As such, the program should not require collateral.
As with any other business relationship, getting to know one another is also important and it has never been more important for collateral decisions and for a company's understanding of the carrier's exposure to risk.
Finally, it is important to know the competitive landscape. An experienced insurance broker should be able to help clients project the amount of collateral any program will incur, not only for the current program, but also for future years.
Because collateral is primarily based on three components—structure, expected deductible losses and financial characteristics—there is no easy rule of thumb as a guide.
Questions insurance buyers should ask their brokers include:
• How did the carrier calculate the collateral requirement?
• How does this compare with your assessment of the deductible losses?
• Should I receive a paid loss credit? If so, how much?
• How are future collateral adjustments determined?
• How do these terms compare with other companies with similar financial characteristics?
Despite the overall credit strain, carriers may be willing to consider trading lower collateral terms for pricing considerations.
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