excellence in risk management: a qualitative survey of successful risk managers april 21, 2004
TRANSCRIPT
Excellence in Risk Management:A Qualitative Survey of Successful Risk Managers
April 21, 2004
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Dynamics in Risk Management
19941994
Key Risk Key Risk ManagementManagement
ActivitiesActivities
Insurance RiskInsurance Risk
Claims ControlClaims Control
20042004
Key Risk Key Risk ManagementManagement
ActivitiesActivities
Risk IdentificationRisk Identification-- Risk CostRisk Cost
Higher RetentionHigher Retention-- CaptivesCaptives-- Risk PoolsRisk Pools
Risk MitigationRisk Mitigation-- Loss ControlLoss Control-- Safety/SecuritySafety/Security
Insurance/ClaimsInsurance/Claims
Economic Downturn/Economic Downturn/
Low Interest Rate Low Interest Rate
Tightened InsuranceTightened Insurance
Markets Markets
TerrorismTerrorism
Sarbanes-OxleySarbanes-Oxley
TechnologyTechnology
Higher Employee Health Higher Employee Health
CostCost
External FactorsExternal Factors
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Pursuit of Excellence
Purpose:
RIMS and Marsh sponsored an Excellence in Risk Management survey to promote a better understanding of risk management professionals and the issues facing them.
Reality:
Risk management has evolved as a true profession. How are successful risk professionals coping with the changes?
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Our Knowledge
By contributing to our understanding of risk management in successful environments, we have a refined outlook of:
Accountability
The risk professional who surpasses the expectations of shareholders, board members, employees, and other stakeholders
Responsibility
The expectations that organizations have of their risk management professionals
Survey Demographics
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Survey Participants
30 risk managers who have either been named Risk Manager of the Year (RMOY) or to the Risk Manager Honor Roll (RMHR) by Business Insurance
RMOY established in 1977 and RMHR in 1981 to increase recognition of the risk management profession and to recognise outstanding performance
RIMS Joins Business Insurance in sponsoring awards in 2001
27 Risk Managers of the Year:– 5 women
– 3 public entities
– 18 Fortune 500 companies
– 2 Canadians
64 Risk Manager Honor Roll members:– 18 women
– 25 public entities
– 12 Fortune 500 companies
– 1 Canadian
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Experience Levels inRisk Management [n=30]
Number of YearsNumber of Years as a Risk Manager at as a Risk Manager at
Current FirmCurrent Firm
1-5 1-5 YearsYears
5-105-10YearsYears
Number of YearsNumber of Yearsas a Risk Manageras a Risk Manager
11-2011-20YearsYears
Over Over 21 Years21 Years
1-5 1-5 YearsYears
5-105-10YearsYears
11-2011-20YearsYears
Over Over 21 Years21 Years
00
1818
66 66
11
1818
99
11
Average Number Average Number of Years of Years as a Risk as a Risk
Manager - 16 Manager - 16
Average Number Average Number of Years of Years as a Risk as a Risk
Manager - 16 Manager - 16
Average Number Average Number of Years of Years as a Risk as a Risk
Manager at Manager at Current Firm - 13Current Firm - 13
Average Number Average Number of Years of Years as a Risk as a Risk
Manager at Manager at Current Firm - 13Current Firm - 13
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Number of People WhoReport to Risk Manager [n = 30]
16-20 People16-20 People
1-5 People1-5 People
11-15 People11-15 People
6-10 People6-10 People
Over 20 PeopleOver 20 People
0 People0 People 33
1313
55
33
55
11
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Under-Under-graduategraduate
GraduateGraduate SpecialtySpecialtyProgramsPrograms
ProfessionalProfessionalDesignationsDesignations
Education/Certification Education/Certification BackgroundBackground
Taken a Continuing Taken a Continuing Education Education
Class in Past 3 YearsClass in Past 3 Years
OtherOther
•URS Public AdministrationURS Public Administration•Post MasterPost Master•Certified Safety ProfessionalCertified Safety Professional•Military Safety TrainingMilitary Safety Training
Education Background
1818
33
2121
44
2727
Have taken Have taken continuing continuing education education
classclass
37%37%
63%63%Have not Have not taken a taken a
continuing continuing education education
classclass
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Graduate School /Post-Graduate Degrees
MS/MS/MBAMBA
MBA/MBA/JDJD
MBAMBA MSMS JDJD OtherOther
88
22 22 22
55
22
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ARM CPCU AIICCSP
5
10
15
Other
•AUAU•CPHRMCPHRM•CFPCFP•AAIAAI•DSASHRMDSASHRM•Property/CasualtyProperty/Casualty•AIRAIR•CEBSCEBS•CHCMCHCM
Professional Designations
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Risk Managers’ Previous Employment Experience
Employment Experience Prior to Employment Experience Prior to Becoming a Risk ManagerBecoming a Risk Manager
Government AffairsGovernment Affairs
Other Risk ManagementOther Risk Management(In-house)(In-house)
Other InsuranceOther InsuranceServicesServices
Outside ConsultantOutside Consultant
Insurance BrokerInsurance Broker
InsurerInsurer
Legal CounselLegal Counsel
Financial ExperienceFinancial Experience
99
77
66
66
22
22
11
11
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Position to Which Risk Managers Report [n = 30]
•Vice President of TaxVice President of Tax•Director of TechnologyDirector of Technology•Manager Environmental RiskManager Environmental Risk•Director of Office and BudgetDirector of Office and Budget•State Risk ManagerState Risk Manager
99
55
44
77
TreasurerTreasurer CFOCFO CEOCEOOtherOther
2222
11
GeneralGeneral
CounselCounselHRHR COOCOO
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Involvement With Employee Benefits/Retirement Plans [n = 30]
OtherOtherCoordinationCoordinationwith Workerswith Workers
Compensation OnlyCompensation Only
NoNoInvolvementInvolvement
DirectlyDirectlyResponsibleResponsible
•Marketing of Employee BenefitsMarketing of Employee Benefits•Administrator of Company 401(k) ProgramAdministrator of Company 401(k) Program•Board Member of Benefits ProgramBoard Member of Benefits Program•Supervisor Claims Administration SystemSupervisor Claims Administration System•Director of International Pooling ProgramDirector of International Pooling Program•Partnered With Outside FirmPartnered With Outside Firm
1111
77
55
77
Risk Manager’s Role
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Range of Activities, Skills, and Experience
Strategic PlayerStrategic Player
Competent RiskCompetent RiskManagerManager
Insurance &Insurance &Claims AdministratorClaims Administrator
Impact On Impact On Organization’s Organization’s Bottom Line Bottom Line and Cultureand Culture
Organizational Organizational Buy-InBuy-In
Technical Technical ManagementManagement
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HazardHazard
OperationalOperational
Value Rank Importance (1st and Value Rank Importance (1st and 2nd)2nd)
StrategicStrategic
FinancialFinancial
AverageAverageTime Time SpentSpent
57%57%
25%25%
12%12%
6%6%
Relative Value and Time Allocation for Types of Risk
11
22
2121
22
1515
44
33 22
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Risk Manager Channelsof Interaction and Communication
ExternalExternalRiskRisk
ManagementManagement
InternalInternalRisk ManagementRisk Management
Risk Risk ManagerManager
Internal ClientsInternal Clients
AuditAuditBrokerBroker
ConsultantConsultant
Senior ManagementSenior Management
RIMSRIMS
LegalLegal
SafetySafety
ClaimsClaims
ProductProductDevelopmentDevelopmentOperationsOperations
InsurersInsurers
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BrokersBrokers
Philosophy on Use ofPhilosophy on Use ofInsurance BrokersInsurance Brokers
Type of RelationshipType of RelationshipWith BrokerWith Broker
Use OneUse One
BrokerBroker
Broker Philosophy andType of Relationship [n = 30]
TrustedTrusted
AdvisorAdvisorExtensionExtension
of Firmof Firm
VendorVendor
RelationshipRelationship
1111
1919
1212
33
1313
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1
18
7
11
Firm OffersProductive CareerPath in Risk Mgt
Firms Listen toRisk ManagementDepartment
0
11
Views of Risk Manager Relative to the Firm [n = 30]
Strongly Agree/AgreeStrongly Agree/AgreeStrongly Strongly
Disagree/ Disagree/ DisagreeDisagree
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Succession Plan for Risk Succession Plan for Risk Management RoleManagement Role
Risk Manager’s Role—RotationalDesign and Succession Plan
No Transition No Transition PlanPlan
Identified 1-2 Identified 1-2 SuccessorsSuccessors
Possible Possible SuccessorsSuccessors
None of the 30 Risk Managers None of the 30 Risk Managers Identify the Position of Risk Identify the Position of Risk Manager as a Rotational RoleManager as a Rotational Role
Rotational Design of Risk Rotational Design of Risk Manager’s RoleManager’s Role
1616
55
99
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67%
33%
9
3
16
11
14
8
5 54
5
8
2
LocalLocalLevelLevel
Regional Regional LevelLevel
RIMS Activity LevelRIMS Activity Level
AnnualAnnualConferenceConference
Currently a RIMS Currently a RIMS OfficerOfficer Currently not a Currently not a
RIMS OfficerRIMS Officer
RIMS Officer Activity LevelRIMS Officer Activity Level
OccasionallyOccasionallyRegularlyRegularly
RarelyRarelyNot InvolvedNot Involved
RIMS Membership/Officer Status [n=30]
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57%
43%
Speakers at EventsSpeakers at EventsOutside CompanyOutside Company
HaveHaveAuthored Authored
DocumentsDocuments
Have not Have not Authored Authored
DocumentsDocuments
Risk Managers Who Have Risk Managers Who Have Authored Documents on Risk Authored Documents on Risk
ManagementManagement
Risk Managers’Speaking and Authorship
Lessons Learned from September 11
Fraud Control—Best Practices
Seminar on Aerospace Electronics
Workers Compensation
Fundamentals of Risk Management
Building a Risk Management Culture
29 out of 30 Risk ManagersGive Speeches Outside of Company:
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43%
57%
Involved
Not Involved38%
62%
Held Position
No Position
Involved With a Involved With a Community-Oriented OrganizationCommunity-Oriented Organization
Hold a Community-OrientedHold a Community-OrientedOfficer PositionOfficer Position
Community-Oriented Involvement
Organizational Elements
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Range of Financial Implications of Risk
Recognizes Profit Recognizes Profit From RiskFrom Risk
• Third-Party Insurance Third-Party Insurance • Captive InvestmentCaptive Investment Gains Gains
Reduces CostReduces Costof Riskof Risk
•Self-Insured/CaptiveSelf-Insured/Captive•Loss ControlLoss Control
Reduces Cost of Reduces Cost of PremiumsPremiums
CC
CC
RR
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Risk Tolerance
Reassessment of Risk Management Strategy
Increased Tolerance/Retention
Risk Identification and Loss Control to the Forefront
Better Identification/Loss Control Begets Higher Tolerance
Elevation of Risk Management Role
Recent Circumstances Are a Springboard:
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Successful Execution of the Process
Identification/PrioritizationIdentification/Prioritization
RiskRiskIdentificationIdentification PrioritizationPrioritization PolicyPolicy
& Procedures& Procedures
Tracking &Tracking &IncentivesIncentives
LossLossControlControl
ProgramsPrograms
Buy-InBuy-In
MitigationMitigationCommunicateCommunicate
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Strongly Agree/AgreeStrongly Agree/AgreeStrongly Strongly
Disagree/ Disagree/ DisagreeDisagree
Risk MgtRisk MgtKey StrategicKey Strategic
FunctionFunction
Firm ManagesFirm ManagesRisk EffectivelyRisk Effectively 00
22
11
22Firm Utilizes RiskFirm Utilizes Risk
Mgt Function toMgt Function toFullest AbilitiesFullest Abilities
Firm’s Culture SupportsFirm’s Culture SupportsInnovation in Risk MgtInnovation in Risk Mgt
3
8
12
9
13
17
12
18
Views of FirmRelative to Risk Management [n = 30]
Measurement Accountability
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Leveraging Information for Risk Management
Strategy InsightsStrategy Insights
Claims & Loss Data
Claims & Loss Data
Analytical ToolsAnalytical Tools
•External BenchmarkingExternal Benchmarking•IncentivesIncentives
•Specific AllocationsSpecific Allocations•Internal BenchmarkingInternal Benchmarking
•Policies and ProceduresPolicies and Procedures•ProtocolsProtocols•General AllocationsGeneral Allocations
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IntegratedIntegratedInterfaceInterface
Risk ManagementRisk ManagementInformation Information
Systems (RMIS)Systems (RMIS)
•Risk MitigationRisk Mitigation
•Claims ReportingClaims Reporting
•Risk CostsRisk Costs
•Forms/CertificationsForms/Certifications
•Third-Party AdministratorsThird-Party Administrators
•InsurersInsurers
•BrokersBrokers
•Risk CostsRisk Costs
•Claims ReportsClaims Reports
•Litigation ReportsLitigation Reports
•Risk Identification/PrioritizationRisk Identification/Prioritization
ManagementManagement
InformationInformation
Claims DatabaseClaims Database
Internet/IntranetInternet/IntranetOperating UnitsOperating Units
Risk Management Information System Flow
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Strongly Agree/AgreeStrongly Agree/AgreeStrongly Strongly
Disagree/ Disagree/ DisagreeDisagree
44
9 18Utilizes InnovativeUtilizes Innovative
Technology forTechnology forRisk ManagementRisk Management
2 9
Use of Innovative Technology [n = 30]
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Benchmarking
Major Themes
– Benchmarking Is Not a Universal Practice
– For Those Who Do Benchmark:• Try to Use Industry Comparison• Tend to Focus on Limits, Coverages, Costs• Compare Themselves Internally as Well as Externally• RIMS Benchmark Used by Some• Sometimes Information Provided by Broker
– Reasons Why Benchmarking Not Used:• Uniqueness of Company/Organization—Comparability• Industry Too Competitive to Benchmark• Talk to Counterparts Instead
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Conclusions
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Levels of Risk Management
Recognizes Profit From Risk
Recognizes Profit From Risk
Strategy InsightsStrategy Insights
Reduces Costof Risk
Reduces Costof Risk
Reduces Cost of Premiums
Reduces Cost of Premiums
Claims & Loss Data
Claims & Loss Data
Analytical ToolsAnalytical Tools
Strategic PlayerStrategic Player
Competent RiskCompetent RiskManagerManager
Insurance andInsurance andClaims AdministratorClaims Administrator
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Changing World of Risk Management
Utilizing Innovative Technology for Risk Management
– Need to have a well-oiled process for the “back room”
– Claims systems, RMIS, internal company systems, intranet and use of the Internet for renewal and policy delivery
– All should be tied together and available to all of your risk management team members
Increasing Financial Expertise
– Disconnect in the language makes it tough
– There are a number of ways to gain this knowledge
– Accounting—disconnect occurs when general ledger entries are completed by accounting and there is no reconciliation by risk management
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Changing World of Risk Management
Outside Information Sources
– Many risk managers report to the CFO
– Outside information sources are terrific but possibly supplement with the periodicals that your boss is reading
– Treasury & Risk Management magazine and CFO magazine
Potential for the Risk Manager’s Role to Be Rotational– Seeing this a bit more often
– Operations is a natural and can get buy-in
– Opportunity for risk manager to see the business differently
– Opportunity to have another function understand risk management’s perspective
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Changing Perspectives of Brokers
As times have changed so have brokers—we have moved from a transactional model to a more consultative model
Your business needs are the primary focus—industry specialization is key to a better understanding of client issues
Making it easier for you to conduct business is essential—leveraging technology is a key component to better service
We act as your trusted business advisor in creating and delivering risk solutions that make you and your firm more successful
We are committed to raising the profile and stature of the risk management profession through innovative products and services
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The Future of Risk Management
What is the takeaway?
There are many, but perhaps the most significant is:
Organizations have defined three successful risk management roles:
Strategic Player: An evolving role
Competent Risk Manager: The full range of skills
Technical Specialist: Insurance and claims
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Other Lessons
Firms listen to these risk managers
Career paths are not well-defined
Brokers are viewed as trusted advisors
Successful risk managers add the most value by managing hazard and operational risks
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Pointing to the Future
The represented firms manage risk effectively with supporting cultures, BUT half do not use the function to its fullest capabilities
More needs to be done
Thank You
RIMS and Marsh are proud to have sponsored the Excellence in Risk Management survey
Marsh is part of the family of MMC companies, including Kroll, Guy Carpenter, Putnam Investments, Mercer Human Resource Consulting (including Mercer Health & Benefits, Mercer HR Services, Mercer Investment Consulting, and Mercer Global Investments), and Mercer specialty consulting businesses (including Mercer Management Consulting, Mercer Oliver Wyman, Mercer Delta Organizational Consulting, NERA Economic Consulting, and Lippincott Mercer).
The Risk and Insurance Management Society, Inc. (RIMS) is a not-for-profit organization dedicated to advancing the practice of risk management, a professional discipline that protects physical, financial and human resources. Founded in 1950, RIMS represents nearly 4,000 industrial, service, nonprofit, charitable, and governmental entities. The Society serves over 9,600 risk management professionals around theworld.
Copyright 2004 Marsh Inc. All rights reserved. Compliance # MA6-10479