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CPCU president shares risk management insights By Bruce Hicks, CLU, CPCU Following the panel discussion Rough Notes magazine invited panelist Millie Workman, CPCU, to add some thoughts on risk management. Workman is the 2005-2006 national president of the CPCU Society. Rough Notes: During the panel discussion, you mentioned the issue of “planning.” Would you expand on that point? Workman: I emphasize the importance of planning for recovery before an event occurs. That is the absolutely best way to be able to meet your goals for surviving a catastrophic event; whether it be a regional disaster such as an earthquake or one specific to you such as a fire at your business. Part of that planning process should be to understand what resources government will bring to you and how they can assist you. Realistic expectations are critical, and we have seen with regional disasters how the public had expectations that weren’t met. Part of the reason for that is that they really didn’t understand what to expect. In addition partnering with government can result in a win-win (situation) for all parties. Rough Notes: What attributes are critical to being an effective risk manager (RM)? Workman: If I had to pick only a few, I would say insatiable curiosity, thinking strategically and savvy communication, all built around strong technical knowledge. Here’s a more detailed list: Rough Notes: What first steps should an inexperienced but interested insurance professional take toward acquiring fundamental RM skills? Workman: Having solid, technical insurance knowledge and a strong understanding of the risk management concept/principles is critically important. (Obviously, CPCU and ARM coursework are great first steps.) Then I think you need to assess your skills against those that make an effective risk manager and work on those areas where you need development. Also network with risk managers. Rough Notes: Are there any fatal mistakes that must be avoided by insurance pros and RMs when working with clients? Workman: Thinking that risk management is a one-time process—it must be continuous, day-by-day. Other mistakes are not digging deep enough (during risk analysis), thinking that it (a disastrous loss) can’t happen to me, or not making informed decisions. Rough Notes: What difference (if any) is there between “risk management” and “enterprise risk management” (ERM)? Workman: By definition, ERM is much broader and takes in areas that haven’t been considered as traditional risk management concerns. On a practical basis, I believe a risk manager’s job is to protect the assets of the organization. That means that a risk manager should be looking for all risks that can impact the company even though s/he may not be the one ultimately responsible for managing those risks. So while there is a difference, I think all risk managers should approach risk management with an enterprise-wide view. Rough Notes: Is ERM—or should it be—a concern only for very large or hazardous businesses? Workman: It may be that ERM, by definition, wouldn’t seem appropriate for or wouldn’t be acceptable by other than really large businesses, but approaching risk from an enterprise-wide view can be done by any business. Rough Notes: What role is played by independent risk managers? Is a risk manager best suited for certain industries, size of business or hazard-level? Workman: Risk management consultants can bring value to businesses that feel they can’t justify, primarily financially, having a full-time risk manager. By retaining a consult-ant, these businesses gain the benefits of an RM’s knowledge and skills but at a more acceptable cost level. However, there is tremendous value beyond pure finances to any business for having a risk manager. Often an RM’s non-financial benefits are difficult to measure or are difficult to understand so the decision is made to not have one. Another role an independent can play is performing special projects, even when there is an existing risk manager. These projects could be something outside the expertise of the risk manager (who is the client’s employee); they could perform an auditor’s role, could be an additional RM resource, etc. Rough Notes: Are there any industries or business classes that are not taking proper advantage of the benefits of risk management? Workman: Certainly there are businesses that don’t, regardless of industry. Some businesses feel they are too small or not complex enough to benefit from RM. But realistically any business can benefit from the process. That doesn’t mean that they have to hire a risk manager; there are a lot of resources available to help them. For example, an independent consultant could benefit them by working with them through the risk management process and then putting processes in place for maintaining that. Their agent/broker or carrier could help with risk assessment. Their insurer could help risk control issues. The big issue is having the right attitude.... recogniz-ing that risk management is beneficial. Finding the resources is easy once you recognize the need. Rough Notes: What issues may substantially affect how businesses approach risk management? Workman: Sarbanes-Oxley is an example of regulation that has had an impact on how businesses approach/adopt/use risk management. But there are many issues that affect only individual businesses or certain business sectors. Sometimes it’s as simple as having a large claim that isn’t covered, losing coverage, or undertaking a new venture that triggers a focus on risk management. Understanding the need for risk management is often an education process, particularly since many businesses still view RM as buying insurance rather than the broader view of identifying and managing the exposures that they face. Rough Notes: How may agents/brokers assist their clients with risk management? Workman: I think that agents/brokers today should approach accounts from a risk management viewpoint, particularly when there is no risk manager. They should look beyond risks that they can provide insurance coverage for and assist in identifying all types of risks and helping find solutions. * |
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