RIMS Special Section
RIMS: Changes at the top
Deborah Luthi is a strong advocate for risk management's expanding role
By Michael J. Moody, MBA, ARM
The Risk and Insurance Management Society (RIMS)'s 58th president took over the reins of the organization on January 1, 2012. And while Deborah M. Luthi, ARM, was new to the role, she certainly was no stranger to RIMS. Her experience includes 32 years as an active RIMS member and 11 years on the RIMS board.
She is currently serving as the Enterprise Risk Manager for the San Francisco Public Utilities Commission, which provides 2.5 million people with reliable water and wastewater services throughout the Bay area. Included in this area are three counties and 27 agencies, and more than 1,200 miles of pipeline. All of the power for the operation of the utilities is provided by hydroelectric power. Luthi's job is to work with the organization on the various risk management issues that arise as a result of providing power, water and sewer services to the Bay Area.
A challenging position
Like many people who are involved with risk management, Luthi has an academic background that might easily have taken her in a different direction. She graduated from the University of Kansas with a degree in art education. But Luthi is quick to point out that her art background provides several over-arching advantages in her current role. For one, today risk management "takes a lot of creativity," a skill that comes naturally to an artist. She also notes that for risk managers to succeed today, "you need to be a good educator as well," another skill that she brings to the table. As she says, "All the stars must have aligned perfectly for me to be in risk management at this point."
Luthi has been involved with the RIMS board as they have molded a new role for corporate risk managers. Over the last 10 years, the risk management profession has expanded greatly to encompass a much broader view as proposed by enterprise risk management (ERM). She indicates that over this time frame, RIMS has adapted to become "a wonderful resource for those risk managers who want to grow and take risk management to a new level." However, Luthi says, "There are still those risk managers who wish to maintain more of the traditional risk management role, and we also need to serve as a resource for them." At the end of the day, "Insurance will always be one of the key risk-financing tools we have," and RIMS will maintain a leadership role in this important area.
RIMS' evolving view of risk management has not stopped at ERM. Recently they have begun to develop the concept that "the next maturation of ERM is moving to a strategic management level." Luthi says, "Strategic risk management provides an even higher level view of the organization." Here she points out, "You must look at the goals of the corporation; what are the risks to its strategies and then develop a method for reaching those goals." It comes down to developing a methodology for ascertaining what the risks are, and "how can we minimize them and turn them into opportunities." She notes, strategic risk management "is really the C-Suite level."
New agenda for moving risk management forward
Luthi indicates that her presidency will center on delivering on the Society's newly developed mission statement: "advancing risk management for your organization's success." She notes that this goal will be achieved through the utilization of what she calls the "Three Rs":
• Relationships—those strategies that are directed at growing membership and strengthening RIMS chapters. "This is the lifeblood of the organization," she points out. It also includes building on existing relationships with "our industry partners." Key strategies for this relationship-building have been, and will remain, networking and educational activities.
• Reach—"Raising the profile of RIMS and risk management is essential for the organization's sustainability and growth." This will include such diverse efforts as geographical expansion and political advocacy as well as fortifying new industry and media relationships.
• Relevant—This represents some significant changes for RIMS in that it calls for an expansion of the definition of "risk practitioner." This view requires a recognition that "there are a number of others who practice risk management within an organization." Luthi states that "H.R., Compliance, Audit, Security, IT, etc., all have roles in management risk"; thus, they are risk practitioners. She points out that "risk managers should be the 'facilitators, and collaborators,' with all those other risk practitioners, thereby better defining and making more relevant the work we do."
All of the above noted points will be required if RIMS is to continue to retain its relevance with senior management and the board. Luthi points out that 2011 was a good case in point for developing and maintaining an ERM program. "It was a year that 'unknown unknowns' happened." She believes that this is where ERM can help corporations better prepare for things "that we would never have expected to occur."
Other issues of importance
Rough Notes readers frequently ask, where does the broker fit in all of this? Luthi has helped to shed some light on this important topic. "The broker has always been the partner of the risk manager!" She goes on to point out that "as risk managers expand their view of risk management, the broker also needs to expand his view." Further, she says, "RIMS believes it is part of its job to also help the broker develop a similar, expanded view of risk management so the broker can continue to work alongside the risk manager." There has always been a need for insurance in risk management and that is not going away any time soon. "Insurance is a frequent solution and the broker will need to be there to provide it," Luthi says.
Additionally, she emphasizes, RIMS needs to assist the broker community to better understand this expanding view of risk management and "help them to better serve their clients." It is important that brokers have a good understanding of their clients' risks because frequently there may not currently be an insurance product for the risk. The broker must be able to help underwriters to appreciate the exposure and find a way to underwrite it. Luthi states, "Reputational risk is a good example of this process."
There has been significant discussion in the past few years about outside drivers or influences that have caused the growth of ERM. One of the outside drivers that is frequently mentioned is rating agencies. Luthi is proof positive of this influence. "This is the reason I am here," she says. She explains that her employer is starting two major infrastructure projects that will involve billions of dollars of retro fitting and renovating both water and sewer systems. Adding to the intensity, the Commission's delivery system crosses three earthquake faults. Both of the projects were financed via bond funding, so the rating agencies played a critical role, she says. One of their initial concerns was about ERM and "the need for it, hence the reason why the Commission created this position."
It appears that RIMS is continuing to serve as a leader in the evolution of risk management. It has provided a positive influence on the overall direction of risk management over the past few years and as an organization has demonstrated an ability to establish a methodology that encompasses the entire risk management process via enterprise risk management. They are currently working at expanding the focus of risk management to include a much broader audience, through strategic risk management. As luck would have it, the current president has an excellent background for making this important transition.