A global view – John Phelps, President of RIMS – North America, Part II

Adrian Ladbury (AL): What are your goals and objectives as president of RIMS this year? John Phelps (JP): During my term as RIMS president we will focus on three areas of emphasis. First, RIMS needs to continue to create value for its members and, in turn, help our members and member organisations communicate and demonstrate the value they can create for their organisation. Providing our members with the best professional development opportunities, conferences, reports, best practice information, case studies, surveys, articles and other highly-relevant and informative resources is the key to achieving this goal. We need to support their professional journey to increase the value that is so critical to all risk programmes and risk professionals at all levels-from the traditional risk manager who is focused largely on insurance and loss control all the way to the chief risk officer.hideSecond, as business continues to globalise, RIMS must extend its resources to reach new audiences, as well as provide our current members with the tools to think globally. Our members operate in more than 60 countries and we are looking to increase our footprint by supporting the activity of members elsewhere in the world through access to our services, networking and best practices and through our chapters. I should also point out that we do not need 'bricks-and-mortar', on-the-ground facilities but we do need to provide services such as education for members around the world. Risk management is no longer only relevant in a handful of countries, it is now worldwide. The third area of emphasis is to focus on the future, the younger generation of risk professionals or future professionals. We need to help young people understand the rewarding career path that this profession can offer. This requires energy and commitment from us all. In the past this may have been overlooked because risk management was regarded as only part of the insurance function but now it is very different. Half of graduate and post graduate degree programmes now have an element of risk management. This presents a great opportunity for the future of the profession and those entering it. AL: You mentioned the historic connection of risk management with the insurance industry. RIMS is generally regarded as an association for insurance managers. Is this correct or is the membership expanding to embrace the wider risk management community? JP: Our legacy has been to support insurance-based functions including loss control and claims management. I know many members of RIMS who are purely responsible for insurance management and work for large global groups that have extremely wide responsibility for insurance, claims and loss control. It astounds me how they can handle such responsibility to be honest. We will continue to be a primary source of support for these risk professionals. But over the last five years we have seen a much-expanded spectrum in risk management, more towards strategic risk management. RIMS has just published its Strategic Risk Management Implementation Guide for risk professionals who wish to advance their programmes to a more strategic value proposition within their organisations. This book talks about how to integrate risk at a strategic level enabling companies to essentially make safer or, more informed, strategic decisions. When uncertainty is reduced at a strategic level, the expected gains from strategic execution are more likely to occur. We all operate in a turbulent global business environment today and risk management can help not only identify and mitigate risk but create value for the organisation. AL: Do you think that the profession would be greatly assisted and the perception of the profession improved in the wider business world if a globally recognised professional risk management qualification were created? Do you think that the European accreditation project that Ferma is planning could be the basis for this? JP: I think that such a professional certification would certainly help elevate the stature of the profession but exactly how this plays out is really up for grabs. There are things in place today that would be vital for a certification programme, such as ISO 31000, that were not in place 10 years ago. This has created an international focus on ERM which is vital and will help lead to certification. Generally speaking, anyone can claim to be a risk manager or that they have an ERM programme so creating a consensually accepted qualification process would benefit everyone if this was addressed. AL: Is the continued connection between risk and insurance management possibly an impediment to the development of an industry qualification? Should insurance and risk management be clearly separated? JP: It really depends upon the organisation and can't be easily simplified. The risk management programme of every company is different and the insurance and risk management for every company is very company specific. In our company, insurance and risk management work very well together. I see risk financing and business continuity as mitigation tools that are part of the overall enterprise risk management process for which I am responsible. Other companies will also include physical and virtual risks, such as the whole range of employee risks and security for which there are also risk financing and mitigation tools. These tools are part of the overall risk management capability within a company. AL: How do you secure CEO and main board buy-in to risk management so that they regard it as a dynamic and positive management activity rather than just a tick box exercise? JP: Certainly some CEOs still see risk management as a 'tick-box' exercise but I think it started changing about 10 years ago. Previously, I don't think that many CEOs saw risk management as anything more than an exercise to satisfy credit rating agencies and regulators but it is different today. For example, in our 2012 Excellence in Risk Management survey of companies with more than $1bn of revenue some 87% of companies said that risk management meant more than just keeping regulators happy. Implicit in this was recognising 'the positive side' of risk management and how a lack of risk management can hamper innovation. An organisation turns the corner when the benefits of risk management are recognised and it realises that it's about identifying value-creating opportunities and not just protecting assets. AL: Having gained true main board buy-in how do you then ensure that risk management is properly embedded within an organisation? How do you demonstrate true added value of risk management to the line manager too? JP: Actually the answer is in the question. The way to make risk management live in an organisation is to create the greatest value and, perhaps more importantly, show how it benefits the operation. Risk management needs to be embedded into activities such as mergers and acquisitions, product development and resource allocation. Managers across the organisation need to be shown that integrating a risk competancy into their day-to-day management can significantly improve their ability to achieve their operational objectives. I have never met an executive yet who has said that they want to make decisions with more uncertainty. Embedded, risk management can be that key to help an organisation more clearly define their strategic objectives, thus helping senior leadership make better informed decisions for the company. AL: What are the big three risks that US business currently face in your view? JP: The first major risk facing most organisations is global political unrest. It has become so easy for a business to do business in other countries. Now, even small businesses, working out of someone's home, can easily market and distribute worldwide. While the ability to take your business to international markets has eased, the ability to manage risk across borders has inevitably become more difficult. The second risk is economic uncertainty. The outlook is slowly improving but here in the US there has been a lot of volatility in the stock market over the last several years. Until things start to flatten out and become more stable, business will remain sceptical. Regulatory changes also have businesses on edge. For example, the Healthcare Reform in the US can completely shift the way an organisation conducts business. Also, falling under the regulatory changes risk, are new measures that are constantly being enacted to force an organisation to be more financially transparent. Whether it's the risks associated with going global, economic uncertainty or regulatory change, each emphasises the importance of a strong risk management function that can help reduce uncertainty and can straighten the path for an organisation to succeed. Who wouldn't want that? • Commercial Risk Europe will be at RIMS in force this year to carry out interviews with leading North and South American risk managers for the ongoing Global Risk Frontiers project. We will also be delivering daily conference news from the main sessions. To book your place at the Global Risk Frontiers Debate in London on 22 May please go to http://www.commercialriskeurope.com/global-risk-frontiers-2013/

A global view – John Phelps, President of RIMS – North America, Part II

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