Narim – risk managers urged to extend frontiers

Michel Fromme, Head of Insurance Risk at Royal Philips Electronics, and Eddie McLaughlin of Marsh Risk Consulting, urged insurance risk managers to emerge from their often self-imposed professional boxes, during a joint presentation entitled ‘Risk & Insurance Management: Raising the Bar’. Mr. McLaughlin carried out a poll of the audience that found that the majority (42%) of risk managers in the room reported to the Chief Financial Officer or Treasury department and 16% to the Chief Executive Officer. This, he said, was very similar to a poll he had recently carried out at the AIRMIC meeting of U.K. risk managers earlier in the week and which he said was encouraging because of the relatively high proportion of reports to key decision makers.hideBut, Mr. McLaughlin’s poll also found that the majority of those polled (39%) only rated the maturity level of risk and insurance management practised at their companies as established, with another 30% rating it as either a basic competence or underdeveloped. Typically this level of maturity level can lead to insurance managers finding themselves excluded from key strategic decisions, and their role, as well as insurance buying in general, left undervalued and overlooked as a result. The key question that faces insurance and risk managers is how to position themselves so that they are involved in strategic decision making and, for example, do not find out about the latest acquisition by reading a press release, he added. “You have to ask to what extent are you are involved in more difficult decisions, involved in major projects, contracts and mergers and acquisitions activity. To what extent does your organisation use insurance and risk management to support decisions,” said Mr. McLaughlin. “You have to stress that insurance is a source of capital, not just a cost, and that even in a simple transaction it can make a big difference. You have to convey that risk management adds value and helps to manage volatility and ultimately the cost of capital. So risk & insurance management is not just about the negative aspects, there are positive aspects too,” he continued. Mr. Fromme agreed that the profession does have to sell itself to the wider business, if only because it is not a core part of the business. He reminded the insurance managers in the room that if they do a good job, losses do not emerge and so they become ‘invisible’. “It is inherent. We have to work harder than other functions to obtain a profile,” he explained. Mr. Fromme said that a starting point for the forward-looking insurance risk manager is to clarify their role. Mr. McLaughlin’s poll had found that 33% defined themselves as insurance managers, another 33% as risk and insurance managers, 10% as chief risk officers and 23% as ‘other’. Mr. Fromme said that there is clearly room for insurance risk managers to extend their remit. “It is important to be clear about responsibilities. You often see the job title risk manager but when you dig deeper they are actually an insurance manager. The position needs to be clarified,” he said. Mr. Fromme provided fellow NARIM members with a list of top tips to help them raise the bar and hopefully also further their careers. These were: Talk the right language – He said that it is critical to talk sense and ensure that insurance fits into the overall finance picture. “You have to make sure that the CFO is aware of what insurance can do to protect earnings and cash flows and what it can achieve compared with other facilities. Remember as a finance tool it is rather good value,” said Mr. Fromme. He also advised his colleagues to avoid insurance slang at all costs. Benchmarking – Mr. Fromme said that it is all too easy to hide from benchmarking exercises but actually, if done proactively, it can be a really positive exercise. “Take the initiative yourself, rather than the boss, and enable yourself to set your own timelines,” he said. Communicate – Mr. Fromme said that it is essential to reach out to other departments and be aware of changes that occur to the business. Risk professionals must ensure that colleagues are aware of the coverages that have been bought and what is available. All too often events occur and management are not even aware that coverage was available, he said. Be proud – Mr. Fromme said that this refers to the whole industry and not just the buyers. “I do not think there is high esteem in this industry. But remember we are operating in a very dynamic industry, it is international and fun to work in. It is crucial if we want to attract young talent that we make it clear that it is a fantastic industry to work in,” said Mr. Fromme. A more in-depth report on this session and the rest of the Narim conference will appear in the July issue of the newspaper. Contact HFoster@CommercialRiskEurope.com to guarantee your personal copy.

Narim – risk managers urged to extend frontiers

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