Author Archives: Jared Wade

About Jared Wade

Jared Wade is a freelance writer and former editor of the Risk Management Monitor and senior editor of Risk Management magazine. You can find more of his writing at JaredWade.com.
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Why Risk Management Should Collaborate With Internal Audit

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Risk management and internal audit should work together. That’s according to a joint report between RIMS and the Institue of Internal Auditors released last week. “The two disciplines are more effective working together than separately, especially when there is a common understanding of each other’s roles,” said Carol Fox, director of RIMS’ strategic and enterprise risk practice. She noted that internal audit’s role helps inform top executives about the companies’ strategic risks while risk management function helps leadership use the proper techniques and methods to assess all the possible outcomes of different strategic paths.

In short, internal audit sees everything that is going on within a company. And risk management can take that knowledge and ensure that all contingencies can be properly understood.

During a panel session at RIMS 2012 Conference & Exhibition on enhancing the value of risk management, Diane Askwyth a risk manager at Harrah’s Entertainment, echoed these sentiments and expanded on how risk managers can partner with their colleagues in internal audit. “You have to look at internal audit as another pair of eyes for you,” said Askwyth. “It’s a very powerful resource if you can get that in your corner.”

In fact, more than just serving as an additional resource, that partnership can greatly enhance your standing in a company. Because if risk management isn’t using the knowledge that audit has, audit will be. And that will mean that the risk management department’s standing will be lowered by comparison.

“The group that knows the most about what’s going on in the entire organization on a very granular level is internal audit,” said Askwyth. “And from that perspective, they have a big advantage over us. So they can either be your enemy or they can be your best friend. It’s your job to make them your best friend — or else they’ll slit your throat.”

Kristina Narvaez of ERM Strategies, LLC  has some advice. She says there are three “Cs” that should govern risk management’s relationship with internal audit. “You can complement and collaborate but you don’t compete against each other,” she said.

Senior Insurance Executives Offer Advice on How Risk Managers Can Thrive in a Hard Market

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The property/casualty insurance market cannot yet be called hard. But “firming” is the most popular word of the week here at the RIMS 2012 Conference & Exhibition in Philadelphia. The rates for different lines of coverage are increasing at different levels, and some are even remaining flat. But there is no doubt that the extended soft market that insurance buyers have been enjoying for much of the past decade is about to disappear. If it hasn’t already.

For risk mangers, this presents some hard choices.

Aon Risk Solutions CEO of U.S. retail business Eric Andersen summed up the main challenge well today at the conferences senior executive panel discussion: “you’re forced to make choices inside a budget that’s not increasing” as the cost of coverage does.

Fortunately, he and the other insurance titans in the room had some advice for risk managers who will have to live through a hardening market with more expensive insurance. “No one is budgeting more money for insurance,” said Andersen. “And if the prices are going up, you’ve got to figure out where you need it, where you like it and where you can do without it.”

Forgoing coverage means losing some peace of mind, of course, but that can be eased if it comes along with a change in mindset. “Today we tend to buy insurance from the bottom up,” said Andersen. “We get as much as we can.”

Switch your mentality to instead focus first on the must-haves. Then, fill in the other key gaps. After that? Well, you will just have to live with some added risk. But as long as you’re protected against those truly catastrophic risks that could take down you company, the new risk tolerance is one the company should be able to accept. What it really comes down to, said Andersen, is “knowing where you can take losses inside your own organization … and then buying things that actually matter as opposed to what you’ve always bought.”

Aon’s chief rival, David Bidmead, the U.S. CEO of Marsh, said that this new reality also means risk managers will need to be more innovative if they want to continue to help their companies thrive. “Don’t get too comfortable with the ongoing suitability of what you’ve done in the past,” said Bidmead.

Just because something “may have worked for the past decade—and it may have worked really well—doesn’t mean it’s going to work in the future,” said Bidmead. Instead, he said, risk managers need “to challenge convention, to explore and identify credible alternatives to the way that you’ve done things in the past, to be open to new ideas, to be creative.”

Fortunately, all news isn’t bad news.

The market doesn’t lack capacity and while prices will increase, you should be able to navigate through the rougher waters as long as you keep the lines of communication open with your bosses. Essentially, just make sure they know that the same protection you formerly purchased now costs more and that some of that security may disappear if your budget stays the same.

“Make sure you’re well informed where the market is through your brokers and insurance partners and communicate that with your management to set the expectations early,” said John Lupica ACE USA’s chairman of insurance. “It’s still a very tradable market—there’s ample capacity to get your risks placed. It may cost more in certain lines of business, but it’s one thing you can manage through with good, open communication.”

And according to FM Global CEO and Chairman Shivan Subramaniam, things could be worse. This looming market turn will certainly not be as friendly as that past few years have been, but at least this won’t be your father’s hard market. In one key way, this upcoming hard market will be much easier for risk managers than the last one was.

“[You] have far more analytics, far more technologies and far more models at your disposal to present your case much better than what you had in 1986,” said FM Global CEO and Chairman Shivan Subramaniam. “You have a lot of knowledge available to you at your finger tips to help you prepare for any kind of market. And I think that’s something that you need to take advantage of.”

Napco Spencer Cup Hockey Tournament Raises Money for Risk Management Education at RIMS 2012

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On Saturday night, some 60 RIMS 2012 attendees gathered to skate around an ice rink carrying sticks and shoot rock-hard pucks of vulcanized rubber at one another. Not exactly the type of behavior you would expect of risk managers: even with helmets, gloves and pads, ice hockey is dangerous.

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But there are no rewards without risks, and for all involved, the upside of the Napco Spencer Cup hocket tournament — fun and raising money for risk education — far outweighed any safety concerns. After all, the four-team round robin tournament raised $12,000 for the Spencer Educational Foundation, a nonprofit that grants scholarships to college students pursuing degrees in risk and insurance.

According to Napco CEO David Pagoumian, who played in the game along with RIMS Director of IT Mike Peters (pictured above), his company has been sponsoring the event since 1997, when it took over from the retiring executives who founded the Spencer Cup in the 1970s to “keep the spirit going.

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Four Industry Luminaries Inducted into Risk Management Hall of Fame at RIMS 2012

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Last year at the RIMS 2011 Annual Conference & Exhibition in Vancouver, RIMS and Chartis launched the Risk Management Hall of Fame. John Pinner, Eldrich Carr, Douglas Barlow, Donald Barrett  and Cheri Hawkins were the first five inductees. Today, they were joined by four others who have spent their lives and careers advancing the discipline: Marc Darby, David Haight, Edith Lichota and Ronald Strine.

“With nearly 150 combined years in the risk management profession, this year’s group of inductees have achieved professional excellence while demonstrating a genuine commitment to advancing the discipline,” said RIMS Executive Director Mary Roth. “It is with great honor that we recognize the careers of these four individuals and welcome them into this elite group.”

Peter Eastwood, president and CEO of Chartis for the Americas, agreed. “This year’s inductees have not only served their companies, but have helped shape the risk management discipline,” he said, “and we are proud to congratulate them on this achievement.”

Below are some highlights from each of their careers.

Marc Darby

Marc Darby’s career at Bombardier spanned almost 30 years before he retired in 1998 as director of risk management and insurance. He increased the profile of the risk manager at the company and helped form a multi-discipline risk management team as Bombardier evolved from a manufacturer of recreational vehicles to a world-leader in the aerospace and rail transit industry. Marc was the president of RIMS from 1983-84, president of Quebec Risk and Insurance Management Association (QRIMA) from 1975-76, winner of the RIMS Harry and Dorothy Goodell Award in 1997 and named to the Business Insurance Risk Management Honor Roll in 1992. He remains an active member of RIMS and QRIMA.

David R. Haight

Before retiring in 1998, David R. Haight has spent more than 35 years as a risk professional at companies including Gould Inc., Ceco Corporation and CF Industries, Inc. He helped form the Northeastern Illinois Chapter of RIMS in 1978 and later served as president. He also served a term as president of the Minnesota Chapter. He was an active RIMS member from 1964-98 and now holds an honorary membership with the organization.

Edith F. Lichota (1929 – 1994)

Edith Lichota began her risk management career in the mid-1960s with a small company in western Ohio, Work Wear, tackling product liability litigation issues. In the 1970s, as assistant treasurer of Carborundum Corp. she fought against the New York State Insurance Department Regulations that would have limited corporations’ risk financing options. In the early 1980s, Ms. Lichota became vice president of government affairs with INA, during which time she supported development of the then-new captive law in Vermont. In 1987, she became the first woman ever named “Risk Manager of the Year” by Business Insurance, one year after having been named “Woman of the Year” by the Association of Professional Insurance Women. Before she passed away in 1994, she also won the highest awards handed out by RIMS, the RIMS Richard W. Bland Memorial Award, and the RIMS Harry and Dorothy Goodell Award.

Ronald E. Strine

Ronald Strine retired from Aetna Life & Casualty in 1992 after 26 years of service, 14 as senior casualty underwriter for Fortune 500 companies and 12 as the director of corporate risk management. In 1979, afte promoted to the position of manager of insurance, safety and security, Ron immediately changed the department’s name to “Corporate Risk Management” and was subsequently promoted to the position of director, a responsibility that included overseeing insurance, safety and security for over 45,000 employees and 100 affiliated companies around the world.

In 1988, Ron was appointed by then Secretary of State George Shultz to the newly created Overseas Security Advisory Council (OSAC) where he was the only risk manager among the council of senior security directors. After earning his CPCU designation in 1970, Ron began a 25-year relationship with The Insurance Institute of America (now The Institutes) as a grader for CPCU and IIA examinations. He also taught RM 54 for many years at the University of Connecticut and later developed the University of Hartford Graduate School curriculum for their course in risk management. He retired in 2005, having served 44 years in the industry.