Sharing Knowledge and Experience
While attending San Diego RIMS 2016, I met a lawyer who had been appointed risk manager for her company. I told her that involving myself with RIMS and professional risk management organizations was instrumental in my personal and professional development.
Risk managers who are new to the function or wish to develop their skills may see the same benefits I did.
I attended a chapter meeting and was hooked! I served on chapter committees. I applied to speak at RIMS national and Canadian conferences. I took advantage of RIMS’ new officer training.
I then served on RIMS national education and conference committees. This gave me a broad view of the spectrum of issues important to risk managers as well as some effective ways to respond.
I was invited to serve on RIMS executive council as treasurer (two terms), VP conference, first VP audit and investments, president and past president.
During this time, I received invaluable executive training on many topics that help me in my professional career, including media, nonprofit board operations, budgeting, public speaking, dispute resolution, and so much more.
I learned from the best – my risk management colleagues and expert RIMS staff.
I also had the pleasure of serving on the Spencer Education Foundation Board and the International Federation of Risk and Insurance Management Associations (IFRMA). Representing RIMS worldwide, I traveled to Britain, France, Tasmania, and Japan, and attended chapter meetings and conferences throughout Canada and the U.S.
Getting Company Support
Getting the support of my company was very important. I took great care to ensure the senior executives understood and supported my involvement. I completed a trip report for every meeting … detailing location, attendees and agenda. I sent it to my director, CFO and board chair. These reports helped demonstrate the value of participation and the lessons I learned.
I used vacation and overtime to offset time out of office.
I copied every magazine article that named my employer, highlighting the publication and reference, and sent it to my CFO, board chair and mayor of Kitchener, Ontario. I facilitated greetings between the mayor and officials in Japan, which helped substantiate the benefit of RIMS membership and participation.
My involvement with RIMS enabled me to meet many influential people including Gen. Colin Powell, Sen. Robert Kennedy Jr., Lord Peter Levene, former chairman of Lloyd’s, U.S. Rep. Newt Gingrich, and U.K. Prime Minister John Major … to name a few.
Some other highlights included:
- Socializing with some of the most senior insurance industry executives during a private, no-agenda breakfast at the Saint Regis Hotel in New York;
- Meeting New York Insurance Commissioner Greg Serio during the contingency fee controversy;
- Joined other risk managers for “RIMS on the Hill” in Washington to meet with U.S. senators and representatives;
- Dined with representatives of the (then) newly formed Department of Homeland Security; and
- Was the first woman and first risk manager to ever be invited to speak on a panel with Lord Levene.
These experiences gave me more insights and connections than I ever imagined. My advice for those entering risk management is to get involved with professional organizations. Get to know your risk management colleagues. Volunteer on a committee, or moderate or speak at a conference. Share experiences and put the best of them to use in your own organizations.
Manage Expectations, Manage Reputation
The art of managing reputation risk really comes down to shaping the expectations of shareholders, customers, vendors, creditors and investors.
“Not an easy thing to do,” said Nir Kossovsky, chief executive officer, Steel City Re, speaking at the annual RIMS conference in San Diego on April 12.
“Managing expectations involves behavioral economics – shaping what people expect from you and then meeting those expectations.”
He said expectations typically revolve around six key areas: safety, ethics, quality, security, sustainability and innovation. Failing to meet any of those expectations creates vulnerability for a company, opening up an opportunity for shareholders or special interest activists to come after the board of directors as the culpable party.
Increasingly, directors and officers are the true casualties of reputation damage.
Dissatisfied customers or partners know that “the court of public opinion is much more effective than the court of law,” Kossovsky said, so they will bring allegations against the board and force a public response.
“Managing expectations involves behavioral economics – shaping what people expect from you and then meeting those expectations.” – Nir Kossovsky, chief executive officer, Steel City Re
The best way to mitigate reputation risk, then, is to proactively communicate the board’s awareness of a company’s exposures, and acknowledge its duties to deliver on expectations related to the six key areas.
“Communication is critical,” said Todd Marumoto, director of risk management, Mattel, Inc. “There needs to be some sense of a plan for how the board will respond to a reputation event.”
Without a quick response, the silence is filled by the white noise of unsubstantiated opinion, Kossovsky said. That weakens the board’s credibility.
“Facts are available without much of a down payment. Allegations brought against the board don’t necessarily have to be true and can’t always be validated.”
Conflicting expectations make reputation risk management even harder.
Customers expect, for example, near impossible standards of quality and customer service, while shareholders expect strong profit and growth, and creditors expect swift payment.
While many believe that marketing and press coverage can be the tool for the messaging needed to mold expectations through public perception, the most effective way to mitigate reputation risk is through enterprise risk management that strives for excellence, the speakers said.
In other words, expectations should be set by a company’s performance.
Kossovsky offered the example of BP, which claimed to be “beyond petroleum.”
Despite impressive initiatives to use cleaner energy, BP was still, in fact, heavily reliant on petroleum. The Deepwater Horizon spill of 2010 sparked so much anger because people expected BP to be above such environmentally dangerous accidents.
ExxonMobil, on the other hand, acknowledged to its shareholders that a spill was always a real threat, but demonstrated the steps it was taking to minimize the risk. Shareholders thus had more realistic expectations of the company and are harder to disappoint.
Presenting to the C-Suite
Risk managers can bring the importance of reputation risk to the C-suites’ attention by demonstrating its financial impact.
“Expenses could come from having to replace a vendor, from a government penalty, litigation and class action lawsuits, or having to implement a new management process,” Marumoto said.
Overall, costs associated with remediating a reputational event can be two to seven times higher than costs related to the operational failure that caused the reputation damage in the first place.
“With reputation risk, it’s not always about right or wrong, but about getting the right outcome to satisfy shareholders and customers.” — Todd Marumoto, director of risk management, Mattel, Inc.
“It affects every line item of the P&L,” Kossovsky said.
The impact on D&O effectiveness will also certainly grab senior management’s attention.
“A typical board member makes about $250,000 per year to sit on the board for a term usually of about three years, and he’s usually sitting on three different boards,” Kossovsky said.
“He’s looking at a personal loss of over $2 million” if a reputational hit leads to him being asked to step down from those boards.
According to Marumoto, risk managers can influence outcomes of a reputational event by working internally with investor relations and marketing to ensure the company is sending a consistent message, and to develop a coordinated response plan.
“Ultimately, you have to be responsible for all things that pass in front of you,” he said. “Partner with vendors you trust, be transparent in your efforts to mitigate risks, and develop relationships with government agencies.
“With reputation risk, it’s not always about right or wrong, but about getting the right outcome to satisfy shareholders and customers.”
Sparking Innovation and Motivating Millennials
Two trends in the insurance industry, if they continue, could compromise its vitality in today’s fast-paced, technology-driven business world: slow innovation and a scarcity of millennial talent.
The quests to develop innovative solutions and services and to recruit young people to the field have raised concerns in the industry for several years, causing some insurers to think about how they will stay viable in the future when senior-level managers begin to retire.
But Lexington Insurance Company, a member of AIG, may have found a way to spark innovation that also engages millennial minds.
Innovation Boot Camp started three years ago as a one-off project meant to identify young, high-potential employees, give them exposure to senior management and evaluate their teamwork and leadership capabilities.
“The original concept was fairly straightforward. We would bring together a group of about 30 high potential employees for some semblance of team project work and it would allow management to gauge and assess talent,” said Matt Power, Executive Vice President, Head of Strategic Development, Lexington Insurance.
Little did he know how well the program would not only generate a plethora of innovative ideas that would drive the company forward, but also reinvigorate younger employees.
“The boot camps would be focused on innovation, with the idea that if we ended up with a concept or product that we could commercialize, then the boot camp would have been effectively self-funded. When they came back at the end of the 12 weeks, we were absolutely shocked because they produced about half a dozen products that have since been commercialized and are in some phase of being rolled out.”
— Matt Power, Executive Vice President, Head of Strategic Development, Lexington Insurance
New Ideas Emerge
The inaugural Innovation Boot Camp began with a two-day kick off meeting for participants— consisting of six teams with five or six participants. Each team was tasked with developing a business plan, and began to connect virtually over the next 12 weeks. The plan would culminate in a presentation to a senior management judging panel at the program’s conclusion.
“The boot camps would be focused on innovation, with the idea that if we ended up with a concept or product that we could commercialize, then the boot camp would have been effectively self-funded,” Power said. “When they came back at the end of the 12 weeks, we were absolutely shocked because they produced about half a dozen products that have since been commercialized and are in some phase of being rolled out.”
Power credits the program’s success in part to the participants’ youth. They were tuned in to different trends and issues than their more experienced counterparts.
Cyberbullying, for example, was a problem that didn’t exist for Power and his contemporaries as they grew up, but was salient for millennials. Based on the presentation of one group, Lexington developed coverage on their personalized portfolio for exposures associated with cyberbullying.
Likewise, “they educated us on the emergence of the craft brewing industry and how rapidly it was growing in the U.S.,” Power said. “That led to us launching a whole suite of products for craft brewers.”
Another team brought forth the concept of how rapid sequencing laser photography could be used to create a three-dimensional picture of a construction work site. That would allow contractors or claims managers to virtually walk through the site at a given point in the construction process to identify deviations from the original blueprint plans.
The images could memorialize the building process down to the millimeter, to every screw and wire. If a loss emerges later on due to a construction defect, the 3D map would be a valuable investigation tool.
Innovation Boot Camp proved so successful that Lexington expanded it to other arms of AIG all over the world.
“Suddenly we started getting calls from London, Copenhagen, Brazil,” Power said. “We were doing these programs for our global casualty team, for our lead attorneys in New York, for our financial lines group, and so on. We recently embarked on the 16th iteration of this program in London, with additional programs in the works.
“It’s a journey that has evolved from trying different things and not being afraid to fail, not being afraid to try new ways of thinking about the business.”
Engaging Millennial Minds
In addition to generating new product ideas, Innovation Boot Camp also engages younger employees more fully by offering the opportunity to make meaningful contributions to the company through independent work that requires some creative thinking.
Past participants are often great crusaders for the program.
“A program like IBC is something rarely seen at a large corporate conglomerate, and really a concept for new age startup companies,” said Alyson R. Jacobs, Vice President, Broker and Client Engagement Leader in AIG’s Energy & Construction Industry Segment. “But we were given a chance to work with people of all different professional backgrounds, and that environment unearthed concepts and solutions that have made a significant impact in the lives of our insureds and their employees.”
The chance to do work that makes a difference, both for the success of their company as well as the clients its serves, is what attracts millennial employees to the program and motivates them to devote their best effort to the project.
“Millennials want to be able to share their ideas and make meaningful contributions at work,” Power said. “Innovation Boot Camp has evolved into the perfect forum for that.”
David Kennedy, Esq., Product Development Manager for Lexington Insurance and former Coach for two Innovation Boot Camps, said the program engenders an “entrepreneurial spirit of developing something new, of applying analytical rigor to emerging risks to create unique and timely solutions for our clients and the marketplace.”
Exposure to senior executives doesn’t hurt either.
“It provided a platform for me to not just interact with our Senior Executive leadership but present a concept that could potentially be adopted by our company in the future,” said Ryan Pitterson, Assistant Vice President, AIG. “It helps to build your internal network, elevate your profile in the company and connects you with our client base as well.”
At a time when recent college graduates choose employers based on how much opportunity they’ll be given to have meaningful input — as well as opportunities for advancement — projects like Innovation Boot Camp could be the answer to the insurance industry’s struggle to pull in millennials.
“We give them the time, space and resources to create something new,” Power said. “When employee engagement is done right, it inspires passion and creativity.”
As multiple arms of AIG adopt Innovation Boot Camp around the globe, both the quantity and quality of new ideas are bound to flourish.
“The bottom line is, many heads are greater than one, and AIG has figured out how to leverage this. AIG hears their employees’ voices and enables those ideas to take our company into the future,” Jacobs said.
To learn more about Lexington Insurance, visit http://www.lexingtoninsurance.com/home.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Lexington Insurance. The editorial staff of Risk & Insurance had no role in its preparation.