13 Rules for Risk Management Success
Over my 24-plus years in the insurance, general liability claims and risk management professions, I have learned that the following practices or attributes are critical for success.
With this opportunity, I would like to share with the readers of Risk & Insurance® the practices and attributes that lead to success when working in a high energy, heavy work-volume environment in our respective organizations.
“Risk management is about people, not money. Money is why we have risk managers; however people are why we strive for excellence. One needs to be cognizant of the uninsurable costs of risk.”
The modern conventional wisdom is that folks need to “do more with less”. Let’s face it, our organizations are either beholden to stockholders, owners or the tax paying citizens of our great country. More than ever the pressures for producing high quality, high volume and cost-effective work product is expected.
The following are some proverbial words-of-wisdom from someone who is the boots on the ground….
- Be the “get to yes” folks and not the “little dark rain cloud”. Risk management is in the position to assist stakeholders in making informed and sound decisions. Rarely should risk management provide an absolute “no” and if so, then the successful risk manager assists in providing alternative methods to assist in reaching the goal in question. In other words, provide the organization’s stake-holders information enough for them to make an informed decision.
- Check your ego at the door when you enter the office. It is not about “you”, it is about “us” and “them”.
- Risk management is about people, not money. Money is why we have risk managers; however people are why we strive for excellence. One needs to be cognizant of the uninsurable costs of risk.
- Having a positive mental attitude is critical.
- What would Woodrow Wilson Do? Woodrow Wilson said essentially; “In times of crises a thousand hasty counsels is worth one cool judgment. The goal is to provide light and not heat.”
- Change is going to happen, embrace it.
- Be forthright, honest, respectful of others and diplomatic.
- Use your internal and external resources. Governmental entities do not have to worry about trade secrets or competition and generally public entity risk professionals like to share in their successes and “lessons learned.”
- Do not reinvent the wheel. In all likelihood someone with institutional knowledge has “been there and done that.”
- Communicate with stakeholders. They do not like surprises and do not wait to be asked to provide a report or information. Let stakeholders know of your successes and simultaneously help identify where organization success can be maximized or where failure can be mitigated.
- Be timely and ready to address issues as they occur without losing focus of the horizon.
- Communicate and collaborate with organizational personnel in developing and supporting a culture of risk management and safety.
- Battleships turn slowly and sink fast…do not rest on your laurels.
Though the cynic may conclude much of the above is cliché’, it has been my experience that incorporating the above points into how one conducts their risk management endeavors benefits the organization, fosters a positive work environment and provides the foundation for building and/or maintaining a quality risk management enterprise.
University Risk Managers Share Concerns
Higher education risk managers converged on Louisville, Ky., last week for the annual conference of the University Risk Management and Insurance Association, where several themes emerged as key areas of focus.
“ERM seemed to be the biggest theme, but there was a enough variety in the sessions to cover all the basics,” said Mark Logel, director, administrative services & risk management at the University of Evansville and a first-time conference attendee.
More than six in 10 (61 percent) survey respondents said they have not conducted an enterprise risk management process at their institution in the past two years, or don’t know if such work was done, according to data shown during one session, “Managing Risk Intelligently: A New Normal.”
And yet, nearly three-fourths (73 percent) said they are more focused on institutional risk now than five years ago, and 63 percent reported having more full board discussions about institutional risk.
Paradoxically, only 39 percent of respondents said they were getting enough information about their exposures, down from 43 percent in 2008.
However, according to Gary Langsdale, university risk officer at Pennsylvania State University (PSU) and a session speaker, these statistics are not as negative as they appear. Such conflicting opinions may demonstrate that institutions are growing more aware of the complex web of risks they face and therefore asking for more information, not necessarily receiving less.
“There’s an impetus for thinking more holistically about risk,” said Andre LeDuc, executive director, enterprise risk services at the University of Oregon. “It’s a continual struggle to promote a risk-aware culture.”
Such a culture needs to be built from the top down, with buy-in from board members and more communication between academic and student affairs offices. The publicity surrounding the Sandusky scandal at PSU revealed a need for greater board involvement, Langsdale said.
But, he noted, there is a limit.
“Board members should have their noses in but fingers out,” he said, meaning the board’s role is to be informed but not overly involved in risk management.
Langsdale identified ways risk managers can help set the culture for a true ERM effort:
• Look for leadership opportunities.
• Break down organizational silos.
• Understand the analytical tools and methodologies available.
• Elicit views from across the organization.
“Establishing ERM is an evolution,” LeDuc said. “Check back in two or three years to see what works and what doesn’t. Every institution is unique. … We have to take lessons learned back to our home institutions and help the thematic thread spread.”
Changing demographics and enrollment challenges, lack of funding and regulatory compliance are three major strategic risks faced by universities.
According to Christine Eick, executive director, risk management and safety at Auburn University, some schools saw hundreds of millions of dollars’ worth of cuts in government funding during the recession.
That is compounded, Langsdale said, by a lack of funding on students’ end as well. As costs rise, fewer students and their families are able to contribute much from their own pockets.
“We have to make choices about which programs to support,” he said.
Many attendees acknowledged that funding for sports programs, while ultimately accounting for a very small percentage of a school’s overall budget, should be the first to take cuts because of their high visibility.
Enrollment has also fallen as demographics shift. There are simply fewer 18-year-olds in the prospective student pool now than there were a decade or more ago, which increases competition among schools vying to keep classrooms full.
“One help has been recruiting returning military members,” Eick said, “who often come with the support of government funding” and have incentives to obtain a degree as they re-enter the mainstream workforce.
Compliance has also risen as a priority, especially with adherence to Title IX and the handling of sexual assault cases coming under tighter scrutiny.
Along with the increased risk, however, comes the benefit of putting “risk managers at the right tables,” said LeDuc, as universities need to discuss such risks among different offices and with board members.
Like any other organization that collects personally identifiable information, higher education institutions are more concerned with cyber threats.
“Data, data, data. Are we fully aware of our exposures?” LeDuc asked, picking out cyber security as a risk to watch related to students’ personal and financial records, as well as the potential for theft of intellectual property, especially at research institutions.
“Cyber is an increasing threat,” Eick agreed. “There has to be a shift in culture that mandates security training for all faculty to be completed by a certain date. Schools should be employing more privacy officers and CIOs to handle those challenges.”
Universities may have a higher exposure for data breach, Langsdale said, because networks are “designed to be open” to allow access for prospective and current students, alumni, faculty, and researchers from other facilities.
“You need to be on top of your cloud providers and know where your servers are located,” he said. “There should be no deemed export of information.”
Along with the increase in study abroad programs comes the increased need for colleges and universities to do more to ensure the safety of students in such programs, including keeping track of their whereabouts and the conditions of the countries they visit.
Until recently, schools have had limited ways to track and communicate with students abroad, and have kept limited records of incidents. Both nonprofit organizations and businesses offer resources to help risk managers expand their efforts.
One way to conduct due diligence is through site visits, which “are not terribly expensive,” according to Eick, but which usually are only done by larger, better-funded schools.
In addition to scoping out the conditions of hosting school and the surrounding communities, site visits allow risk managers an opportunity to analyze local coverage and ensure that the right policies are in place. Language barriers can result in improper coverage.
Six Best Practices For Effective WC Management
It’s no secret that the professionals responsible for managing workers compensation programs need to be constantly vigilant.
Rising health care costs, complex state regulation, opioid-based prescription drug use and other scary trends tend to keep workers comp managers awake at night.
“Risk managers can never be comfortable because it’s the nature of the beast,” said Debbie Michel, president of Helmsman Management Services LLC, a third-party claims administrator (and a subsidiary of Liberty Mutual Insurance). “To manage comp requires a laser-like, constant focus on following best practices across the continuum.”
Michel pointed to two notable industry trends — rises in loss severity and overall medical spending — that will combine to drive comp costs higher. For example, loss severity is predicted to increase in 2014-2015, mainly due to those rising medical costs.
Debbie discusses the top workers’ comp challenge facing buyers and brokers.
The nation’s annual medical spending, for its part, is expected to grow 6.1 percent in 2014 and 6.2 percent on average from 2015 through 2022, according to the Federal Government’s Centers for Medicare and Medicaid Services. This increase is expected to be driven partially by increased medical services demand among the nation’s aging population – many of whom are baby boomers who have remained in the workplace longer.
Other emerging trends also can have a potential negative impact on comp costs. For example, the recent classification of obesity as a disease (and the corresponding rise of obesity in the U.S.) may increase both workers comp claim frequency and severity.
“The true goal here is to think about injured employees. Everyone needs to focus on helping them get well, back to work and functioning at their best. At the same time, following a best practices approach can reduce overall comp costs, and help risk managers get a much better night’s sleep.”
– Debbie Michel, President, Helmsman Management Services LLC (a subsidiary of Liberty Mutual)
“These are just some factors affecting the workers compensation loss dollar,” she added. “Risk managers, working with their TPAs and carriers, must focus on constant improvement. The good news is there are proven best practices to make it happen.”
Michel outlined some of those best practices risk managers can take to ensure they get the most value from their workers comp spending and help their employees receive the best possible medical outcomes:
1. Workplace Partnering
Risk managers should look to partner with workplace wellness/health programs. While typically managed by different departments, there is an obvious need for risk management and health and wellness programs to be aligned in understanding workforce demographics, health patterns and other claim red flags. These are the factors that often drive claims or impede recovery.
“A workforce might have a higher percentage of smokers or diabetics than the norm, something you can learn from health and wellness programs. Comp managers can collaborate with health and wellness programs to help mitigate the potential impact,” Michel said, adding that there needs to be a direct line between the workers compensation goals and overall employee health and wellness goals.
Debbie discusses the second biggest challenge facing buyers and brokers.
2. Financing Alternatives
Risk managers must constantly re-evaluate how they finance workers compensation insurance programs. For example, there could be an opportunity to reduce costs by moving to higher retention or deductible levels, or creating a captive. Taking on a larger financial, more direct stake in a workers comp program can drive positive changes in safety and related areas.
“We saw this trend grow in 2012-2013 during comp rate increases,” Michel said. “When you have something to lose, you naturally are more focused on safety and other pre-loss issues.”
3. TPA Training, Tenure and Resources
Businesses need to look for a tailored relationship with their TPA or carrier, where they work together to identify and build positive, strategic workers compensation programs. Also, they must exercise due diligence when choosing a TPA by taking a hard look at its training, experience and tools, which ultimately drive program performance.
For instance, Michel said, does the TPA hold regular monthly or quarterly meetings with clients and brokers to gauge progress or address issues? Or, does the TPA help create specific initiatives in a quest to take the workers compensation program to a higher level?
4. Analytics to Drive Positive Outcomes, Lower Loss Costs
Michel explained that best practices for an effective comp claims management process involve taking advantage of today’s powerful analytics tools, especially sophisticated predictive modeling. When woven into an overall claims management strategy, analytics can pinpoint where to focus resources on a high-cost claim, or they can capture the best data to be used for future safety and accident prevention efforts.
“Big data and advanced analytics drive a better understanding of the claims process to bring down the total cost of risk,” Michel added.
5. Provider Network Reach, Collaboration
Risk managers must pay close attention to provider networks and specifically work with outcome-based networks – in those states that allow employers to direct the care of injured workers. Such providers understand workers compensation and how to achieve optimal outcomes.
Risk managers should also understand if and how the TPA interacts with treating physicians. For example, Helmsman offers a peer-to-peer process with its 10 regional medical directors (one in each claims office). While the medical directors work closely with claims case professionals, they also interact directly, “peer-to-peer,” with treatment providers to create effective care paths or considerations.
“We have seen a lot of value here for our clients,” Michel said. “It’s a true differentiator.”
6. Strategic Outlook
Most of all, Michel said, it’s important for risk managers, brokers and TPAs to think strategically – from pre-loss and prevention to a claims process that delivers the best possible outcome for injured workers.
Debbie explains the value of working with Helmsman Management Services.
Helmsman, which provides claims management, managed care and risk control solutions for businesses with 50 employees or more, offers clients what it calls the Account Management Stewardship Program. The program coordinates the “right” resources within an organization and brings together all critical players – risk manager, safety and claims professionals, broker, account manager, etc. The program also frequently utilizes subject matter experts (pharma, networks, nurses, etc.) to help increase knowledge levels for risk and safety managers.
“The true goal here is to think about injured employees,” Michel said. “Everyone needs to focus on helping them get well, back to work and functioning at their best.
“At the same time, following a best practices approach can reduce overall comp costs, and help risk managers get a much better night’s sleep,” she said.
To learn more about how a third-party administrator like Helmsman Management Services LLC (a subsidiary of Liberty Mutual) can help manage your workers compensation costs, contact your broker.
Debbie discusses how Helmsman drives outcomes for risk managers.
Debbie explains how to manage medical outcomes.
Debbie discusses considerations when selecting a TPA.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Helmsman Management Services. The editorial staff of Risk & Insurance had no role in its preparation.