Risk Insider: Tony Boobier

New Riders of the Storm?

By: | March 26, 2015 • 3 min read
Tony Boobier holds a WW Executive role at IBM, focusing on solutions for Risk and Finance, and was previously IBM Insurance Analytics leader for EMEA. He can be reached at boobier@uk.ibm.com.
Topics: ERM | Risk Insider

I recently had the pleasure of talking to a large group of insurance risk experts about the transformation not only of their industry, but how they also will need to personally reinvent themselves.

It seemed to them that the so-called “nexus of forces” — cloud, analytics, mobile and social — were potentially so disruptive as to seem more like the Four Horsemen of the Apocalypse

Some of these new forces of change are easier to take on board than others. Almost all the audience had android devices, and they could understand how “mobile” allows business insight to be distributed much more effectively, and in a timely manner.

“Cloud” seemed to them to be more of a threat than an opportunity, but all recognised the need for greater agility and higher performance from their platform technology. The relatively new concept of the “hybrid cloud” approach allows both scalability and flexibility, without data going off premises or out of country, and in doing so appeared to tick many of the essential boxes.

Mention “social” and one immediately jumps to thinking about external social networks, but we equally need to consider internal communication networks.

“Analytics” was viewed as critical, and of course the risk industry is founded on complex analytics, but as we pushed the discussion further, the concept of cognitive analytics started to make them think more about how their roles would invariably change within the next decade, probably sooner.

But it was the fourth “nexus” that seemed to create the most curiosity, that of “social media.”

Mention “social” and one immediately jumps to thinking about external social networks, but we equally need to consider internal communication networks.

One of the key challenges for risk managers will be to change the organizational culture, and embed risk into each and every decision. This won’t be done by all the employees having a simultaneous “hallelujah” moment, but rather by careful planning and sustained effort, and effective use of internal communication probably delivered through an internal social media platform.

So it was rather worrying that, amongst the audience of nearly 200 risk professionals, the number of who were tweeting could be counted on two hands — and I’ve seen a similar trend at other risk events.

This is much lower than I’ve seen at events for other professions. Are risk professionals so risk averse as to be excessively wary of social media? If so, of the four apocalyptical horses, will the use of social media prove to be one of the more difficult ones to ride?

At the end of the day, we have a choice.  We can be victims of any or all of these four horsemen, and be trampled by them as we rush to escape from the inevitable. Or, we can learn to ride any or all of these stallions, and in doing so become masters of our destiny, and greater masters of our profession.

I know what I prefer, and what’s the best way forward … a “little bird” told me.

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Managing Risk

Advantages and Challenges of Risk Committees

Risk committees help identify risk, gather information, implement risk management programs and create risk-aware cultures.
By: | March 6, 2015 • 4 min read
Topics: ERM | RIMS
risk committee

Ever since the 2008 financial crisis, organizations across the country have been rethinking risk and how to manage it.

While many factors contributed to the crisis, not the least of them was a failure of the financial institutions at the center of the crisis to properly manage risk, which was aggravated by the growing complexity and velocity of the risks they were facing.

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The Dodd-Frank Act, written and passed to prevent a repeat of the conditions that led to the financial crisis, addressed this issue head on. Recognizing the role inadequate risk management played in precipitating the crisis, Dodd-Frank included new regulations that require publicly traded financial institutions (other than banks) to establish risk committees.

While these requirements only apply to certain national and international financial institutions, the wisdom of the risk committee provisions has been accepted more broadly, and risk committees have come to be accepted as a best practice across other industries, as well.

A new report by the Risk and Insurance Management Society (RIMS), “Exploring the Risk Committee Advantage,” examines the benefits and challenges of the risk committee concept, and describes different types of risk committees and important considerations regarding implementation.

John  Phelps, director of business risk solutions, Blue Cross and Blue Shield of Florida Inc.

John Phelps, director of business risk solutions, Blue Cross and Blue Shield of Florida Inc.

“The mistake a lot of enterprise risk managers make is designing their risk committee and then using it to design their program. It should be the other way around,” says John Phelps, a contributor to the report.

Before determining the appropriate type of risk committee, it is important to determine an organization’s risk management needs, said Phelps, who is director of business risk solutions for Blue Cross and Blue Shield of Florida Inc., and was 2013 RIMS president.

“Once you have decided on the program … then you should think about forming a risk committee as a way to facilitate it,” he said.

Risk-aware Culture

Risk committees offer a number of tangible benefits, such as helping organizations identify risk, gather information and implement risk management programs. But according to the report, one of the biggest benefits is creating “a more risk-aware culture throughout the organization.”

Report contributor and RIMS board member Gloria Brosius, director of risk management and insurance programs, Farm Credit Council Services Inc., said risk committees “make everyone in the organization a little more aware that risk management is everyone’s job.”

Risk committees can take a variety of forms, from board level, focusing on long-term strategic risk; to C-suite; to operational risk committees that focus on identifying exposures and developing and implementing risk control programs.

Brosius said that many organizations could incorporate some combination of the three. The best type for a given organization depends on that organization’s size and needs.

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Considerations like the number of the members and frequency of meetings are also dependent on the size and nature of the organization, but the report includes specific recommendations. Risk committees should ideally have eight to 12 members.

“If you have too few people you’re not going to be able to accomplish your goals,” said Brosius, “but if you have too many, it’s going to be counter productive.”

Best Practices

And while there is no consensus on the ideal frequency of risk committee meetings, the report recommended meeting more frequently at first. It also emphasized the importance of meetings being held in person.

Once the goals and configuration of the risk committee have been determined, it is important to define them, typically through a board-approved charter that spells out the committee’s purpose, focus and responsibilities, as well as specifics like meeting structure, schedule, and reporting requirements.

It is important to include enough flexibility that the committee isn’t unduly constrained, but Phelps added, “Having narrow expectations about reporting can add some teeth to what you are trying to do.”

Gloria Brosius, director of risk management and insurance programs, Farm Credit Council Services Inc.,

Gloria Brosius, director of risk management and insurance programs, Farm Credit Council Services Inc.,

The report is clear about the benefits of risk committees, but it also acknowledges the challenges.

Time constraints are always a concern. There is the potential for bias or skewed perceptions due to committee members’ individual backgrounds or the committee’s reporting structure. Junior members may feel inhibited from speaking freely in the presence of their superiors.

Perhaps the biggest challenge is getting adequate buy-in across the organization.

“Making something formal means you have to report on it, and it may require more administrative work as well as more work for those who are chosen to be on the risk committee,” said Brosius.

“They may be doing it informally now, but making it formal creates the illusion, if nothing else, of additional work.”

And it is crucial that the members understand the importance of the risk committee to the rest of their work.

“If they don’t see enterprise risk management and their role in it as integral to them achieving their area’s goals, then there is going to be a lot of apathy in the committee,” said Phelps.

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As companies increasingly move toward an enterprisewide approach to risk management, risk committees will become an increasingly important tool, but Phelps said it is important to remember that it is just that — a tool.

“An enterprise risk management committee is no good without a solid enterprise risk management program,” he said.

To download a copy of the report, visit www.rims.org.

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at riskletters@lrp.com.
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Sponsored: Lexington Insurance

What Is Insurance Innovation?

When it comes to E&S insurance, innovation is best defined as equal parts creativity and speed.
By: | March 2, 2015 • 4 min read

SponsoredContent_LexingtonTruly innovative insurance solutions are delivered in real time, as the needs of businesses change and the nature of risk evolves.

Lexington Insurance exemplifies this approach to innovation. Creative products driven by speed to market are at the core of the insurer’s culture, reputation and strategic direction, according to Matthew Power, executive vice president and head of strategic development at Lexington, an AIG Company and the leading U.S.-based surplus lines insurer.

“The excess and surplus lines sector is in a growth mode due, in no small part, to the speed at which our insureds’ underlying business models are changing,” Power said. “Tomorrow’s winning companies are those being built upon true breakthrough innovation, with a strong focus on agility and speed to market.”

To boost its innovation potential, for example, Lexington has launched a new crowdsourcing strategy. The company’s “Innovation Boot Camps” bring people together from the U.S., Canada, Bermuda and London in a series of engagements focused on identifying potential waves of change and market needs on the coverage horizon.

“Employees work in teams to determine how insurance can play a vital role in increasing the success odds of new markets and customers,” Power said. “That means anticipating needs and quickly delivering programs to meet them.”

An example: Working in tandem with the AIG Science team – another collaboration focused on innovation – Lexington is looking to offer an advanced high-tech seating system in the truck cabs of some of its long-haul trucking customers. The goal is to reduce driver injury and fatigue-based accidents.

SponsoredContent_Lexington“Our professionals serving the healthcare market average more than twenty years of industry experience. That includes attorneys and clinicians combining in a defense-oriented claims approach and collaborating with insureds in this fast-moving market segment. At Lexington, our relentless focus on innovation enables us to take on the risk so our clients can take on the opportunities.”
— Matthew Power, Executive Vice President and Head of Regional Development, Lexington Insurance Company

Power explained that exciting growth areas such as robotics, nanotechnology and driverless cars, among others, require highly customized commercial insurance solutions that often can be delivered only by excess and surplus lines underwriters.

“Being non-admitted, our freedom of rate and form allows us to be nimble, and that’s very important to our clients,” he said. “We have an established track record of reacting quickly to trends and market needs.”

Lexington is a leading provider of personal lines coverage for the excess and surplus lines industry and, as Power explains, the company’s suite of product offerings has continued to evolve in the wake of changing customer needs. “Our personal lines team has developed a robust product offering that considers issues like sustainable building, energy efficiency, and cyber liability.”

Most recently the company launched Evacuation Response, a specialty coverage designed to reimburse Lexington personal lines customers for costs associated with government mandated evacuations. “These evacuation scenarios have becoming increasingly commonplace in the wake of recent extreme weather events, and this coverage protects insured families against the associated costs of transportation and temporary housing.

The company also has followed the emerging cap and trade legislation in California, which has created an active carbon trading market throughout the state. “Our new Carbon ODS product provides real property protection for sequestered ozone depleting substances, while our CarbonCover Design Confirm product insures those engineering firms actively verifying and valuing active trades.” Lexington has also begun to insure new Carbon Registries as they are established in markets across the country.

Lexington has also developed a number of new product offerings within the Healthcare space. The Affordable Care Act has brought an increased focus on the continuum of care and clinical patient safety. In response, Lexington has created special programs for a wide range of entities, as the fast-changing healthcare industry includes a range of specialized services, including home healthcare, imaging centers (X-ray, MRI, PET–CT scans), EMT/ambulances, medical laboratories, outpatient primary care/urgent care centers, ambulatory surgery centers and Medical rehabilitation facilities.

“The excess and surplus lines sector is in growth mode due, in no small part, to the speed at which our insureds’ underlying business models are changing,” Power said.

Apart from its coverage flexibility, Lexington offers this segment monthly webcasts, bi-monthly conference calls and newsletters on key risk issues and educational topics. It also provides on-site risk consultation (for qualifying accounts), access to RiskTool, Lexington’s web-based healthcare risk management and patient safety resource, and a technical staff consisting of more than 60 members dedicated solely to healthcare-related claims.

“Our professionals serving the healthcare market average more than twenty years of industry experience,” Power said. “That includes attorneys and clinicians combining in a defense-oriented claims approach and collaborating with insureds in this fast-moving market segment.”

Power concluded, “At Lexington, our relentless focus on innovation enables us to take on the risk so our clients can take on the opportunities.”
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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.




Lexington Insurance Company, an AIG Company, is the leading U.S.-based surplus lines insurer.
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