ERM Roadblocks and Remedies
I recently had a conversation with a client, a traditional risk manager/insurance buyer, who was asked to take over the leadership of his company’s Enterprise Risk Management (ERM) program.
The program had been in place for a few years and there was excellent documentation of three tiers of risks, described and managed.
But company leaders were unsure about the program’s vitality and worth. The risk manager wanted help reviewing and reviving the program.
It’s not unusual for ERM programs to create a lot of buzz and energy in the formation stage. People like to jump into the risk management process of identifying, assessing, analyzing and evaluating risks.
The risk assessment process is energizing, with people thinking holistically about operations and talking about what’s working (and what’s not). If done well, more and more people become engaged in the process and a meaningful understanding of how to manage key risks is developed among a broad group of stakeholders.
If an organization can also apply the risk management process (risk assessment + treatment, monitoring and communication) to the consideration of opportunities and strategy, ERM can really pick up steam.
That’s when people start to understand the connection of risk as both an opportunity and threat to what matters most to the organization and its future.
A pause at three years (or even more often) is a healthy opportunity to review what you’ve built and how it’s working.
And then what happens? How can organizations sustain ERM efforts over time and retain that engagement and enthusiasm?
The first thing to understand is that typically, about three to four years in, there is a pause. One reason is the shift from the formation stage to the sustainability phase.
The vitality and energy that created the risk register dissipates, and people must shift their focus to ERM as an ongoing process and continual effort.
It’s also common at this time for people to question the value and outcomes of ERM and wonder: “Is this worth the effort?” or “Is our ERM program succeeding?”
If your organization hasn’t put enough thought into the creation of a sustainable, integrated framework for the overall management of risk, this pause may look like a potential roadblock and the questions, frightening.
The truth is that if you are following the model described in ISO 31000 (the international standard on the practice of risk management), you will be anticipating this. The continual review and improvement of your overall program is built into that model.
A pause at three years (or even more often) is a healthy opportunity to review what you’ve built and how it’s working. It gives you a chance to assess, alter and (if needed) re-energize efforts.
The goal is to ensure that risk management is effective and continues to support organizational performance. The review must take into account not only the risk register or the management of key risks, but also how risk management is integrated into organizational activities and decision making.
In my years as an ERM consultant and delegate to the international committee that created (and is now revising) ISO 31000, I’ve observed a number of common roadblocks and challenges to the implementation of ERM.
I look forward to sharing more of them, along with possible remedies and solutions, in future columns.
Cyber Checklist for Risk Managers
This article was written in conjunction with Christine Novotny, ARM, Manager, Risk and Insurance, PeaceHealth.
If the value of personal information makes us vulnerable, the value of health care information exponentially expands the bullseye. According to Reuters, medical records are worth up to 10 times more than credit card numbers on the black market.
As a health care organization, it is our responsibility to protect the integrity of our patient’s records, and we take this responsibility very seriously.
To help us break this threat apart into manageable steps we have created a checklist for the risk manager.
All too often the effort has been focused on preventing and managing massive cyber-attacks. However, it is critically important that we be mindful of the exposure the individual employee represents in our cyber security.
This could be the employee who inadvertently faxes data to the wrong person, leaves their computer unattended and at risk, or the employee who intentionally sets out to hurt the organization as a retaliatory measure. This is a real exposure that is often overlooked.
It’s important that you act in lock step with network security and organizational teams in order to detect, stop, and address the untoward event appropriately. Cyber threats can be overwhelming and a contributor to sleepless nights.
To help us break this threat apart into manageable steps we have created a checklist for the risk manager.
Checklist for Risk Managers
- Work with board and executive leadership to ensure support for cyber initiatives.
- Provide for strong data breach identification and management policies and procedures creating a zero tolerance culture for data breaches.
- Ensure that education and training occurs at all levels of the organization at least annually to include basic definitions, policy content and zero tolerance culture.
- Create a breach response team in partnership with Organizational Integrity, Finance, Legal, Risk, IT security, Human Resources, and Communications to ensure are all working together for immediate detection, response and action when a breach occurs.
- Negotiate a robust cyber insurance policy that has breach response, liability coverages, as well as coverage for regulatory actions, fines, and penalties.
- Create data breach preparedness planning opportunities.
- Leverage insurance carrier for education and loss prevention opportunities.
- Appreciate the regulatory landscape through education and training.
- Develop contracts with external partners including forensic firms, law firms, and public relations firms to assist during a large breach event.
- Train, test, revise, train, test, and revise!
The answer to many cyber threats is having the force of an integrated cyber security and breach response team as your shield.
The Doctor as Partner
Professionals helping employees return to work after being on disability or a leave of absence face many challenges. After all, there is a personal story behind each case and each case is unique.
In the end, the best outcome is an employee who returns to the job healthy and feeling well taken care of, while at the same time managing the associated claim costs.
Learn what most employers want from their group disability and life benefits program.
While many carriers and claims managers work toward these goals, in the end they often tend to focus on minimizing costs by aggressively managing claims to get the worker back on the job, or they “fast track” claims, approving everything and paying little attention to case management.
Aggressively managed claims can leave many employees and their doctors feeling defensive and ill-at-ease, creating an adversarial relationship that ultimately hinders return to work and results in higher direct and indirect employee benefit costs for the employer. Fast track or non-managed claims can lead to increased durations, costs and workforce productivity issues for employers.
Is it possible to provide a positive employee benefit experience while at the same time effectively managing disability and lowering an employer’s overall benefit costs?
A Unique Approach
Liberty Mutual Insurance’s approach to managing disability and absence management focuses on building consensus among all stakeholders – the disabled employee, treating physician, employer and insurer. And a key component of this process is a large team of consulting physician specialists, leading practitioners from a variety of specialties, highly regarded experts affiliated with leading medical universities across the country.
“About 16 years ago, our national medical director, Dr. Ed Crouch, proposed that if we worked with a core group of external consulting medical specialists – rather than sending most claims for Independent Medical Evaluations – we could do a better job making disabled employees and their attending physicians comfortable, and therefore true partners in producing better disability management outcomes and employee benefit experiences,” said Tim Kastrinelis, senior vice president, Distribution Partnerships at Liberty Mutual Benefits.
“In this way, our consulting physician and the attending physician are able to work with the disability case manager, the employee and the employer to deliver a coordinated, collaborative approach that facilitates a productive lifestyle and return to work.”
The result of Dr. Crouch’s initiative has produced positive results for the clients of Liberty Mutual Insurance. This consensus building approach to managing disability with consulting physician expertise has helped achieve industry leading client retention results over the past decade. In fact, 96 percent of Liberty Mutual’s group disability and group life clients renew their programs.
“By getting all stakeholders on the same page and investing heavily in consulting physician specialists, we have been able to lower claim costs and shortened claim duration for our group disability policyholders. …In the end, it’s a win-win for all.”
–Tim Kastrinelis, Senior Vice President, Distribution Partnerships, Liberty Mutual Benefits
A Collaborative Approach
In the case of complex disability medical health situations, Liberty Mutual’s disability case managers play a vital role in seeking additional expertise—an area where the industry’s standard has been to outsource the claimant for independent medical examinations.
However, Liberty Mutual empowers its disability case managers with the ultimate responsibility for the outcome of each claim. The claimant and the case manager stay together throughout the life of the claim. This relationship is the foundation for a collaborative approach that delivers a better employee benefit experience and enables the claimant to return to work sooner; which more effectively controls total disability claim and absence costs.
Sending a disabled employee with complex medical needs to an external specialist may sound like a cost-effective path, but it often comes at the cost of sacrificing the relationship and trust built between the employee and case manager. The disabled employee must explain their medical history to a new clinician, which he or she is often reluctant to do. The attending physician may be uncooperative as this move can appear to question his or her treatment plan for the employee.
As a result, the entire claims process takes on an adversarial atmosphere, building major roadblocks to the ultimate goal of helping the claimant return to a productive lifestyle.
Liberty Mutual takes a different approach. Nearly 100 physicians representing more than 30 medical specialties are available to consult with its medical and claims professionals, working side-by-side with case managers.
More than 95 percent of these consulting physicians are in active practice, and therefore up-to-date on the latest clinical best practices, treatment guidelines, therapies, medications, and programs. Most of these physicians are affiliated with leading medical universities across the country. “We recruit specialists from around the country, getting the best from such prestigious institutions as Harvard, Yale, and Duke,” said Kastrinelis.
These highly-credentialed physicians help case managers focus on providing the support needed for the disabled employee to successfully return to work as quickly as appropriate. Their collaborative work with the attending physicians provides the behind-the-scenes foundation that leads to a positive claimant experience, results in a better outcome for the claimant, and more effectively reduces total claim costs.
Coordinated Care Plan
When one of these consulting physicians reaches out to an attending physician, there’s an immediate degree of respect and high regard for his or her opinion. This helps pave the way to working together in the best interest of the employee, improving treatment plans and return to work results.
In this process, the claimant is not sent to yet another doctor; instead, the consulting specialist works with the attending physician to help fill in the gaps of knowledge or provide information that only a specialist would have. Although not an opportunity to direct care, these peer-to-peer discussions can help optimize care with the goal of helping the employee return to work.
The attending physician may have no knowledge of the challenges the employee faces in order to return to work. A return to work plan created in concert with the specialist, disability case manager, employer, and attending physician can set expectations and provide the framework for a proactive and effective return to a productive lifestyle.
“Our consulting physicians bring sophisticated medical expertise to the discussion, and help build consensus around a return-to-work plan, helping us more effectively impact a claim’s outcome and costs, and at the same time provide a better claimant experience,” said Kastrinelis.
“We can work more collaboratively with the attending physician, manage expectations, and shepherd the employee through the process much more effectively and in a much more high-touch, caring, and compassionate manner. Overall, we’re able to produce better outcomes as a result of this consensus building approach.”
“Our approach – including the use of consulting medical experts – helped us significantly reduce disability costs over two years for one large health service company,” notes Kastrinelis. “We cut average short-term disability claim durations by 4.2 days in that time, while increasing employee satisfaction with our unique disability management model and collaborative, partnership approach.
How did Liberty Mutual’s unique approach lower claim costs, reduce disability duration and improve the benefit experience for one customer?
“By getting all stakeholders on the same page and investing heavily in consulting physician specialists, we have been able to lower claim costs and shortened claim duration for our group disability policyholders,” said Kastrinelis.
“Plus, we, the employee, and the employer also get the bonus of creating a better employee benefit experience. This model has shaped our disability and absence management program to more aptly reflect our core mission of helping people live safer, more secure lives. In the end, it’s a win-win for all.”
How does Liberty Mutual provide a superior employee benefit experience?
Tim Kastrinelis can be reached at firstname.lastname@example.org. More information on Liberty Mutual’s group disability and absence management offerings can be seen at https://www.libertymutualgroup.com/business-insurance/business-insurance-coverages/employee-benefits.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.