By TOM STARNER, who writes about technology.
Meet Jeff Gehrke, one of a newly emerging breed of risk managers. He faces the challenge of ensuring the safety of children in about 1,000 schools across the United States.
As vice president for risk management at the Learning Care Group Inc., a for-profit learning company based in Novi, Mich., Gehrke also must help senior management reduce costs and make strategic decisions that can ensure successful long-term growth and sound planning.
Gehrke answers to the needs of two very different constituencies: a group of very young clients scattered across the country and senior managers with an eye on bottom-line efficiencies.
Prior to arriving at Learning Care Group, which operates schools for kids from six months to 13 years old, in 2009, there was no risk management information system in play at all.
Learning Care Group managed its risks without the software programs, which are today considered a critical component of managing corporate risk.
Gehrke quickly realized the company needed better technology to generate the best possible risk management outcomes. With a profit-centered company, he had to make a strong business case first.
"We had so many different data sources from which we were pulling information that it was very difficult to do any sort of meaningful reporting on a timely basis to underwriters or to company management," Gehrke said. "Claims were coming from as many as nine different insurance carriers and third-party administrators (TPAs) data systems as well as state workers' compensation funds."
He's not alone. More risk managers are trading in the persona of safety expert/insurance buyer and transforming themselves into a bona fide value-producing, strategic member of the management team. In a stagnant weak economy, they have to.
They are doing so by embracing emerging risk management technology that, when used effectively, can earn them a seat at the table within the top of their respective organizations.
What was sufficient four or five years ago from a risk manager isn't enough anymore, said Bob Morrell, president and CEO of Riskonnect, a risk management software and platform provider in Marietta, Ga.
"There are still risk managers out there doing the basics, and that may be fine for their situations," he said. "But there also is a large and growing chunk of the market that needs and wants to do more."
"Increasingly, risk managers are asked to be part of new client accounts and strategies, and chief risk officers -- a growing top management position -- are sitting on boards," said Neil Smith, emerging risks and research manager within the exposure management team at Lloyd's. "That is a relatively new development."
With newer, more innovative risk management information system options, Smith said, collecting and acting on data to focus on "upside risk" is given a more systematic, effective path, as the latest technology helps risk managers to get there more quickly.
"It's changing as we speak," he said. "From a RMIS technology standpoint, we have not reached the end point by any means."
Gehrke needed to be able to consolidate data from all these sources in order to compare information between states, between years, between operational areas of the company. "We didn't have the ability to do that very effectively with our existing system," he said.
His answer was to use a system provided by Aon eSolutions. The product, sold under the brand RiskConsole but known internally as DataStar within Learning Care Group, converts data into information in a way that would tell a story all on its own, a story that would enable managers and employees to act.
When Gehrke went to his manager, Chief Financial Officer Robert VanHees, to discuss a risk management technology addition, the reaction was positive, but VanHees challenged Gehrke to pay for the cost of a system with savings the system could generate immediately, either through fewer claims, or through premium reductions, or both.
It came as no surprise that everyone in the company was interested in a new system. During the selection process there was a representative from each department with an interest in what the product could do for each of them. There was also a demonstration of how the technology could be built across the entire company, expanding the risk manager's role in terms of overall strategy and impact.
"Everyone had a seat at the table and a vote in the final selection decision," Gehrke said. No less then nine representatives from within the company had a stake in the new system.
Apart from reducing costs, Gehrke and his risk management team have been lengthening their view of value and return on investment. They are taking a "long view." To that end, one of Gehrke's goals is establishing a holistic approach, or "one version of the truth" related to the company's risk and insurance information.
"This is a perfect example of taking the platform and making it configurable and delivering an expanded view of how to manage risk," said Phillip Lucas, director of global product management for Aon eSolutions. "Within RiskConsole, Jeff has worked with solutions, and is getting ready to go on to business intelligence as well, which will further extend his ability to tell the story about what is driving risk within the organization."
Gehrke might look at the cost of insuring each school at the per-school level, breaking it down by fire or by flood risk, or even by demographic risk, Lucas said.
It's the kind of data that could be used to help Gehrke and his company push into new markets, and an example of how the risk management information system can develop "upside risk" options.
"We're not doing it right now, but it's certainly a strong possibility," Gehrke said.
This new breed of effective, innovative risk managers, in fact, provides wide-ranging strategic influence in an organization. Often, they offer a strong voice in company growth objectives, while simultaneously leading enterprise risk management efforts.
Linsey Elliott, project manager for risk management at DHL Global Business Services in Westerville, Ohio, said her company has had risk management technology systems in place, but it recently began consolidating data into a single system where it can house all claims, exposures, policy information, and link all the data silos.
"Risk management here has greater visibility because we have much more data at our fingertips now," Elliott said. "With the press of a button we get executive summary snapshots, which our senior management needs. We also are creating efficiencies within our entire organization.
"Our RMIS technology, which keeps getting easier to use and more powerful, is giving risk management a real foothold within the organization," she said. "We have streamlined and migrated to the latest and greatest technology and gained visibility and respect of our business line partners. We are able to provide them with information and trends out there and help make strategic recommendations."
In fact, Elliott said risk management is consulted on nearly every major contract and large-scale business transaction, whether it involves new business or renewals.
"Having the data at our fingertips can make for a quick, educated business decision," she said. "The better we get, the more credibility we gain, and the more often they will come to you for advice when making a strategic business decision."
The new solutions allow managers to take an enterprise risk management approach, and to look beyond the typical financial concerns of the past, said Bill Diaz, president and CEO of Chicago-based CS Stars LLC.
Morrell of Riskonnect calls it "hitting the critical issues dead on."
As the definition of risk continues to broaden, and risk managers on the leading edge are going beyond claims management and looking more holistically at risk.
"We see many risk managers suffering because they are using technology for only five to ten percent of what they do," Morrell said. "They want to do more and they can if given the chance."
Gehrke got his chance and took advantage of his company's new-found focus on risk management. He's now much more than insurance buyer and safety expert, as a result.
"Our safety manager and I had an hour with our CEO, COO and CFO regarding a safety-related issue, and we used the data we have from DataStar to identify solutions, sort them and then build a strategy to fix an issue," he said.
"Before DataStar, we could not have told that story. This time, we had little trouble getting their attention.
"Each new generation of RMIS software gives added'color' to the story," Gehrke said. "And that can translate into a significant opportunity to contribute to business strategy, which goes well beyond the typical risk management role."
August 1, 2011
Copyright 2011© LRP Publications