By Tom Starner
Knowing how to collect, slice and dice data has become crucial for today's successful risk managers. After all, without the right claims and risk exposure data -- and the technology to collect and mine it -- mounting and maintaining an effective management strategy can be difficult, if not impossible.
These days, the most successful risk managers are going beyond merely collecting and analyzing data. They also are figuring out how best to share that information across silos within the organization.
Perhaps most importantly, that ability and skill is the critical factor in attaining the proverbial "seat at the executive table." Those risk managers that have earned that coveted seat have found the most effective ways to present critical risk information to senior executives and board members, as well as business line managers across the enterprise.
In the end, many will tell you, success in risk management boils down to effectively communicating risk and what it means to the organization with colleagues on all levels -- above, below and beside them.
"Risk managers who can leverage data and communicate the information in meaningful ways help boards make better, faster decisions and add strategic value to an organization," said Philip Lucas, director, global product management, at Aon eSolutions. "For a clearer picture of the risks and to turn data into strategic, actionable information, risk managers need to communicate clearly to the CEO and senior management, and often the board as well."
As a key strategy to hit that mark, risk managers are leveraging new, emerging technologies -- from cloud computing to predictive analytics. Risk managers who do it well, Lucas said, either have already earned or will eventually earn that coveted seat at the executive table.
Tom Upchurch, director of risk management with Dr Pepper Snapple Group, which owns more than 50 beverage brands, logged time in the risk management information systems technology arena prior to becoming a practicing risk manager.
"Even before working with Snapple Group, I experienced the dynamic," Upchurch said. "For me, you can be your most effective through influence and persuasion. You need to be a consensus builder. That is, after you identify the right stakeholders, which can be a real challenge in a large organization."
Based in Plano, Texas, the company employs 19,000 people and operates 200 distribution centers and 22 bottling and manufacturing plants. Communicating and working closely with a myriad of touch points within the far-flung organization is key, he said.
Over the past year, risk management engaged with the operational leadership of the largest distribution and salesbusiness unit. The goal was to learn more about the challenges and obstacles faced in managing occupational injury claims, getting injured workers appropriate medical care, and calculating the cost impact of occupational injuries to the business.
By engaging with these leaders, Upchurch said risk management recognized that the business line had limited or no access to information about their losses, the treatment and recovery progress of their injured workers, or the data used to understand the cost of occupational injuries.
Feedback from these leaders about the value of this data, he said, combined with the quarterly claim reviews, has been overwhelmingly positive.
It has given managers a new awareness and the ability to influence loss frequency and severity, and it comes down to demonstrating how the data can be used to add value, control costs, prevent injuries and help management make the best possible business decisions.
"It is important to senior management and the board, but you can't take a traditional risk management approach," Upchurch said. "Factors such as report formats or terms such as incurred loss might mean a lot to us, but they do not have the same impact for senior management."
Moving down a level, communicating clearly can help all managers understand the true cost impact of risk.
"First and foremost for us it's about safety, protecting and driving a safety culture," Upchurch said. "There are a lot of benefits that come out of a safety culture. We want our people to feel safe and see the company is doing everything it can to deliver that type of workplace."
Angela Trygestad, director of insurance services at the Schwan Food Company, a privately held, multibillion-dollar company of 16,000 employees that manufactures and markets frozen foods through home-delivery, retail-grocery and food service channels, said that making the most of opportunities with top executives requires a highly focused approach.
"We have very limited time with senior management, and let's be honest, insurance-related items are not top of mind for them. They are just a piece of the puzzle," Trygestad said. "You need to present consistent information and do it quickly. It comes down to structure and consistency.
"Most of all, risk managers need to decode the language of insurance so it sounds, well, normal," she said.
Trygestad said that today's emerging technology tools provide ways to translate risk-related information into meaningful data with different audiences, something that was often difficult to achieve historically.
"We would love to engage more with business partners, but older systems did not allow it," she said. "Now, we are finding better ways to clean up data, and partner with other areas of the company."
She said that when it comes to presenting risk management data to and working with top management at the Marshall, Minn.-based company, risk managers need to be precise and succinct if they expect to get the respect they seek.
"They want to see a single piece of paper, and it has to be concise and easily understood," she said. "It has to mean the same thing to everyone. You can highlight five risks, and if you are not clear, they can mean something different to everyone in the room."
MATCHING TOOLS WITH NEED
Ron Carlson, risk managing information systems and process improvement manager for The Church of Jesus Christ of Latter-day Saints, in Salt Lake City, said in his risk management experience there generally had been a dearth of effective communication in the past.
But today, what the LDS church is trying to do with risk management is to develop robust communications, and most of all match emerging technology tools to a specific risk management need. In the case of communications, for example, risk management built email templates to communicate with attorneys when matters are open and closed, to communicate new reporting locations to the third-party administrator, and when changes are made to critical fields on a claim. Risk management also notifies management of serious claims through these email templates that are tied to configurable business rules in the risk management information system.
"It's an evolving process. C-level management may not always communicate clearly what they want, so most of all you have to manage expectations," Carlson said. "If you don't manage expectations, you will rarely meet them."
Carlson said the responsibility is on risk managers to invite feedback from top management and board members. For example, ask what they want measured and how to best present that data, with the hope being that they will be very specific. They might request only a clear, two-page summary, for instance, that clearly outlines the metrics that make a difference to them.
"It mainly comes down to risk appetite, the cost of doing business, and growth versus exceptions where corrective actions need to be identified," he said. "You have to have that communication with the higher management."
Bob Morrell, CEO at Marietta, Ga.-based Riskonnect, a provider of cloud-based enterprise-class technology for the risk management industry, said risk managers who want to deliver real value to their organizations and who covet that seat at the table, must communicate as effectively as possible.
magic of the single page
"There is little time to waste in today's business world," he said. "So you must use technology to get things done well, and as quickly as possible."
For example, Morrell said at one Riskonnect client, a global distribution company, the risk manager had to create a single page of critical insurance-related risk data for the CEO -- no easy task considering the risk manager had to pull data from several systems and sources. In the past, Morrell explained, it might have taken months to pull it all together. But in this case, the client, working with Riskonnect, was able to pull the data together for the presentation in five days.
"It used to be a nightmare, but now it's a single click-type situation," he said. "Executives will ask, 'How do you put this together?' When they tell their top management they ran it out of a single system, they are very impressed."
Jack Tatum, vice present of global business development at Riskonnect, said C-suite and board members often were frustrated because what they got from risk management was information and statistics on coverage limits, claims, the value of claims -- lingo they often do not understand.
"The CEO and CFO are very competitive with peer companies," Tatum said. "They don't want a lot of statistics they don't understand, they want to know how to they compare with peers. Do they have a competitive advantage or not?"
They don't want to hear about so-called soft savings, Tatum added. They want the information on a granular level as to what is driving loss costs, what the risk manager needs to spend, and what is the return on investment.
"Next, they want to see a new trend, one based on improving lost costs," he said.
Aon's Lucas said that at the highest levels within any organization, people need and want to see risk management data in a very visual, simplistic way.
Lucas suggested that whenever spending and the impact on the bottom line is in play, risk managers can use a financial statement format, which is very familiar to executives, to deliver key points.
"Don't just present some bulk number of claim losses for the past year," he said. "Use the formats they are used to looking at in the C-suite or the boardroom.
"However you do it, no matter what technology use, you need to show where risks are, show where you want to be, and then clearly demonstrate to top management how you intend to get from here to there," Lucas said. "That will be a major step toward a seat at the table."
TOM STARNER is a freelance writer who specializes in technology. He can be reached at email@example.com.
February 21, 2012
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