Creating New Approaches to Risk

Risk and Insurance Management Society (RIMS) president Deborah M. Luthi was an art teacher before she launched her longstanding risk management career, and she sees plenty of opportunity for creativity in risk management.

“The thing I like about risk management is the creativity of it,” she says. “I like coming up with solutions, and the problem-solving you do to assist organizations to meet their goals. It could have been that I wasn’t supposed to be an art teacher to begin with — I was really supposed to be a risk manager.”

Like an artist working on a masterpiece, Luthi sees the risk management canvas from two decidedly different perspectives.

On the one hand, she sees the narrow, detailed perspective. In this picture, risk managers strive to understand and master all of the details that make up an individual organization’s culture, structure and risk profile, with a view to determining the best possible way to protect an organization — including insurance product innovation.

The other is a broad perspective, in which risk managers combine all of their knowledge to promote new, creative strategies that facilitate informed risk-taking, thereby creating value for organizations.

Luthi certainly has a broad perspective on the practice of risk management, given her professional experience in each of the private, public and university sectors.

As an art teacher looking to make a career move in the summer of 1979, she called the HR manager at a Fortune 500 company where she’d temped the previous summer. The HR manager of AMFAC, a diversified company that started as a sugar plantation business in Hawaii in 1849, called her back and said: “Well, we need to hire somebody with insurance expertise, but until we find that person, come and just sit at the desk in the risk management department,” he said.

“My response was: ‘You have a mismanagement department?’” Luthi recalls. “And so a career was born.”

That career has spanned more than 30 years. After working for AMFAC for three and a half years, she moved on to another diversified Fortune 500 company, Natomas, that did business the fields of oil and gas drilling, shipping and real estate.

Diamond Shamrock in Dallas, Texas acquired the company seven months later, offering Luthi a job in their risk management department. The catch? Luthi would have to move with her husband and son to Dallas.

“I grew up in Kansas and once you’ve seen San Francisco, I don’t think you go back,” says Luthi. “So I did not accept that offer. Instead, I became the first risk manager for Sacramento Regional Transit.”

This was Luthi’s first stint in public service. The transit authority was building a light rail line to supplement its bus network. After three and a half years, once the project had completed its first phase, Luthi sought a different form of challenge. She found one in academe.

Luthi joined the University of California Davis Campus as a risk manager in 1987. “The Davis Campus is the third-largest campus in the University of California system and the largest in terms of acreage,” she said. “The campus had a law school, a vet school, a school of medicine and teaching hospital, a school of engineering, a graduate school of management and about 35,000 students. If I thought working for a Fortune 500 had lots of risk, a leading research university had even more so.”

The various challenges sustained Luthi for more than 21 years. After that, she got the bug to do risk management for a private enterprise once again. She moved to Matheson Inc., which offered trucking and environmental services, but the global financial crisis revealed the risk of working in private enterprise during economically challenging times. “I figured out then that the universe was really telling me that I needed to be in public service, and that’s when I became enterprise risk manager for the San Francisco Public Utilities Commission,” she says. The SFPUC provides retail drinking water and wastewater services to San Francisco, wholesale water to three Bay Area counties, including Silicon Valley, and green hydroelectric and solar power to San Francisco’s municipal departments.

Throughout her long professional career, Luthi volunteered for RIMS in a number of different capacities. Her mentor at AMFAC, Ralph Perry — whom Luthi describes as “one of the pioneers of risk management” — encouraged her to join RIMS.

Luthi became a board member for the local San Francisco Golden Gate Chapter. Then she moved to Sacramento, where a local RIMS chapter didn’t exist at the time. “I thought, ‘Well, I want to start a RIMS Chapter here,’” she says. “It was kind of a challenge because at that point, Sacramento, as a state capital, was really a governmental town, so I waited a couple of years and began to make contacts with other risk managers who were with for-profits. One of those individuals posed the idea that we co-found a chapter. He was really helpful in that regard. So in 1991, we started a chapter there, the Sacramento Valley chapter.”

At about that time, Luthi got a call from a colleague who was a chair of the RIMS membership and chapter services committee. Luthi joined the committee and after several years became the chair of that Society committee. “From there, I was involved in being on the Society’s strategic planning task force and the board of directors nominating committee,” Luthi says. “One thing led to the other, then I was asked to join the board. I’ve been a member of RIMS for more than 30 years and I’ve been on the board of directors for 11 years. As someone who was not born and raised a risk manager, I can’t say enough about RIMS and how it has provided resources and networking opportunities for me.”

Now that Luthi is president of RIMS, she sees risk managers facing emerging issues as diverse and varied as her professional background. She notes a recent RIMS survey reveals the top emerging issues of concern to risk managers include:

• the impact of economic stagnation on budget and earnings (top of the list, cited by 58% of respondents);

• cyber risk;

• regulatory preparedness;

• bridging the organizational talent gap; and

• failure to recognize the upside of risk.

“I think the survey tells us that the risks are all over the board and identifiable in all aspects of our business,” Luthi says. She believes that this speaks to the importance of risk managers taking a leadership role within their organizations. As an enterprise risk manager herself, Luthi encourages other risk managers to reach out to people within their organizations and to work with them to assist their businesses to first manage these risks in a holistic way. That means partnering with audit, compliance, IT security and HR departments, among others.

And with this collaboration comes what the art teacher in Luthi loves — creativity. Once these internal consultants have facilitated the management of these risks, then risk managers can also partner with insurers to help drive innovation in insurance products that will address the remaining residual risk.

“I think insurers are partnering with risk practitioners to get a better understanding of the risk so that [non-hazard risks] can in fact be underwritten; that an insurance product can be developed,” Luthi says. “One example is reputational risk: some carriers are now offering reputation insurance. That’s where that creativity piece is, working together to challenge ourselves and ask the question: ‘Can we create something new that hasn’t been there before?’”