RIMS CONFERENCE 2001: ON THE WORLDSTAGE

“We stand on the verge of an incredible opportunity.” With these words, incoming Risk and Insurance Management Society president David Mair opened the society’s 2001 conference in Atlanta. The opportunity, he says, comes from the changing insurance market, and the changing role of risk management on the corporate landscape. As hardening insurance rates create new challenges to risk managers’ creativity, the profession is also working in a more complex technological environment that is taking on an increasingly global perspective. The society plans to respond, Mair says, by increasing its presence to keep pace with these new demands.

Atlanta, Georgia welcomed the world in 1996 when it hosted the Summer Olympics. Step forward five years to April 2001 – the city once again opened its arms to an ever-expanding international gathering, the Risk and Insurance Management Society’s (RIMS) annual conference.

While the RIMS annual conference has long been a North American professional gathering, the association used this year’s event as a launch pad for its global ambitions. The first “international step” was announced at this year’s conference with the creation of a new risk management chapter based in Japan. The expansion is a sign of the growth of the profession’s profile and the society’s brand internationally, notes new RIMS president David Mair. “Others are seeking us out.”

“We must strengthen our influence and leadership on the international front,” agrees immediate past president Roger Andrews. The society needs to be more “relevant and inclusive”, including further development outside North America, for which the Japan chapter is a foundation.

Far East connection

“It is our first chapter outside North America, but not our last,” hopes Canadian risk manager Sue Meltzer, who is also a former RIMS president and now the society’s delegate to the International Federation of Risk and Insurance Management Associations (IFRIMA). She sees Japan as a fitting starting point for this growth. While some countries have structured risk management associations of their own, “risk management continues to be an emerging field in Japan…it’s a place where we could do some good”.

The goal will be to “jump start” the profession of risk management within corporations. Meltzer notes that many Japanese companies that operate in North America will have a risk manager here, but not one at the head office in Japan. She adds that it was the desire of people like Yutaka Maekawa, a former professor and now head of a consulting group in Japan, which brought about the chapter’s creation. “They wanted us.”

Maekawa will be a driving force in the new chapter, and will spearhead the growth of membership benefits, including education, there. The chapter will act as an “all-in-one” organization that can give similar programs across the country. The first meetings are set for the fall in Tokyo and Osaka.

World vision

Risk managers at home and around the world need to think more globally. This was the message of a survey released by the Chubb Group of Insurance Companies at the RIMS conference. Despite the growth in international activity and hence of international risks for many companies, they survey finds that risk managers continue to focus on domestic issues. They survey, which included both Canadian and U.S. respondents, found that while many companies are doing business across borders, little attention was being paid to risks such as currency, kidnap/ransom and economic/political instability.

Speaking in terms of the Canadian corporate environment, Perry Brazeau, senior vice president and Canadian division manager for FM Global, notes that merger and acquisition activity, especially across borders, is a definite trend. The sale of Canadian companies, which are “a cheap buy” right now, is changing the way risk managers have to think. “A lot [of risk managers] are dealing in countries they wouldn’t have dreamed of,” he says. This puts a special emphasis on insurers to work with clients to tackle international risks, he adds.

As such, Brazeau believes that similar m&a activity in the insurance industry could pose a problem for risk managers, who may face limited choice or even conflict of interest issues, such as those that have been experienced in the U.K.

Tightening the belt

Consolidation of insurers is clearly not the only issue facing risk managers. As evidenced by RIMS’ 2000 “Cost of Risk” survey, the tightening insurance market is a prime concern for the profession.

Brazeau points out, “after a decade of rate reductions and coverage expansions” the market is definitely turning. While we are still at the “front end” of this turn, he sees many insurers not only increasing rates but also putting “significant limits or deductibles in place”. While he does not favor the broadbrush application of strict limits, proper pricing is needed. The industry has too long relied on investment income to recoup the losses resulting from inadequate rates. “With the uncertainty for the [investment] market in 2001, it’s got to come from the rate side.”

“The good news is, it’s not going to be like it was back in the 1908s. The industry learned a lesson because people went into alternative markets [such as captives],” Brazeau says. In this respect, he predicts a more “orderly” approach will take place, and says the onus is on insurers to better understand and assess risks, particularly financial risks. Insurers need to work with risk managers to understand supply chains and revenue flow in their operations, and to pinpoint “where it [revenue] can bottleneck”.

Online risk/reward

Understanding financial risks is particularly difficult in the e-commerce age, Brazeau admits. Insurers are trying to create new covers with little historical data to understand the underwriting of these new risks. But the problem will have to be tackled, he says, as corporations, both insurers and their clients, integrate e-commerce into their everyday business processes.

In light of this, RIMS has launched a new online portal, askrims.org, which the society says is the first risk management search engine. Among the features will also be email, chat rooms, a member directory and chapter websites. The Quebec chapter was singled out during the conference as the first bilingual chapter site. RIMS is also looking at data standards for risk management forms, working with ACORD, the U.S. insurance technology arm. The standards will be based on XML, explains Jack Hampton, RIMS executive director. The result should allow for standard fields of data entry on incident reports, claims forms, and the like, and should provide an accurate, easily transmitted, single-entry system that can also generate reports. “Enormous efficiency is the outcome if this is done correctly.” But, Hampton also says that the project will take a great deal of time and effort to complete. “It’s a complex task.”

Good fellows?

One RIMS project that is ready to roll out is its RIMS “Fellow” designation. Based on the Canadian-born “Fellow of Risk Management” program, the new designation is moving more toward “the mainstream of executive education”, says Hampton. Interactive, activity-based workshops will be added to the curriculum, and continuing education requirements, including RIMS chapter participation, will be clearly spelled out. “RIMS is shifting its educational philosophy,” Hampton maintains, an idea he says comes from the Canadian tradition of “a strong recognition that risk managers really are professionals”.

Risk management is “not an entry-level position, you have to have knowledge of the business of risk management”. Part of Hampton’s mandate is to see that the new designation is “accessible and affordable”, including to Canadian members, who should see local content and local delivery of course material.

The push for the designation outside of Canada is a response to the changing role of risk managers. Brazeau notes that some “very vocal risk managers” have been raising the profile of the profession within corporations, including the creation of titles such as chief ri sk officer. He sees the pendulum swinging in their favor.

Hampton agrees that risk managers need to continue to exert themselves on the corporate landscape, and to communicate to senior management the role risk managers can play in reducing financial losses. The society as well has a role, he says, in promoting risk management as “a unique and critical organizational activity”.