Risky Business

As John Phelps approaches his fifth decade in the insurance and risk business, he wants to ensure that Risk and Insurance Management Society Inc. (RIMS) is prepared to bring younger professionals into the field and into the senior ranks.

“The pipeline of professional risk managers that are going to replace me and people like me when I retire… they are the future of this discipline,” says Phelps, who was appointed RIMS president on January 1, 2013. “I want to make sure, when I leave this year, that we have structures in place that will assure us that we have a strong pipeline that will assure the future of this discipline for many years to come,” he adds.

Giving young professionals opportunities for networking and mentoring is one area that Phelps has asked RIMS staff to make a focus. Beyond the new blood, he has also asked RIMS executives to look beyond and to concentrate on improving its “international reach.”

“We are increasing that footprint either in chapters or in services as we support risk professionals around the globe in more than 125 countries,” he says, noting the addition of the newest chapters – the Melbourne-based Australasia chapter and the Lima-based Peru chapter – were “great accomplishments” for RIMS over the last year.

Founded in 1950, RIMS has more than 11,000-plus members. As of April, when the non-profit organization held its annual conference and expo in Los Angeles, RIMS had 82 chapters in 60 countries, including 10 chapters in Canada, where RIMS has scheduled another conference in early October. For its part, the upcoming RIMS Canada conference in Victoria will feature Canadian astronaut Chris Hadfield as a keynote speaker.

ROAD TO RISK

This is not the first time Phelps has served as president – he was president of RIMS’ North Florida chapter, one of 68 in the United States, in 1999, and has been on the RIMS Board of Directors since 2003. He was chair of the RIMS enterprise risk management development committee from 2004 until 2007, and before becoming president earlier this year, was vice president and board liaison to the external affairs committee and RIMS Canada Council.

By day, Phelps is the director of business risk solutions at Blue Cross and Blue Shield of Florida Inc. in Jacksonville, the health insurance provider known by its trade name, Florida Blue. He spent three years with Blue Cross and Blue Shield in Rochester, New York, before joining Florida Blue 23 years ago.

What led Phelps to pursue a career in insurance? He says he was inspired by his grandfather. “I always thought it was an industry that provided well for the family, and was the kind of activity where people liked to see him,” Phelps says of his grandfather. “So I decided to pursue an insurance career at an early age.”

After graduating with a business degree from the Rochester Institute of Technology, Phelps began his insurance career in 1974 as a commercial account analyst with The Travelers Companies Inc. He stayed there for three years before being hired by an agent with whom he had worked at Travelers.

Phelps spent the next 10 years in the brokerage industry, but decided to move into risk management after becoming frustrated with what he perceived as a narrow focus on insurance as a solution to risk. “I knew there was a lot more that could be brought to bear on a risk than just the application of insurance, so I went into risk management with Blue Cross and Blue Shield.”

Insurance cannot always be a “total solution” to a risk, he suggests, because insurance policies have exclusions and conditions. “I found myself many times recommending not to purchase insurance, to self-fund a risk, because it was a better application of their assets,” Phelps reports. “I wanted to look at a client’s needs holistically and see insurance as one tool in the toolbox rather than the toolbox itself,” he adds.

At Florida Blue, he works on business continuity management, emergency response and the firm’s enterprise risk management (ERM) program.

When Phelps started implementing the program, many people referred to ERM as a fad, he recalls. “I think it’s pretty obvious this is not a fad,” he says. “This is a new way of thinking about and understanding risk to create advantage at a company,” says Phelps. “That’s something they want to have as… part of how they do business every day.”

There are more regulations “requiring enterprise risk management-like features,” suggests Phelps, pointing to the Risk Management and Own Risk and Solvency Assessment (ORSA) Model Act published by the National Association of Insurance Commissioners. “Corporate America has more of an understanding of what enterprise risk management is, and an appreciation of the benefits it can generate,” Phelps says.

DEVELOPING ISSUES

Because Florida Blue deals with confidential patient records, computer security is one major priority, he says. “We have a lot of restrictions in how we behave and what we can do with our data and our devices. For example, I cannot take a thumb drive and put it into a company computer. It has to go through a process to be cleansed and inspected before it can be used, and then it has to be encrypted,” Phelps notes.

It is a risk that is on the minds of many. “Who on earth does not have a very significant cyber risk?” Phelps asks, adding that the issue is “pretty high on everybody’s attention list, especially the C-Suite because of the incredible damage that can be done to a company’s physical assets and their reputation just with the click of a mouse.”

It is also a developing area. “A lot of the cyber products are broadening coverage to pick up some of the new exposures so that’s one area of insurance where we’re seeing a lot more development,” Phelps says.

In Canada, he suggests the increase in petroleum production is changing the risk landscape, alluding to the July 6 train derailment and explosion in Lac-Mégantic, Quebec that claimed more than 40 lives. Canada’s tremendous increase in oil production and the risks associated with moving that oil are “bound to have a constricting effect upon the availability of coverage for those exposures,” he adds.

STRENGTHENING THE RANKS

In an effort to support educational opportunities in Canada for budding risk managers, RIMS last April donated $30,000 to the William H. McGannon Foundation, which is accepting applications for scholarships in Canada from students majoring or minoring in a risk management or insurance discipline and who have a career objective in risk management.

Phelps suggests that risk managers need to reach out to professionals in other fields – such as audit, finance and business continuity – and encourage them to consider getting into a risk management organization.

“We’re also encouraging (RIMS) chapters to reach out to these young professionals,” he says. “Look for ways to engage them from companies in their chapter area. Invite them to chapter meetings and allow them to come for free. Pick them up at their business, bring them to a chapter meeting. Get them engaged.”