Stretching the Role of Risk Management

Listening to Risk and Insurance Management Society (RIMS) vice president Terry Fleming, you get a sense of how his professional background and outlook reflect the evolution of the risk management discipline in North America.

Having come to risk management in a “traditional” way — starting to work first in the field of insurance and then ultimately finding his way into a career in risk management — Fleming’s professional background characterizes the historical evolution of the risk management discipline from an adjunct of insurance into a discipline in its own right.

Secondly, reflecting risk management’s current global outreach, Fleming’s personal experience is international in scope. A Canadian by birth, Fleming’s father worked for the Canadian External Affairs Department (as it was known at the time) in Ottawa, Ontario. His parents moved the family to the United States when he was in Grade 1. He is currently working towards his personal goal of obtaining dual citizenship in both Canada and the United States.

Finally, Fleming’s cast of mind is open to change. He makes no bones about his desire to see the risk management discipline stretch beyond its current frontiers.

“I think there’s a great opportunity to recognize risk management not only as a discipline to uncover and mitigate loss exposures, but as a vehicle to achieve positives in all of the silos of an organization,” Fleming says on the phone from Maryland. “That’s where I see risk management evolving.”

Fleming is the director of the division of risk management at Montgomery County, Maryland, a position he has held since 1988. Managing a staff of 12 employees, he is responsible for all aspects of the county’s US$100-million risk management program, including the purchase of insurance, risk financing, loss control, and management of the county’s self-insured property and casualty operation covering more than 50,000 employees, in a pool arrangement consisting of 13 public entity participants.

When Fleming talks about the future of the discipline, he recalls, although not by name, a commercial broker campaign launched a few years ago that encouraged risk managers to consider ‘The Upside of Risk.’

“‘All management is risk management,’ is what Douglas Barlow used to say,” Fleming says, adding that Barlow was the 18th president of RIMS and often referred to as the “founding father” of the risk management discipline. “When you think about it, there’s a positive and a negative to every decision that you make as a risk manager. You recognize the positive and attempt to magnify it.

“When you evaluate, for example, whether you should get into a new business relationship or [offer a] new product, there are opportunities for loss, obviously, but there are also opportunities for gain-sharing, new profits and new relationships across the world.

“It does stretch [the role of risk management]. But that’s our goal, to stretch the discipline… These are new opportunities for risk managers to become more of a player at the C-suite and board of directors’ level. I think that’s where risk managers belong.”

Fleming himself got into risk management by way of insurance claims adjusting, claims handling and loss control. He graduated from college with a wife, a child and a need for stability at a time when the Vietnam War was on. He had several opportunities available, and in 1969 he chose to capitalize on Liberty Mutual Insurance Company’s reputation for good training in handling insurance claims.

“Frankly, I feel lucky that I started in claims because when you think about what’s involved in an insurance claim, there are aspects of finance in reserves and payments, legal aspects and litigation, medical components and aspects of risk management [as well],” he said. “I think it was a good beginning.”

After several years of working for insurance companies, he caught on with a third party administrator (TPA) that handled worker’s compensation claims, mainly, but also some liability for a self-insured group. “There were a number of questions and issues that came up that were not really insurance issues, but they were safety issues, coverage issues, accident prevention issues and questions that employers had about how to recognize exposures to loss before they became issues. That experience really developed what eventually became my risk management skills.”

Fleming was eventually hired by one of his clients, Fairfax County Public Schools in Virginia, to be their risk manager. After about a year there, he moved to his current post in Maryland.

In a way, Fleming sees his route into risk management, via the route of insurance, as being inverted. The opportunity now exists to specialize in risk management first, and then, through the path of risk management, learn more about the insurance field.

For example, he observes that although he says he is practising risk management at Montgomery County, the structure of the department in which he works is really not unlike that of a modern-day insurance company. “In my organization, for example, I have a claims component,” he says. “We have a TPA that we work with. We do underwriting since we have a self-insurance pool set up here with 14 different entities that participate. There’s the budgeting and finance and actuarial pieces. I have an Occupational Safety and Health section. So just like a mini-insurance company, there are opportunities to bring [risk management] people in and teach them the [insurance and self-insurance] business.”

This is the opposite of what Fleming experienced in his becoming a risk manager. “When I started back in risk management, there were very few formal educational opportunities in risk management, per se,” Fleming says. “Those opportunities are more recognized, especially in the financial side of the business.”

The old adage about crisis leading to opportunity is particularly appropriate in the risk management field. Fleming notes the corporate governance issues precipitated by the meltdowns of WorldCom and Enron — followed by the subsequent financial issues that led to the bankruptcies or sales of venerable investment institutions such as Lehman Brothers and Merrill Lynch — have created a need for risk managers who know about financial issues.

“It’s evolved significantly,” Fleming said of the risk management field. “When we started out, the insurance buyers were considered risk managers. But risk managers have had to evolve — especially on the finance side, but also on the governance side, as crisis after crisis occurs in the market — and there are so many opportunities to mitigate exposure that we’ve had to evolve in order to stay relevant. And that’s going to continue. Risk modelling will never completely eliminate the human element of risk management.”

Many people before Fleming have described their involvement with RIMS as a family affair. For Fleming, his initial introduction to RIMS was quite literally a family affair. His wife Karen, who was a risk manager prior to Fleming’s becoming one, introduced him to RIMS. Once Fleming started working as a risk manager at Fairfax, he had the opportunity to make his mark as a member of RIMS in his own right.

Likely to become RIMS president in January 2010, Fleming is currently vice president of RIMS and serves as the board liaison to the RIMS finance committee. He has been a member of RIMS board of directors since 2004 and has served on RIMS conference programming committee and audit committee.