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Canadians revel in a risk management renaissance.

by Alice H. Oshins The Renaissance in Europe was a time of vigorous artistic and intellectual activity when au fields of endeavor were re-examined and reborn. Today, something similar is happening in the field of risk management whereby past accomplishments and future challenges are being rethought and reconsidered. That's why this year's RIMS Canadian conference in Edmonton on September 22-25, "Risk Management Renaissance ... Advancing the Art," focused on the themes of a risk management renaissance.

"Most risk managers agree on the desirability of a renaissance for the profession," said H. Wayne Snider, professor emeritus at Temple University in Pennsylvania. "Risk managers have come to the unanimous conclusion that they want to see themselves with an expanded role and greater opportunities for the future."

Indeed, in keeping with the theme of a Renaissance, the conference chairman, John Grunde, risk manager at the Edmonton-based Teleus Corp., said: "We're trying to discuss the issues for today and tomorrow. Our objective is to look at the rebirth of the risk management profession."

All the conference speakers voiced diverse opinions on how risk managers can do their jobs better, and, in turn, get greater recognition from executive management. One of the ways they can achieve these goals is through education, explained RIMS President Bob Esenberg. "Risk managers are facing enormous change. And the best way to deal with that change is through education," he said. "Conferences such as this exemplify the high quality of education that RIMS chapters provide in order for risk managers to seize expanding and changing opportunities."

Risk management education should be directed at business schools, Mr. Snider said, and an effort should be made to include risk management in general management and human resource management textbooks. Other aspects of an education program, Mr. Snider said, would be for risk managers to broaden their financial skills and to educate senior management on the importance of aspects of actively managing risk.

"Because new risks are created every time there is a change in the company's organization, risk management is destined to emerge as an essential corporate function," Mr. Snider said.

The dilemma, however, is that while risk management is essentially concerned with the survival of the organization, few risk managers actually have direct access to the chief executive officer, said Ward Ching, senior consultant with Tillinghast in Irvine, CA.

For risk management to be considered a senior position in the corporation, a new "risk management process" must be formed, Mr. Ching said. "The old techniques do not give new decision-makers tools to make decisions. There has been too much emphasis on property/ liability exposures, and not enough on products and survival-oriented risk management," he said.

Theoretically, the true risk manager of the corporation is the CEO because he or she ultimately has fiduciary responsibility, Mr. Ching said. In this light, risk managers should take the position that all risks pose a threat to the organization's profitability and survival, and risk financing can be an opportunity to contribute to the bottom line. This way of thinking, Mr. Ching said, will prompt others in the organization to see risk management as a profit center with return on equity and demonstrated intrinsic value.

David Warren, a risk management consultant in Orinda, CA, said risk management in its truest form is management's taking a comprehensive and realistic view of the organization. "Since changes in the business world come so quickly today, the risk manager is always considering what types of risk he or she should address," he said.

Douglas Barlow, former risk manager for Massey-Ferguson Inc., said his view is that the Darwinian rules apply to risk management. "If risk management evolves to better things, it is because it has proven its survival value," he explained. "The test of survival value in a corporation is the opinion of the CEO."

Canadian Challenges

Christopher Markwell, senior vice president of insurance at Royal Bank of Canada in Montreal, said one of the challenges risk managers face is choosing between more products when there will be less distinction between "the four pillars to the financial services industry: banks, insurance companies, trust companies and investment dealers." Trust companies and insurers, he said, have already moved into the banks' domain by taking deposits and getting involved in commercial lending. In addition, investment dealers have started to pay interest on the cash balances of their customers.

Mr. Markwell said new legislation before the Canadian government will augment cross-ownership and diversification powers for banks, insurance companies and trust companies. Although it gives banks greater opportunities in insurance, he said, it also disallows them from participating in the retailing and networking of insurance products.

Canada has a sophisticated insurance market and is an important player in the the global scene, said Brian Johnston, CEO and president, CIGNA Insurance Co. of Canada in Toronto. "A global economy is not in the concept stage; it's a reality," he said, adding that cross-border capital flow has boosted demand for commercial insurance.

With an increased emphasis on financial services and global trade relations, insurers must maintain a strong local presence, be cost efficient and deliver products that meet customers' needs to remain competitive in the world economy.

Faced with greater challenges and more volatile risks, how does the risk manager combine all the elements-loss control, safety, and the environment-into an effective, total risk management program? Experts agree that the best approach is a team approach. The advantages of the team approach are efficiency, lower costs, timeliness, no duplicity, credibility, improved communications and more underwriter awareness, according to Paul Gray, manager for risk, safety, environment and regulatory affairs for the Kanata, Ontario-based Nordion International Inc.

The conference also featured the presentation of the Donald W. Stuart Award to Gary Vamplew, manager of insurance and risk management for the Province of Ontario based in Toronto. The award is given annually to a Canadian risk manager for extraordinary contribution to the field of risk management. In addition, Nancy Chambers, insurance assistant at the University of Guelph in Ontario, received the Canadian Education Award for achieving the highest grade point average this year on exams leading to the CRM designation. Text, Lies and Videotape Within the context of risk management, "texts" are the reports and strategic plans, "lies" are the misconceptions on the part of employees at various levels of an organization, and videotape" is the meeting of operations people and taking the risk manager's show on the road, says Bernard Fung, global managing director of Anistics Ltd. in Toronto.

In today's corporate structure, risk managers are obliged to act more like professional business communicators than ever before. Like communications specialists, they must "daily defend their right to exist ... and they must meet the challenge of making a hazardous spill look like a public service," Mr. Fung said.

Other similarities between the risk manager and the business communicator are the lack of understanding and appreciation of their value to their organization and the perception that their department is strictly a cost center. Yet, both positions must represent the company under dire conditions and require technical and political skills for survival.

"Risk management is a changing and increasingly pervasive discipline, due to increasing regulation, the global economy, health and safety concerns, among other factors," Mr. Fung explained. "There is a trend toward a client-centered approach in order to sell risk management, and if it is to succeed, risk management must be practiced throughout the entire organization."

Perhaps the most important fact which needs to be communicated is that risk management is not synonymous with insurance. What should be communicated are general practices and principles based on strategies that are consistent with corporate mission and objectives, such as enhancing operating results to benefit shareholders.

With whom must the risk manager communicate? The board of directors, senior management, operational management, other employees, financial institutions and the community-at-large are all important audiences for the risk manager, according to Mr. Fung.

Meeting the Board

Hal Wyatt, retired vice chairman of the Royal Bank of Canada, stressed the value of risk managers in communicating with the audit committee of their company's board of directors.

"It should not be difficult to gain the interest and support of directors on the importance of risk management in enhancing and protecting a company's financial well-being," he said. "Directors should be provided with an evaluation of the company's risk management and insurance programs that includes costs and funding options."

How then can risk managers get their message across within their companies and into the minds of the board of directors? Mr. Wyatt noted that in many companies, the risk manager's reporting relationship shields him or her from direct contact with the board of directors, such as when the risk manager reports to the corporate secretary or the chief financial officer.

Yet despite this reporting relationship, the risk manager should stress the importance of direct contact with the board because of the serious issues involved in the financial well-being of the company.

Mr. Wyatt said the audit committee should be more involved in risk identification to locate exposures that could seriously impair resources, risk evaluation based on past and future losses, risk control to eliminate hazards and improve safety as well as risk financing to ensure sufficient funds are there to meet any loss situation.-AHO
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Title Annotation:includes related articles on the importance of measuring the cost of risk and risk management techniques
Author:Oshins, Alice H.
Publication:Risk Management
Date:Nov 1, 1991
Previous Article:Electromagnetic fields and their effects on our lives.
Next Article:RIMS Conference promises new approach to issues.

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