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Overseas conferences give RM global color.

Overseas Conferences Give RM Global Color

Shortly before 1988 drew to a close, two major risk management events occurred in the Pacific Rim. Both brought to light the global nature of risk management and gave credence to the goal RIMS and other founders had in creating a federation of risk management associations in 1984.

Called the International Federation of Risk and Insurance Management Associations (IFRIMA), the goal is simply to encourage the practice of risk management worldwide. Conferences like those in Brisbane, Australia, in late October, and Singapore in early November "promote and further the exchange of risk management materials and information among members of the federation." Conferences also serve other purposes of the federation, including promoting educational programs, making known needs and viewpoints, aiding in establishing and maintaining a competitive insurance market with adequate regulatory controls to ensure long-term stability, and cooperating with other professional societies and organizations.

Both conferences, via open communications, demonstrated these goals and purposes. Equally important, both conferences received public recognition from local government officials. The Lord Mayor of the City of Brisbane, Alderman Sallyanne Atkinson, keynoted the IFRIMA conference which was hosted by the Association of Risk and Insurance Managers of Australia (ARIMA).

Brisbane, which hosted 18 million visitors to Expo '88 between April and October, moved into a risk management mode during the year. It developed a centralized, computerized claims management system, and is drafting a risk management policy statement. Its fleet of ferryboats and 3,000 motor vehicles is self-insured. The city is now looking to further "reduce unnecessary 'dollar swapping' with underwriters," according to Alderman Atkinson.

Recruitment is underway for a risk management controller and two loss control engineers. In 1987, Brisbane launched an ongoing education program for its 7,500 city employees to increase awareness of legal liabilities and loss prevention strategies. In the Lord Mayor's opinion, by "properly identifying risk through risk management reviews," the city has come to be recognized, particularly by underwriters, as a responsible corporate citizen."

The Singapore Conference was the first official event held by the Risk and Insurance Management Association of Singapore (RIMAS) which was formed in the spring of 1988.

Congratulating RIMAS on its formation, Law Song Keng, insurance commissioner and actuary, and Monetary Authority of Singapore, termed risk management a very practical process which "needs to be accepted as part and parcel of good management." Seeking to make Singapore a major Pacific Basin captive domicile, Commissioner Keng also participated in the IFRIMA conference in Brisbane where he discussed captive formation during a workshop. He urged increased education and training programs and suggested adopting the existing body of knowledge and adapting it to local needs.

RIMAS President Chan Seck Cheng, risk management officer of Mass Rapid Transit Corp., noted that RIMAS sees risk management as multi-disciplinary and will address risk in its totality. Membership recruitment is aimed at all related corporate disciplines--safety, security, engineering, law and finance.

Both conferences drew upon the expertise of their own members and risk managers from other IFRIMA member associations including RIMS, AEAI of Europe, IIIRM of India, AIRMIC of the United Kingdom and local and international insurance industry representatives. Some 350 delegates attended the IFRIMA Conference in Brisbane and 150 participated in the RIMAS event in Singapore. Delegates and speakers came from 20 countries.

Brisbane and the Technology of Leisure

Playing on the theme of Expo '88, "Leisure In the Age of Technology," IFRIMA President and Conference Chairman Kevin Knight of the Australia Post, asked a group of speakers to address the challenges and threats of leisure and technology. Setting the stage, Francois Settembrino, risk manager of Tabacofina in Brussels, and president of the European Association of Risk Managers, noted that while "new technologies may help us to handle risks, they add new risks." He added that leisure is "part of life, and in life there is plenty of uncertainty."

While sophisticated technology is often touted as providing individuals with more time for leisurely pursuits, RIMS President Dick Heydinger, risk management director for Hallmark Cards, sees the upheaval experienced by American business as leading to a decline in leisure time. The numerous mergers acquisitions and leveraged buy-outs have had significant impact. The overall number of jobs has been reduced. In addition, the survivors are expected to expand their knowledge, increase productivity and get more done with less in order to show better returns to shareholders. However, using technology from computers to fax machines, has improved internal and external communications and "makes more work manageable," noted Mr. Heydinger.

William M. Wilson, the chairman of Alexander & Alexander International in Toronto, sees technology as our greatest strength--and our greatest weakness. "It creates new vulnerabilities at the same time that it invents powerful tools to exploit them," he said. As a result, he sees alarming risks on the horizon that "may lead to potential shortages of insurance capacity." One way to boost capacity, he said, is for insurers to develop new products and services. Mr. Wilson also called for tax incentives that would include the use of pre-tax earnings to build financial reserves, and for regulatory agencies to streamline statutory requirements to encourage the creation of insurance capacity.

An underwriter's view was provided by Barry West, head of general insurance at Commercial Union in London. Generally, he noted, insurers view the leisure industry "reasonably favorably." It's a growth industry, but one with enormous potential liability. "This is an industry where risk management and control strategy and practice is a critical factor in determining the quality of risk," he said. "First-class systems for monitoring and controlling risk, checking contractual liability and dealing with complaints and claims will give a high probability that the risk is above average and should reflect directly in premium rates and claims." However, Mr. West pointed out, "risk managers do not pursue this aspect sufficiently. It is still unusual to see a presentation to underwriters with detailed information stating risk control philosophy and systems."

The Australian View

How do Australian risk managers see themselves? Stuart Bassett, international risk manager for Mayne Nickless, a transport, security and computer services company, suggested that the greatest challenge for risk managers is credibility. "Our profession is not recognized as a professional career in that few universities offer a degree course," he said. "Also, few senior managers are prepared to take the time and effort to understand the work we do and the value risk management adds to a company's worth." In Mr. Bassett's view, "many risk managers cling to insurance because it's readily quantified in dollar terms.

To overcome this major hurdle, he suggested better, jargon-free communications including facility visits and use of fax, telex and telephone. Mr. Bassett urged ARIMA and other risk management associations to adopt stronger public profiles, lobby for or against changes in the law and convey these views to the press.

On a hopeful note, he pointed out that "senior executives of corporations are thinking along the lines of complete management of risk as opposed to the traditional path of insurance. "I think there is a great future for risk managers who are prepared to grasp the technology of the present and develop strategies for the future management of risk in their organizations," he added.

Fellow Australian Paul Viciulis, safety controller at Grace Bros., believes there is no such animal as a risk manager. "Not one person possesses all the necessary skill and technical attributes to be able to fully implement, organize and control an all-encompassing risk management role," he said. Instead, Mr. Viciulis sees the position as one of a risk coordinator who "brings together elements of the various disciplines that are necessary to identify and evaluate the magnitude of the risk." "Who cares" he exclaimed, "whether a person's title is risk manager, risk coordinator!" Reality, he noted, is that a risk management process is applicable and vested to some degree in every management role. However, he said, some management personnel have tended to specialize in the "more clinically pure aspects" and have subsequently created a management niche. This, he stressed, does not establish a profession.

In order to do so in Australia, Mr. Viciulis urged all those involved in the risk management community "to go forth and develop the profession" through establishing education standards.

The View from India

Another person who looked at risk management as a profession was T. Ramanan, an insurance and risk manager for Hindustan Lever Ltd. Mr. Ramanan is also president of the Indian Institute of Insurance and Risk Management, an IFRIMA member. In his remarks, R. Ramanan noted that there are few risk managers in India or other developing countries. In India, interest is developing in the areas of risk evaluation and prevention. Seminars and courses are available, and the government-owned General Insurance Corporation of India has set up a consulting body which meets with representatives of industrial corporations. "There is a correlation," Mr. Ramanan said, "between the stage of economic development of a country and the significant strides in insurance and risk management." For example, in 1986, 54 percent of the world's insurance premium was generated in North America, 25 percent in Europe and 15 percent by Japan. The rest of the non-Communist controlled world contributed only 6 percent of total world premium.

Workers' Compensation Update

New South Wales Workers' Compensation Board Commissioner Graham Butchard discussed legislation passed in 1987 which abolished common law rights of workers to sue employers, but increased weekly benefits to incapacitated workers with dependents. However, more important in the Commissioner's view, is the area of rehabilitation. It has taken on a "new dimension," with far greater responsibility placed on employers to provide appropriate programs to encourage early return to work, and, if necessary, vocational retraining. According to Mr. Butchard, claims are down and the system appears to be working.

Toward the 21st Century

Looking ahead, Marnix Guillaume, president of Corroon & Black International, suggested adopting four basic principles to lead to more structured decision making. These principles include "cause" (exploring why something occurs), "change" (identifying and quantifying the cause) and "chance" (considering the cause only less predictable). Therefore, according to Mr. Guillaume, the more disciplined we are in analyzing causes and monitoring changes, the more stability will result. The fourth principle is "commitment to quality and safety" for people, Mr. Guillaume said. "In the long and short of it, it is through people that the control or elimination of the fortuitous becomes fact."

Similarly, Felix Kloman, a principal and vice president of Tillinghast, cited quantifiable risk assessment methods and better communication skills as the path to clearer risk management performance standards. The importance and impact of risk assessment data, for example, should be communicated to operating units and management. An annual report, newsletters and audio-visual tools should all be employed in this process.

General Elections

During the IFRIMA Conference in Brisbane, the Association of Risk and Insurance Managers of Australia (ARIMA), held its annual general meeting and reelected Brendan Ryan of Alcoa in Melbourne as its president. Elected vice presidents were Ian Waters of the Committee of Direction of Fruit Marketing in Brisbane; Joe Rovella of Coles Myer Ltd., in Sydney; and Mark Hicks of Hamersley Iron Pty. Ltd., in Perth.

Two risk management achievement awards were also presented during the conference. The Alexander Stenhouse Award, presented annually to the ARIA member who attains he highest marks in the Insurance Institute of America's ARM program, went to Robert Medbury of Bell Bros. Holdings in Perth. The award entitles the recipient to attend this year's RIMS Conference in Atlanta.

The first ProRM Risk Manager of the Year Award went to Paul Viciulis, safety controller of Grace Bros. Pty Ltd., in Sydney. Initiated by ProRM, a software firm, criteria is similar to that of Business Insurance's award in the United States.

IFRIMA Board Meeting

On October 25, the IFRIMA Board of Directors held its semi-annual meeting. A new member from the United States, the Public Risk and Insurance Management Association (PRIMA), was welcomed.

During 1989, IFRIMA members will undertake a member profile survey. Consolidated results will provide data from 20 countries. Results will show risk managers' areas of responsibility, reporting structure, as well as the size of organizations that employ risk management departments (i.e., assets/sales) and the size of those departments (i.e., number of employees).

Under consideration is the development of a "core" curriculum for risk management applicable on a worldwide basis. The goal is to create a "standard" for basic risk management education. The board will meet next during the Annual RIMS Conference in Atlanta, GA, in April.

Delegates Get `Exposure to Risk' in Singapore

"Managing Risk is Our Business" was the simple and direct theme of the Risk and Insurance Management Association of Singapore's (RIMAS's) first conference, which was also a first exposure to risk management for almost half the delegates. Chairwoman of the organizing committee, Jeanne Tan, the executive officer of group insurance/securities with Jack Chia MPH Group, noted that Singapore and the region were not immune to the effects of the near collapse of the liability insurance market a few years ago. This, she said, sensitized the region to risk management principles and gave impetus to increased loss control and prevention efforts. Additionally, it also developed an interest in risk financing alternatives, which points to the interdependence of buyers and sellers of risk management services.

"With U.S. experience as a foundation, how does the discipline of risk management transfer to the unique challenge of the newly industrialized countries and emerging economies of Asia?" asked William C. Thomas, chairman of Alexander Stenhouse in Singapore.

Many Asian-based companies are now multinationals. Manufacturing processes involving sophisticated technology, use of hazardous materials and the spread of consumerism are all of concern to these companies. "Out of various social, legal, economic and technological pressures has come the realization that today's risk must be identified and dealt with in a far more effective manner," Mr. Thomas said. "Living in an age of increasing uncertainty requires the development of new services, planning procedures, risk funding capacity, and above all, a new form of management organization to respond to loss potential and financing. The mandate of the 1990s will be to conserve resources that have been entrusted to the managers of commercial enterprises. The financial and organizational restructuring that is being developed to conserve these resources is risk management."

Asked to discuss RIMS role, its president, Dick Heydinger, risk management director at Hallmark Cards, stressed the organization's continuing function as a catalyst for change. RIMS serves as a forum that brings risk managers as well as insurance industry and government officials together. It has developed the power to manipulate the environment. "Today," Mr. Heydinger said, "When RIMS speaks, others listen." Because RIMS is a voice of reason, it can knowledgeably communicate the realities of the commercial insurance industry. Risk management associations, "must step forward to represent the corporate insurance consumer, or others will purport to."

A Look at the Sessions

Plenary and workshop sessions offered throughout the two-day conference covered the major bases of risk management. Risk control and risk financing methods, from self insurance through captive insurer formation, were also explored. John G. Campbell, chairman of Gallagher Bassett International in Chicago, advanced the view that if a risk manager focuses attention on where the largest portion of funds are being spent, then works towards reducing losses--thereby claims, "savings can be enormous."

George F. Lazovsky, general manager of Johnson & Higgins' Hong Kong office, discussed a major loss incurred by ITT Corporation in the 1970s; a loss from which it learned that the "hidden" or uninsurable costs, such as lost research data and market share, for overshadowed the insurance recovery for the physical plant.

Victor Adam, managing director of the Singapore broker Sterling Knight, termed insurance the "most expensive risk management technique." He added that it should be considered a last resort after comprehensive, quantitative risk analysis has been conducted.

An overview of funding mechanisms, deductibles, paid loss retro and captives--was presented by Gary Buckingham, the president of American International Underwriters in Singapore. Noting that underwriters are prepared to work with clients in a variety of combinations, he said, "a mixture of self-insurance, conventional insurance and risk control minimizes the total cost of risk versus reliance entirely on conventional insurance. Captives and commercial insurance compliment each other."

An insider's view of Singapore and Malaysia came from Loew Siak Fah, chairman of Sime Shield Investment Holdings in Singapore. Referring to risk management in-roads in the region, he pointed out, "Selling any new concept of services has to be duly tested. Therefore, the costs versus benefits argument is relevant and will dictate the future growth of risk management in our markets. The Singapore insurance market, with the omnipresence of most multinational brokers, attractive government incentives and quality infrastructure, can contribute to the growth and success of the business of risk management. The rapid growth of captive insurers (27 have been formed in recent years) is indicative."

Mr. Fah said, "The Malaysian policy on the development of the national insurance industry has a quite different set of priorities. At the moment, they do not include a desire to set up within Malaysia a regional reinsurance market or a haven for captive insurers. However, this does not mean that risk management ideas and techniques will be slow to develop because we can envisage that risk management efforts will become increasingly more important to large corporations."

Limitations to wide introduction of alternative funding mechanisms are due to the relative small size of the industrial base and, therefore, capital base of the economies in the region, as well as to the lack of sophistication of regulatory authorities. An exception to the latter is Singapore where the government has created the climate for development of an international insurance market.

Nominations for Bland Award Sought

RIMS chapters should begin to consider nominees for the Richard W. Bland Memorial Award. Richard Bland, an outstanding risk manager and leader in the field of legislation, was a member of the Greater Kansas City Chapter of RIMS. The chapter established the award in his memory to recognize outstanding performance or effort by a RIMS deputy member in the field of legislation and/or regulation.

All deputy members are eligible, with the exception of the current vice president-governmental affairs, who is not eligible for three years after leaving this office. However, such service may be counted as part of an individual's performance qualifications.

"As an outgrowth of the governmental affairs "Whip System," we are beginning to see more and more risk managers take grassroots initiatives and make RIMS voice heard in the legislative/regulatory arena," said Haren Kahn, assistant director of governmental affairs. "As a result, we look forward to more chapters nominating award contenders."

All nominations must include performance qualification documentation in the form of a booklet containing biographical information, samples of legislative bulletins, letters or articles written by the nominee, copies of testimony presented before legislative or regulatory bodies, endorsements and testimonials by chapters other than the one the nominee is a part of and by insurance commissioners.

"Performance and effort" is envisioned as embracing service by the nominee at the state, provincial or federal level in such areas as:

* Influencing or securing passage of legislation favorable to insureds, and conversely, blocking passage of unfavorable legislation.

* Engaging in formulation and sponsorship of bills.

* Working toward securing revision of onerous existing laws.

* Cooperating with state/provincial regulatory bodies and other governmental or industry groups to promulgate desirable model legislation.

* Apprising legislators, insurance commissioners and others of the insureds' viewpoint and advising RIMS chapters and members of legislation or regulation affecting their interests and encouraging action.

The documentation may be based on one's efforts in the calendar year preceding the year of presentation or based on efforts conducted over a period of years which resulted in a significant contribution or result.

PHOTO : Shown at the opening session, from left, are RIMS President Richard C. Heydinger, Congress

PHOTO : Moderator Hugh Loader and Stuart Bassett, international risk manager.

PHOTO : Lynda Caporn of ProRM presents the Risk Manager of the Year Award to Paul Viciulis,

PHOTO : safety controller for Grace Bros. in Sydney.

PHOTO : From left are conference speakers William C. Thomas and Victor Adam, Insurance

PHOTO : Commissioner Law Song Keng, Conference Chairwoman Jeanne Tan and RIMAS President Chan Seck

PHOTO : Cheng.
COPYRIGHT 1989 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1989 Gale, Cengage Learning. All rights reserved.

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Title Annotation:includes related articles; International Federation of Risk and Insurance Management Associations' conferences
Author:Epstein, Rita
Publication:Risk Management
Date:Jan 1, 1989
Previous Article:Court upholds refunds to insurers under tax agreement.
Next Article:Expanding liabilities for directors and officers.

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