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Corporate risk management

Good overview of how risk management can assist organizations in finding money during a tough economy.

Corporate risk management

  1. 1. Corporate Risk Management Making an Impact in a Tough Economy
  2. 2. Challenges of the Current Risk Management Environment
  3. 3. Challenges in the Current Risk Management Environment AON Survey (2009) of CEOs Risk Economic Slowdown Regulatory Changes Business Interruption Increasing Competition Commodity Price Risk Damage to Reputation Cash flow/Liquidity 551 Companies—40 Countries % “Ready” 60% 65% 79% 71% 77% 58% 75%
  4. 4. Challenges in the Current Risk Management Environment Insurance Industry Issue: Carrier Performance 1. Declining operating performance 2. Lack of investment income 3. Lack of new capital Results: 1. Potential change in program structure 2. More selective underwriting 3. Potentially decreased insurance capacity
  5. 5. Challenges in the Current Risk Management Environment Company Level • Fear of layoffs – Failure to self report minor injuries – Incentive to report fraudulent injuries • Increased stress levels – Increased instances of alcohol/drug use and domestic violence – Mental distractions leading to injuries • Organizational changes – Staff reductions – Program reductions
  6. 6. Challenges in the Current Risk Management Environment Are Tough to Swallow
  7. 7. Current Business Perceptions • 95% of management teams say they are customer-focused • 80% of those managers believe their company provides “outstanding value and a superior customer experience” • 8% of their customers agree • Who are your risk management customers? Would they agree or disagree with the above statements? Bain and Company Survey
  8. 8. The “Myth of Excellence” (by Fred Crawford and Ryan Matthews) • Five Customer Touches—Price, Service, Access, Product, and Customer Experience • No company (even excellent companies) can perform at a level of excellence in all five areas at once • Dominate in one area, differentiate in one area, and meet the industry par in the remaining three areas
  9. 9. The “Myth of Excellence” (by Fred Crawford and Ryan Matthews) • Five opportunities to engage customers—Price, Service, Access, Product, Customer Experience • Consumer Relevancy of each of the five “touch points” is on three levels: – Acceptance: customer views as “par” for the industry. No sense of loyalty, transactional relationships – Preference: customer prefers your company to another due to a deeper level of respect, access, and quality – Seeking: customer will seek you out above the competition
  10. 10. The “Myth of Excellence” • The Trap: Complacency “73 percent of executives think their firms have an edge on their competitors” (Chief Executive/Arthur D. Little poll) • The Myth: No company (even excellent companies) can perform at a level of excellence in all five areas at once • The Goal: – Dominate in one area – Differentiate in one area – Meet the industry par in the remaining three areas
  11. 11. Rate Your Risk Management Platform (1 to 5: 5= dominate, 4= differentiate) Acceptance Preference SeekingSeeking Value/Efficiency of Service Quality of Service You Provide Product Client Experience When Dealing with You Access
  12. 12. Goals (“Without a vision the people will perish”) • Do you have a clear vision for your risk management platform? Do you know what you want to achieve? • Can your leadership team articulate your vision? • Does your leadership team support your vision? • Have you established performance goals and metrics that support your vision?
  13. 13. Keys for Survival • Understand your company’s strategic objectives • Understand your supervisor’s strategic objectives • Design your strategies around the objectives of your organization and your boss • Develop appropriate metrics to demonstrate how you are adding value • Communicate frequently • Ask for periodic feedback
  14. 14. Where Do you Fit? Gets involved with other activities that moves the organization forward Good Team Player Gets Results Not a team player Needs much attention High Maintenance Gets Results Gets things done Does not need much of management’s time Does not get results Not a team player Needs much attention Constant follow up Poor Results
  15. 15. Strategy/Positioning • The real questions are— What will you excel at? What won’t you do?
  16. 16. Why Bother—What’s in it for Me? Goldman Sachs/JBWere Study (October 2007) “Research shows that over the period November 2004 to October 2007 companies who did not adequately manage workplace health and safety issues underperformed those who did… “investors could have increased returns over the past four years had they incorporated WHS measure into their investment strategies (+38%)… “This approach is also appealing because “blow ups” caused by something such as poor WHS or governance may pose unacceptable risks due to the reputational risks being often disproportionately large for issues of this nature.” Hint: Think Company Valuation
  17. 17. Summary • Excellence in Risk Management requires a clear vision with defined performance metrics • Risk Management strategy requires identifying an area of domination and an area of differentiation with a focus on customer acceptance • Risk Management can and should be measured financially in terms of financial performance and profit margin

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