The document discusses risk management and risk transfer. It defines key terms like risk, risk management, and risk transfer. It outlines different risk categories and techniques for managing risk, including risk retention, insurance, and other methods. It emphasizes that a multi-pronged approach to risk management is most effective, using techniques like risk identification, analysis, control, and monitoring. The presentation aims to explain why risk management is important and how integrating different risk transfer and control strategies can benefit organizations.

1. Risk Management and Risk Transfer
A MULTI-PRONGED APPROACH
Presented by
Remonde Brangman, CBIZ MHM Financial Risk Advisory Practice Leader
Email: rbrangman@cbiz.com | Phone: (301) 951-3636, Ext. 6719
linkedin.com/in/rbrangman
Tony Consoli, President, CBIZ Insurance Services, Mid-Atlantic Region
Email: aconsoli@cbiz.com | Phone: (877) 251-5345
linkedin.com/pub/anthony-consoli/5/248/abb

2. 2
 What is Risk Management?
 What is Risk Transfer?
 Why are they relevant?
 How do we integrate them?
 Value to your organization
 Q&A
Topics

4. 4
A Risk Factor is something that can
cause harm. It is a poor business
condition or practice that can
negatively impact a company.
Risk is the likelihood of harm.
The likelihood that profitability
and shareholder value will be
negatively impacted.
Definitions - in business terms….

6. RISK MANAGEMENT:
Coordinated activities to direct and control an organization with regard to risk.
RISK MANAGEMENT FRAMEWORK:
A set of components that provide the foundations and organizational
arrangements for designing, implementing, monitoring (2.28), reviewing and
continually improving risk management (2.2) throughout the organization.
Note 1: The foundations include the policy, objectives, mandate and
commitment to manage risk (2.1).
Note 2: The organizational arrangements include plans, relationships,
accountabilities, resources, processes and activities.
Note 3: The risk management framework is embedded within the
organization's overall strategic and operational policies and practices.
ISO 31000 Definitions

8. Risk and Insurance Overview
Strategic Risk
Hazard Risk Financial Risk
Operational
Categories
of
Risk

9.  Risk retention
 Contractual risk transfer, i.e. noninsurance
 Risk control
 Risk avoidance
 Insurance risk transfer
 Financial tools, ala hedges, swaps, etc.
Risk and Insurance Overview

10. DEFINED:
A risk management technique whereby risk of loss is
transferred to another party through a contract (e.g., a hold
harmless clause) or to a professional risk bearer (i.e., an
insurance company).*
Risk Transfer
* International Risk Management Institute (IRMI)

11. Continuum of traditional and alternative
insurance arrangements

12. 12
Risk Profile Risk
Aware
Risk
Aware
Risk
Attentive
Risk
Attentive
Risk
Enabled
Risk
Enabled
Description
Management is aware of the
benefits of implementing risk
management principles
organization wide
Management is ready to
embrace risk management in
everyday processes and
practices. It is attentive to
some, if not all, of its risks.
Management recognizes risk
management as a core
competence and is successfully
using it as a competitive
advantage in chosen markets.
§ Risks managed in silos
§ Management holds decision
power
§ Financial risk focus only
§ No risk management training
 Risks managed in silos
 Management holds decision
power
 Financial risk focus only
 No risk management training
§ Risk management committees
§ Decision power devolved
§ Operational risk focus
§ Balanced scorecard in place
 Risk management committees
 Decision power devolved
 Operational risk focus
 Balanced scorecard in place
§ Self sufficient committees in place
§ All involved in decision making
§ Business risk focus
§ Risk management is core
competence
 Self sufficient committees in place
 All involved in decision making
 Business risk focus
 Risk management is core competence
Characteristics
 Reactive
 Financial focus
 Career internal auditors
 Low profile
Role of Internal
Audit
 Proactive
 Operational focus
 Role rotation
 Higher profile
 Change agents
 Business focus
 Integrated risk management
 Risk & control educators
Risk Management Continuum

13. 13
65%
of Public Firms
Financial
Services
Energy
Sector
Health
Care
Transportation
Education
Newcomers:
Construction
& Mining
Source: Excellence in Risk Management VI, Marsh | RIMS
Industries That Have Adopted ERM

14. 14
ERM: Both Negative & Positive Mindsets
Controlled Risk
Maximum
Performance
vs.
Uncontrolled Risk Under
Performance

15. Risk Management Heat Map
321
3
2
1 O - 8
12
R - 3
3
3
2
1
Opportunities RisksLikelihood Likelihood
ImpactonObjectives
ImpactonObjectives
Managementaddresses these keyrisks and
opportunities in its plans and priorities
Note: Some adjustment to current priorities may be required
O - 14 R - 34
R - 72
O - 21 R - 11
Developed by
Jay Mattingly

16. 16Vary by Industry & Importance
Characteristics of Risk Factors

17. 17
Transparency
TechnologyCompetition
Compliance
Public
Companies
Public and Private
Companies
ERM Implementation Drivers

18. How do leaders determine which techniques
or approaches to risk management are the
most appropriate for their organization?
Key Question:
Answer:
Risk Assessment Process

19. 19
Risk Analysis
Analyze presence of risk
- Assess the level of risk
- Quantify the results
- Report the findings
- Recommend action
Risk Response
Develop an action plan;
determine what risks to
control and assign
responsible individualsRisk Control
Implement a
solution to reduce
or transfer the risk
Risk Monitoring
Observe the completed
implementation and
report the results
Risk Factor Identification
Identify all potential risk
exposures
The ERM Process

20. 20
Top-Down / Bottom-Up Risk Based Approach
High Risk Processes
Moderate RiskProcesses
Low Risk
Processes
Risk
Governance
RiskOversight
Risk Management
Board of Directors
Executive Management
ProcessOwner
Executive Management
Management
ProcessOwner
Design
Implementation
Top-DownBottom-Up

21. Risk Management Evolution
Traditional Risk Management Modern Risk Management
ISO 31000
Methodology
Principles
Framework
Process
Compliance oriented
Financial focus
Negative risk events
Driven from credit and market
risk modeling
Top down approach
Complex methodologies
Lacking front line involvement
and buy-in
Not seen as a model for small
businesses
Management oriented
Broad organizational focused
Positive and negative risk events
Driven from strategic and
organizational objectives
Both top down and bottom up
Simplified methodologies
Organizational buy-in
Excepted model for all businesses

22. Knowledge, understanding and development
of a plan for continuous improvement.
Risk Control Techniques
 Safety Programs
 Security Systems
 Fire Suppression
 Construction Materials
 Driver Training
 Pre Employment Screening

23. Insurance Policy
Safety
L
oss
C
ontrol
C
laim
s
M
anagem
ent
FinancialA
nalysis
Insurance Policy
Safety
L
oss
C
ontrol
C
laim
s
M
anagem
ent
FinancialA
nalysis
Insurance Policy

24.  Review of risks
− Operational
− Hazard
− Financial
 Coverage Review
 Building &
Equipment
Insurable Valuation
 Review Current
Risk Processes:
− Safety Program
− Claims Handling
− Lease
Agreements
 Loss Analysis &
Trending
 Total Cost of
Risk
 Business
Interruption limit
calculation
 Benchmarking
 Risk Transfer
Options
• Fully Insured
• Large Deductible
• Self Insurance
• Captive
Placements
 Brokerage Services
 Coverage
Recommendations
 Implementation
 Periodic Review &
Analysis
 Risk Management
Services:
− Safety
− Claims
Management
− Contract Review
Identify Quantify Fund Manage
Consultative Risk Management Process

25. 25
!?
Ensures Sound Decision Making
How: By adjusting managerial business approach and policies
Benefits of Controlling Strategic Risk

26. 26
Improves Operational Efficiencies
How: By installing more cost effective and accurate internal systems
Risk Management Evolution

27. 27
Maintains Availability of Credit and Manages Cost of Funds
How: By improving outside relationships and considering all “what if” scenarios
Benefits of Controlling Financial Risks

28. 28
Reduces the Consequences of Uncontrollable Losses
How: By increasing safety and obtaining adequate coverage for potential losses
Benefits of Controlling Hazard Risks

29. 29
By removing business
conditions that can
have a negative
financial impact
By installing business
practices that can have
a positive financial
impact
ERM Maximizes Profitability and Shareholder Value

30.  Increase the likelihood of achieving objectives
 Encourage proactive management
 Be aware of the need to identify and treat risk throughout
the organization
 Improve the identification of opportunities and threats
 Comply with relevant legal and regulatory requirements
and international norms
Why Implement Risk Management?

31.  Improve mandatory and voluntary reporting
 Improve governance
 Improve stakeholder confidence and trust
 Establish a reliable basis for decision making and planning
 Improve controls
 Effectively allocate and use resources for risk treatment
Why Implement Risk Management?
Continued

32.  Improve operational effectiveness and efficiency
 Enhance health and safety performance, as well as
environmental protection
 Improve loss prevention and incident management
 Minimize losses
 Improve organizational learning
 Improve organizational resilience
Why Implement Risk Management?
Continued

33. 33
Organization A was a Non-Profit organization with a large source of
Government Grant funding. The organization believed that it had a good
handle on risk and had recently updated its Governance structures.
During a review of the organization we noted that the governance structure did
not include a structure for risk management.
After performing a one day review of risk exposures it was noted that the
organization’s compliance program did not cover all relevant compliance
requirements.
Further tests revealed that it was not in compliance with a Government
regulation and had utilized the Grant inappropriately.
The amount of the misappropriation was significant to the survival of the
organization. A simple Risk Management infrastructure would have prevented
this loss from occurring.
Risk Management Case 1 – “Lesson Learned”

34. 34
Company B had a database with over 2500 outside contractors for various levels
of technical support. They realized that they were vulnerable to significant
operational risk if their contractors did not adequately fulfill their contracts but
were struggling to manage such a vast contractor base.
A risk based framework was developed to determine which contractors presented the
greatest risk to the organization and procedures were developed to monitor the specific
risks identified.
Of the 2500 contractors, only 15 were critical to Company B requiring extensive oversight,
an additional 35 vendors were moderate risks and required a minimum level of oversight
and 300 low risk contractors. The remainder represented inactive vendors.
Company B was able to develop a more efficient oversight program utilizing fewer
resources with increased risk coverage than provided by their previous business model.
The organization also ended up with a risk profile that allowed them to reduce the number
of supporting contractors without impacting the level of service being provided.
Risk Management Case 1 – “Performance Improved”

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