Risk & Insurance - March 2017

on energy regulation offers a good example. If corporations are not held to standards that call for them to reduce emissions of greenhouse gases, and if subsidies for “green” companies are done away with, it provides greater freedom for businesses in every sector to choose how they produce and consume energy. More choices and fewer compliance hurdles are unquestionably good for business.

But without environmental regulation, the long term effects of climate change could also elevate risk for every sector over the long term. And as other countries invest in clean energy resources, the U.S. could lose competitive standing in that industry.

“You have to play it out from both
sides,” Kashlak said. “What will we
gain, and what will we be missing?”
Unfortunately for risk managers,
confusion among the political ranks
and strong influence exerted by the
general populace on both sides of these
issues make it difficult to know just
which way the winds will blow.

PLANNING FOR THE UNKNOWN

Balancing short and long term goals against potential risks in the face of so much uncertainty will be a key challenge for risk managers.

“One of the biggest challenges facing any decision-maker is developing long-term strategies while still recognizing the need to deal with the short term,” said Howard Kunreuther, James G. Dinan professor of decision sciences and business and public policy at the Wharton School and co-director of the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania.

“We all tend to be myopic by focusing on short term impacts. But corporations, more so than individuals, also recognize the need to develop short term and long term strategies. There is thus a need to build in short term incentives to enable long term planning,” he said.

Short term impacts include end-of-year balance sheets and bonuses. But Kunreuther suggested that insurers should change their way of thinking to broaden what “short term” means. They can, for example, move away from annual property policies and toward three- to five-year terms, which would promote longer term thinking in a way that is still manageable.

Darin Goodwiler, chief compliance, risk and ethics officer at CFA Institute, said that reliable information and intelligence monitoring is the key to being prepared to react to change over the long term.

“Risk managers need trusted and
defendable information, and the faster
you get it, the better equipped you
are to respond to any event,” said
Goodwiler, who will also be presenting
a session at RIMS.

The challenge, though, lies in the vast amount of information to be gathered, and the question of where to get the best quality, most dependable facts.

“Today, the risk manager is expected
to have a keen awareness of a host of
issues that range from international
trade policies, regulatory updates,
immigration laws and import/
export tax changes,” Addis of Beyond
Insurance said. Risk managers will have
to expand their own understanding
of political and economic issues, and
identify both internal and external
resources and experts to fill in the gaps
your company respond? Are these
repeatable events?

That analysis tips off risk managers to pre-event indicators. In the face of uncertainty, it’s important to be able to tell when an event or change is coming and start a proactive response to mitigate the full negative impact — or in the best case scenario, leverage it to create a positive impact. Know who the decision-makers in your organization are, and have a plan to get information into their hands as fast as possible.

OPPORTUNITIES FOR RISK
MANAGERS

On the upside, this level of uncertainty opens an opportunity for risk managers to become strategic partners in their organizations. They can take a leading role in data and intelligence gathering, in formulating plans to identify critical upcoming changes and response plans, and in educating senior executives and boards of directors on long term risks.

“The risk manager is in the midst of a ‘risk revolution,’ evolving into a risk strategist who is required to have plans to deal with both controllable and uncontrollable matters,” Addis said.

Recognizing that trend, this year’s RIMS conference features a new Executive Leadership track, which Roth said, “is positioned for senior professionals that are engaged in driving strategy throughout their organization.” Sessions in this track will examine “international strategic planning and ERM, the threats and opportunities of Brexit, and risk and resiliency in the changing world.”

“As leaders in risk management and representatives of the risk management community, we feel it’s imperative to engage our members and attendees in that dialogue and look at ways that others are addressing these changes and challenges,” she said. “We have to provide a forum for individuals to find out what best practices are out there and how other risk professionals are addressing the challenges they’re facing.” &

KATIE SIEGEL is a staff writer with Risk & Insurance®. She can be reached at ksiegel@lrp.com.

when necessary.

Goodwiler suggested that the best way to start planning for the future is to look back. Examine your organization’s past 20 years; what events made a significant impact, either positive or negative? How did

“One of the biggest challenges
in any decision is developing
long-term strategies while still
recognizing the need to deal
with the short term.”

— Howard Kunreuther, co-director, Wharton Risk Management and Decision Processes Center, University of Pennsylvania

J ose ph Fe rn a ndes

Risk Revolution at RIMS

The 2017 RIMS Annual Conference and Exhibition will be held April 23 to 26, at the Pennsylvania Convention Center in Philadelphia.

The opening reception at The Franklin Institute on Sunday, April 23, coincides with the conference theme, Risk Revolution, by giving visitors a chance to see how disruption can stimulate innovation. Attendees will discover how the disruptors of today create groundbreaking ideas that change how we think, behave and do business.

On Monday, April 24, the opening keynote speaker will be Derreck Kayongo, CEO at the Center for Civil and Human Rights. Kayongo is a renowned expert in environmental sustainability and global health. With his Global Soap Project, he uses his knowledge to change the way hotels dispose of the barely used complimentary soap.

Later that day, Allison Massari, executive coach and
visual artist, will give the leadership keynote address at
the RIMS award luncheon. Massari, a survivor of not one,
but two, life-threatening car crashes, shares her story of
absolute loss, forgiveness and finally success. Her talk
o;ers applicable tools to help anyone rise above obstacles
and find peace, purpose and happiness in turbulent times.

Award-winning actor Michael J. Fox will give the conference finale keynote talk on Wednesday, April 26 at 3 p.m. Fox, a tireless advocate for living with Parkinson’s Disease, shares his story about the remarkable lessons he learned after life threw him a curveball.