Canadian Underwriter

Taking New Risks

August 1, 2001   by Vikki Spencer

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The world of risk management is one in transition, one that has seen tremendous development in recent years in terms of its profile within the corporate structure, but one that is increasingly burdened by responsibility as well. As international trade barriers open up, Canadian companies, and hence their risk managers, are opened up to a host of new, little understood risks. The growth of e-commerce and the increasing exposure to global risks are both a boon and a burden to risk managers who are being asked to know more, to do more and to take on more responsibility.

At the apex of this development, the Canadian chapters of the Risk and Insurance Management Society (CRIMS) host their 26th annual conference, appropriately enough in Ottawa, the “Silicon Valley of the North”. This year’s theme, “Building Blocks”, is intended to capitalize on the developing role of risk managers, say conference co-chairs Paul Gray and Karin Zabel.

“In a new millennium, it’s the idea that people in risk management have the basics, and now we’re building on that,” says Zabel. “As a risk manager, you need to broaden your focus and move away from insurance, to things like corporate governance.” One of the keynote sessions of the conference will deal with the topic of corporate governance and the need for risk managers to learn to operate within the corporate structure.

“It’s taking everything people have now as a base, to meet the needs of a changing business environment,” adds Gray, who says the globalization of Canadian companies is a key part of this new environment, as is the growth of technology.

New role, new opportunity

“The risk manager is getting broader and broader in terms of their role,” observes Gray. The networking opportunities of the conference are not merely about making social connections, but are more a chance to learn from risk managers whose daily routines touch on a variety of corporate functions. The rise of enterprise-wide risk management means that professionals are entering into the widest scope of business operations.

Gray uses the example of human resources, offered for the first time as a session at the conference, as a new area into which many risk managers are being asked to delve.

Zabel adds that the increased focus on risk management is making its way to the highest levels of the corporate structure. “Senior managers are looking to risk managers to provide advice”, she says, and there is a need for broad knowledge of the business, inside and out.

“It’s more than an insurance buying function,” explains Gray, noting that this change in emphasis has been taking place over the curse of many years but is now becoming accepted practice. He points to the growth of the chief risk officer (CRO) role in some companies as evidence of this. “It’s not widespread yet, but it’s moving that way.”

Zabel observes that this added responsibility is also a boost for the profession. “From my point of view, it’s much more interesting, an opportunity for broader involvement in the company [for risk managers].”

Brave new world

New risks will be a key focus of the conference, including the rise to prominence of financial risks, the growth of global risks and the risks associated with e-commerce. These trends are moving across the professional landscape of risk management, regardless of industry sector, and are a response to larger corporate movement.

In fact, Gray notes, these risks fit hand-in-hand, the expansion of information technology allowing for connectivity between corporate offices worldwide and demanding a consistent, centralized and all-encompassing view of risk. While Gray allows that everyone is talking about security, the use of firewalls and other IT protection systems, attention also needs to be drawn to the potential for IT in the increasingly global operations of Canadian corporations. “There is a huge amount of acquisition activity around the world. You have to have cohesiveness and IT is part of doing that.”

With this increasing dependence on IT come risks, and also rewards for risk managers, Zabel agrees. “There is another side to this – as a risk manager, how do you use IT to help you do your job?” As risk managers learn to function within the international marketplace, IT will become a key factor to their success in managing corporate operations.

Insurance alternatives

Another challenge facing risk managers is the hardening insurance market and the question of whether visibly tightening insurance rates and policy terms will force a turn to alternative forms of risk transfer. As Gray notes, risk management has long been about more than insurance buying, and part of the society’s role is to make professionals aware of other options for handling risk. However, he sees a greater need for insurers to strengthen their relationships with their corporate clients if they are to successfully implement price corrections.

“Establishing a team with the insured, the insurer and the broker” is going to be more important than ever given market trends and the availability of alternatives. “It’s not a question of ‘I don’t like the rate this year’, and going out and finding a better rate,” he contends. Risk managers will be looking to insurers for better service to justify rate increases, for more advice and more assistance in understanding and covering risks. “A surface level of service is not enough, you have to drill deeper,” he says.

“Everyone [insurers] wants more business, but there’s a lot of emphasis on maintaining that existing relationship,” he explains. If insurers are going to manage rate increases, they are going to have to work to build their relationship with existing clients, “in order to ride out the hard market”.

Diversity at work

Both Zabel and Gray say the conference is a big part of maintaining the relationship between insurer and risk manager, a chance to network with existing and potential partners. It is also an opportunity for risk managers from vastly different industries to learn from one another.

Gray and Zabel are a good example of this diversity. He comes from an occupational health background, a graduate of Queen’s and the University of Toronto prior to positions in that field with General Electric and Dome Petroleum. Now director of industrial operations for global healthcare manufacturing company MDS Nordion, Gray has for the last 15 years filled the risk management role along with a variety of other functions within his job.

His private sector resume contrasts with Zabel, who works for Crown corporation Defense Construction Canada and comes from a financial background. A chartered accountant and commerce graduate from McMaster, she has previously worked as an auditor for Ernst & Young and in the financial department of Cineplex Odeon until her move to public service 15 years ago.

One thing Gray and Zabel share is a long history with the Canadian capital region chapter of RIMS. Both have served as chapter president and society director, along with other committee roles in the chapter. When, four years ago, the chapter was awarded this year’s conference, Gray took on the role of chair. But as that role grew it became increasingly clear the job would be better served by co-chairs. Three years ago, Zabel and Gray teamed up and began dealing with the challenges of running one of the largest industry events in the country. Attendance this year is expected to blossom, particularly given the central location and attractions of Ottawa, and the exhibitor list is topping 95. “The Canadian conference is so different from the one in the States, because it’s really put together by a local group of volunteers,” Zabel explains.

And with this “dynamic duo” at the helm, this year’s hopes to bring the many faces of the risk management community together.

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