RISKVUE ARCHIVE | FEATURE STORIES

How To Choose, Use, But Not Abuse A Risk Management Consultant, Part 2

By C. C. (Bud) Griffin, CPCU

As the economy and escalating insurance rates take their toll on risk-management-department budgets, more private companies, corporations, and public entities increasingly rely on consultants. Such “outsourcing” has proven to be an effective way for some organizations to reduce long-term overhead, while still availing themselves of knowledgeable help. Here we discuss how to select and get the best performance from a consultant. (While we refer to risk management consultants in this article, the principles generally apply to any type of consulting activity.)

How To Select A Consultant

If you decide you need a consultant, there are several steps you should take to get your money’s worth.

(1) Define the Scope of Work. Clearly define the scope of work to be performed and what problems you expect to be solved. You may want a complete audit of your organization’s overall risk management program, or you may want the consultant to look at only certain facets of your program. Be specific so that the consultant can focus on your needs.

(2) Assemble Pertinent Information. Assemble sufficient information about your organization to enable the consultant to prepare a responsive proposal. Such information may include:

• An annual report, SEC form 10K, or other descriptions of the organization’s activities.
  
• Summary of loss information, insurance coverages and any special funding arrangements.
  
• List of major facilities, organizational charts, product brochures, etc.

(3) Request for Proposal. Create a written request for proposal (RFP) and send it to one or more reputable consultants. Assistance in finding consultants may be obtained from trade organizations, RIMS (Risk & Insurance Management Society; www.rims.org), SRMC (Society of Risk Management Consultants; www.srmcsociety.org), or experienced risk managers. Also, Business Insurance (www.businessinsurance.com) publishes an annual listing of consultants.

• The RFP should ask the consultants to provide a general list of clients plus the names of contacts at five or more organizations familiar with the proposed consulting project team. In addition to speaking with these references, call other clients on the consultant’s general client list, particularly those in the same business as your organization. Be sure to find out who actually performed the work, as well as the client’s opinion of its quality, practicality and timeliness.
  
• Request copies of articles and papers written by the consultants. While copies of a consultant’s actual work provide the best indication of his/her creativity and communications skill, many clients are reluctant to release studies to outsiders and a good consultant will respect the clients’ desire for confidentiality. Therefore, you may not get to see the consultant’s best work.
  
• Ask the consultant whether he or she performs work for or receives income from insurers, brokers, third-party claim administrators, or other entities that provide insurance or risk management services. The answer will disclose whether the consultant has any conflicts of interest that may affect his or her objectivity in performing the proposed work.

(4) Compare the Consultant’s Written Proposals. Each proposal received should be carefully reviewed and evaluated. Some good questions to ask yourself are:

• Is the proposal responsive to the RFP? Is there anything in the RFP that the consultant neglected to address in the proposal?
  
• Do you agree with each consultant’s perception of the problem? Are each study’s objectives, scope of work, plan of action and personnel clearly defined?
  
• Do you understand exactly how the fees will be charged? An estimated fee, not to be exceeded without your prior approval, lends itself to many situations.
  
• Are any submitted sample articles, papers and reports clear, easy-to-understand, and free of “”boilerplate?” Ability to communicate clearly is often as important as technical expertise.
  
• Is there a breakdown of estimated time to be spent on the project by each member of the consulting team?
  
• Will interim billings be submitted on a regular basis so that you have a record of work as it is done?
  
• Are necessary travel plans well-defined to avoid unnecessary consulting time and expenses? Some consultants bill for travel time, some do not.
  
• Are the number and types of reports and presentations clearly stated?

(5) Personal Interview Process. Once all proposals have been reviewed, arrange to meet the consultants who submitted the best proposals. During the interview process, try to reach conclusions about the consultants, using the following questions as guidelines:

• Is the consultant energetic and enthusiastic?
  
• Does the consultant talk in a way that commands your attention? Does he or she project confidence in posture, eye contact and overall appearance?
  
• Does the consultant speak clearly and strongly, in language that your organization’s employees and officers will understand? Can the consultant explain complex concepts in a simple manner?
  
• Does the consultant exhibit the assertiveness and diplomacy necessary to work effectively with your organization’s people?
  
• Does the consultant appear to be committed to excellence and honesty in all dealings?
  
• Does the consultant demonstrate the knowledge needed to effectively handle the project? Does he or she understand your problems and propose a reasonable approach to find answers?

The above questions are not easily nor quickly answered. The written proposals and personal interviews alone won’t give you all the information you need. Pay special attention to each consultant’s reputation for quality and integrity, and carefully check references. The consultant’s track record is probably the best indication of how he or she might perform for you. Also ask the consultant to identify his or her areas of greatest expertise and greatest weakness. You may learn much about the consultant from the way this question is answered.

How to Get The Best Results From Your Consultant

Once you have decided on a consultant, there are several things you should do to get the most from his or her work and your money:

• Schedule adequate time to meet with the consultant. Be certain you are available when the consultant is in your office.
  
• Do not leave the consultant in a vacuum. Promptly provide the consultant with all the information needed to complete the study.
  
• Arrange interviews and travel schedules to most effectively use the consultant’s time. Make sure all individuals to be interviewed by the consultant will be available when the consultant is on site.
  
• Impose reasonable time constraints. Be sure your organization can hold up its end of the assignment (and deadlines) as well. Remember that the consultant’s information needs must be met before the work can proceed.
  
• Know and communicate to the consultant how much documentation you need in their reports. Must every recommendation be supported with the exact logic used to reach it or is the “bottom line” adequate? Will you require a personal presentation of study results? A clear understanding of the number and kind of reports and presentations needed will avoid wasted time and unnecessary consulting fees.
  
• Determine in advance whether the consultant’s work may require access to confidential material. You may wish to have the consultant sign a confidentiality agreement in which the consultant agrees not to release to third parties any information obtained during the consulting assignment. Also you may wish to require that the consultant return to you at the conclusion of the study all information and work generated during the course of the project.

For particularly sensitive studies involving such things as environmental or hazardous-products liability risk assessments, you should consider going a step further by having the proposed consulting assignment contracted through your attorney. This might provide some protection in the event of subsequent litigation. While this technique is not fool-proof, it should be discussed with your legal counsel. 

ABOUT THE AUTHOR

Bud Griffin, CPCU, is President of Warren, McVeigh & Griffin, Inc., a risk management consulting firm, and is responsible for major risk management studies for WMG’s corporate and governmental clients. Bud has also served as an expert witness in various insurance litigation cases. He can be reached at 949-752-1058 or ccgriffin@griffincom.com.

EDITOR’S NOTE

If you have questions regarding this article or would like to offer readers other tips for dealing with consultants, please submit your ideas to us at gary@griffincom.com.

riskVue | The webzine for risk management professionals
September 2002