RISKVUE ARCHIVE | FEATURE STORIES

Avoid Risk Management “Worst Practices”

Risk managers often fail to achieve their goals or perform adequately for many of the same reasons that other professionals fail. The reasons are numerous, but the following are consistent troublemakers for risk managers, what we like to call “worst practices.” Stated differently, worst practices can limit opportunities for advancement and, in some cases, have been the direct cause of some risk managers losing their jobs.

1. Weak Communication Skills

Poor communication skills are the number one career and opportunity killers. One of the hardest feats for many risk managers is articulating to others the technical concepts that abound in risk management. It may be because many professionals were never properly trained to write and communicate effectively. However, developing the ability to communicate is crucial, not only in the production of reports, letters and memos, but also in oral communications, such as the giving of instructions or when making presentations.

If you are a weak communicator, your career, no matter your depth of knowledge in your field, eventually will stall out, if it has not already done so. Otherwise capable persons who do not communicate well are less likely to get noticed by senior management, and if they do get noticed, it often is for the wrong reasons.

While some people seem to have a natural ability to communicate effortlessly and effectively, for most of us, good communication skills are developed by understanding that we have weaknesses and that they need correcting. For some people it will be harder than for others, but once good communication skills are learned, the dividends can be dramatic. Risk managers and others who develop good communication skills are more likely to be invited to speak, write articles or otherwise pontificate on their individual areas of expertise. Such exposure is invaluable and can be a resume-builder.

Remember, it is only from a foundation of solid communication skills that most professionals are able to advance. All that is required is that you be able to deliver your message and have it understood. The best way to ensure the comprehensibility of your message is by communicating as simply and as concisely as possible.

There are many fine books and courses available specifically designed to build effective communication skills. If communication is not your strong point, consider investing some time and money-even your own-on such materials.

2. Poor Selection Of Service Providers

Risk managers often use outside providers to deliver a wide variety of services. These providers can include insurance agents and brokers, lawyers, third-party administrators and others. Because the success or failure of the providers often reflects directly upon the risk manager, great care should be taken in their selection. Sometimes, however, the risk manager has little or no say in the selection process; instead, forces within the company can cause the risk manager to select other than the best candidates. When politics dictate a service provider that is substandard, the risk manager may still be held responsible for the provider’s poor performance.

One way to better ensure the quality of the service providers is to periodically conduct a formal selection process. The best way to carry out the selection usually is to develop pre-defined criteria with a method of scoring each candidate. So even when internal politics may be at play, a formal, unbiased selection process that scores performance can help to ensure that the best candidate is selected.

3. Failure To Implement Formal Service Agreements

People often do not do what they promise. This problem often arises when someone is trying to sell you a service or product. Most brokers and service providers do not intentionally deceive their clients, yet it is still a frequent occurrence. Some risk managers may rely on these oral communications and make promises to upper management that may not be fulfilled. Therefore, some formal yardstick of performance should be put in place so that promised services can be tracked and measured. The overriding advantage of a service agreement is that the expectations of the insured and the responsibilities of the broker are reflected in writing. Creating a formal agreement helps eliminate disputes that might arise over what specific services were actually to be provided. A formal service agreement also establishes benchmarks or milestones by which the provider’s services can be measured. When the risk manager is the purchaser of a product or service that fails to be delivered as was expected, who do you suppose management will blame? While your broker or other provider may be easily replaced, your job is not. Use formal service agreements to your advantage.

4. Overreliance On Broker Resources

Most brokers, even small regional brokers, are now capable of providing a wide range of risk management services. These are valuable assets a savvy risk manager can use to better perform his or her own duties. But some risk managers become so dependent on the broker that the broker becomes the de facto risk manager.

Overreliance on brokers is dangerous for two reasons. First, it may be an indication that you lack the confidence or skills required to do your job effectively. Second, some risk managers absorb the broker into the risk management function to the extent that it becomes difficult to change brokers.

Remember, also, that a broker or service provider has a vested interest in providing you with more of what it is they sell. The need for a recommended product or service may be difficult to discern when the only source of consultation is the one suggesting and providing the service. Beware of conflicts-of-interest, and do not be afraid to seek outside assistance or opinion from other risk managers.

5. Failure To Document

Remember the old school-game “Musical Chairs”? Failure to document your communications, especially with your broker or insurance company, can leave you the only one standing when the music stops. Documentation is important especially when it comes time to collect on those insurance policies that you recommended purchasing. However, the form of your documentation is not as important as putting the substance of your communication on paper. That documentation may be your strongest evidence in the event of any kind of dispute, even with those within your own organization.

6. Failure To Develop A Knowledge Bank

No one person can know all there is to know on a subject as complex as risk management, yet many risk managers feel compelled to do their jobs without taking advantage of the wealth of knowledge and information that usually is close at hand. The best risk managers are the ones that know their own limitations, but they also know where to get the answers when they are in doubt. Good risk managers have knowledge banks. A knowledge bank is composed of identified sources of specialized information to which risk managers can turn to when in need.

All risk managers should have a library of reference materials close to their desk. Such a library should consist of specialized manuals or books on a wide variety of insurance and risk management subjects. Also, because of the importance of communication, do not overlook a good dictionary and one or more books on style and grammar. Pick the books you are likely to use most, but make sure to keep up on what is currently available.

The Internet can prove invaluable for a wide range of topics, but remember, much of what may be available is unedited, unreliable or just plain wrong.

Perhaps the most important resources are other professionals in the risk management community. These would be people you can turn to who have been through the same or similar dilemmas that you might be facing. Wisdom can be gained by learning from one’s own mistakes, but much agony and expense can be avoided when you learn from the mistakes of others.

Trade and professional organizations are great places for networking and picking brains. Try to develop relationships with three or four individuals whom you hold in high regard, people who have achieved a high degree of success and respect in their chosen fields. Seek out risk and insurance professionals, of course, but do not overlook others who have experience in law, accounting or other fields. And do not be afraid to seek the acquaintance of someone because you feel he or she may be too busy. It’s often the busiest people that make time for that additional project or appreciate the opportunity to help others.

Be wary of seminars and symposiums. While there are many good ones, they usually are expensive and normally are not long enough to fully develop any real learning. Some are little more than social gatherings that are more helpful for networking than gaining knowledge. And free seminars put on by service providers are often nothing more than thinly veiled infomercials.

Conclusion

Risk managers who want to be successful will want to remember these worst practices. Avoid them if you can; but if you have already found yourself inadvertently following worst practices, invest the time and energy necessary to remedy them. Your job and career may depend on it. 

riskVue | The webzine for risk management professionals
December 2002