Why risk managers need to look ahead: RIMS president Laura Langone

This is a time of great challenge and opportunity for risk professionals, according to RIMS president Laura Langone. The effects of the presidential election are inevitably going to be felt across the country—and that’s against a backdrop of the continuing COVID-19 crisis.

“Everyone is in the midst of a worldwide crisis, but those risk leaders who looked at emerging or strategic risks are probably better off, as are those who looked at operational risks,” Langone says.

“Some companies are having to ask themselves if they have truly managed to pivot to digital and cloud-based solutions, where they can be agile and how they can offer services more quickly to customers.

“If during this crisis—and before it—you are heavily dependent on suppliers for goods and you don’t have the right infrastructure, you are most likely facing significant operational risks. At the same time, we need to be forward-looking at what’s coming next.

“It shouldn’t be isolated to preparing for the next pandemic—for example, what is the outcome of the US election going to bring to us? How is this going to impact your company locally or globally?”

How well companies have fared since the arrival of COVID-19 depends on whether they had a pandemic solution, she adds. “Many risk professionals did present the possibilities and impact of a pandemic to their senior business leaders,” she says.

Now, however, she sees the insurance market retreating, leaving pandemic solutions harder to achieve.

“As we look at renewals for our organisations, CFOs are now asking us to ‘get something for pandemic’ and to look at parametric triggers,” she says. “They want to know what is available in the marketplace for these dynamic events—such as severe weather and wildfires.”

Langone believes the pandemic has been an opportunity for the companies that had prepared to endure and adapt, but even for those that have fared well, the pandemic still affects a whole raft of issues including how and where work is carried out and how companies think about real estate, operations, technology and delivering services to customers.

“Time will tell where the commercial real estate market will be in a year or two and how organisations adapt to work environments. They will look at physical space and have to make a decision on whether it is needed.

“The pandemic has changed the way companies think about the virtual workforce. With risk, there is opportunity, but this was certainly a learning experience for many.”

One of the persistent challenges is the question of how to insure for risks such as pandemic and climate change that are still not readily available in the marketplace.

“The pricing not there yet,” she says.

Role of risk managers
As the need to prepare intensifies, Langone sees an opportunity for risk professionals to play a more prominent role within their organisations. They are working closely with those responsible for business continuity and crisis management and focusing on making risks more transparent.

“We need to bring issues to light and to talk about ways to protect the balance sheet, our workforce and mitigate these risks internally,” she says.

“We do that well but the next opportunity is to rise to the board level. Risk professionals should strive for board service and opportunities to become part of the C-suite.

“We have the frameworks and are thinking through upside and downside issues, but we don’t always have the attention of senior leaders. Frankly, the boards and C-suites should be looking at that holistically and listening to their advisors.”

For insurers, she sees an opportunity to reject a restrictive, conservative posture, along with the temptation to increase rates, and instead work with their clients to find real solutions.

“There’s tremendous capacity in the marketplace, but many in the C-suite wish there was more certainty of coverage. We are seeing hardening and we are seeing the insurers dictate terms of pricing to underwriters. It’s having a significant impact on both the risk professionals and the underwriter’s book of business.”

Langone adds that there are some good examples from insurers, however.

“The insurance market can sometimes take longer to react. But, at the same time, there are many examples of companies that were prepared with pandemic insurance policies, where the insurers responded quickly and paid claims.

“Instead of excluding pandemic outright, there is an opportunity to reassess and tap into the capacity that exists in the market to deliver more solutions and coverage. The other issue is that the insurance industry is mired in so much regulation that it is difficult to be that creative and develop admitted new products and solutions in a very timely fashion.

“Many times this is why insurers target the London and Bermuda markets or alternative financing to find capacity and/or creative solutions.”

Looking ahead to 2021, she believes leadership and getting in front of the C-suite should be a key focus for risk professionals, who need to make sure they get the opportunity to have constructive discussions about the emerging risks for their businesses.

“Risk is constant and we do not know what the next emerging or dynamic risk will be. Creating more defined risk management frameworks for governance and board transparency so that we are prepared to discuss risk is something that RIMS is focused on.

“The RIMS network is a fantastic resource that offers invaluable support and best practice strategies to help elevate your game,” the president says.

In order for risk professionals to feel more confident to deliver these concepts, the society’s RIMS-Certified Risk Management Professional certification enables the risk management community to advance professionally. It helps create that path to deliver information to the board and, perhaps, one day to serve on one.

“All these issues are covered extensively in RIMS’ resources, such as how to weather the hard market, enterprise and strategic risk management, and the advantages and challenges of captives,” Langone says.

“In addition to knowledge and resources, it’s really about the personal connections you can make with some of the world’s foremost experts in the field. That networking experiences—being able to share challenges and then solutions—is why so many risk professionals turn to RIMS.”