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Risk Insider: Jack Hampton

Least Risk or Most Opportunity?

By: | March 12, 2018 • 3 min read
John (Jack) Hampton is a Professor of Business at St. Peter’s University and a former Executive Director of the Risk and Insurance Management Society (RIMS). His recent book deals with risk management in higher education: "Culture, Intricacies, and Obsessions in Higher Education — Why Colleges and Universities are Struggling to Deliver the Goods." His website is www.jackhampton.com.

For the second year in a row, the Academy Award for Best Picture went to a movie that was a controversial choice. In 2017, Moonlight prevailed over La La Land, the overwhelming favorite. In 2018, it was The Shape of Water, probably a narrower winner, over Three Billboards Outside Ebbing, Missouri.

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The winners of Oscars were chosen by a vote of the 7,000 or so members of the Academy of Motion Picture Arts and Sciences.

In 23 of the categories, the Oscar is awarded based on the most first-place votes. For best picture, a preferential voting system reallocates votes to reflect both the most and least preferred. Such a system rewards pictures that do not offend. La La Land annoyed people with its portrayal of Jazz. The harsh portrayal of police brutality had the same impact in Three Billboards.

The Oscar results remind us of a parallel situation with respect to the selection of chief executive officers of corporations. The CEO is chosen by a board of directors, partly based on past achievements and partly on their likely ability to advance the value of the company common stock. But yet another factor is involved; risk appetite.

The upside of risk is the pursuit of opportunity.

Few CEOs are directly responsible for whether companies succeed or fail. We focus on Apple, Google, and Amazon where CEOs made all the difference in the world. In the meantime, the vast majority of organizations have lackluster CEOs who have little if any impact on the success or failure of the company.

This situation may exist because of the perceived or actual risk appetites of the board and the candidates.

Board members are often satisfied with the status quo. Absent some real crisis, all of the top prospects will have suitable but similar credentials. Board discussions may mitigate promising strategies and focus on a continuation of current practices. That is, the board may make a final selection on an Oscar-like preferential voting process. The board members who are risk adverse may knock out the strongest aspirants for the top job.

The upside of risk is the pursuit of opportunity. This, too, may take a preferential hit after the CEO gets on the job.

Once in place, the chosen CEO often foresees only five to seven years until retirement. Is this a time to stir the pot or continue the course?

During the job interview, all the talk was about the future. Once in the chair, the negative consequences of bold changes impair the value of success. The CEO does not choose strategies based on their merit. Instead, a preferential decision-making behavior may choose lower-ranked courses of action with fewer risks.

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Why did VisiCalc invent the electronic spreadsheet and then hand it to Lotus 123 and MS Excel? Why did Nokia and Blackberry fail to respond to the threat from the iPhone? Why did Blockbuster cling to a flawed business model as it watched Netflix eat its lunch?

Can these behaviors be explained by a simple risk-return reality?

Thus, we have two lessons from the Oscars.

First, nobody likes physical abuse in Moonlight or romance with a fish in The Shape of Water, but these may be less bothersome to voters than the features of other films.

Second, preferential voting endangers our organizations if risk management does not accept the risks that go with bold strategies.

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

The risk manager for Boyd Gaming Corp. says curiosity keeps him engaged, and continual education will be the key to managing emerging risks.
By: | May 1, 2018 • 4 min read

R&I: What was your first job?

I was trained as an accountant, worked in public accounting and became a CPA. Being comfortable with numbers is helpful in my current role, and obviously, the language of business is financial statements, so it helps.

R&I: How did you come to work in risk management?

Working in finance in the corporate environment included the review of budgets and the analysis of business expenses. I quickly found the area of benefits and insurance — and how “accepting risk” impacted those expenses — to be fascinating. I asked a lot of questions. Be careful what you ask for — I soon found myself responsible for those insurance areas and haven’t looked back!

R&I: What is the risk management community doing right?

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I have found the risk management community to be a close-knit group, whether that’s industry professionals, risk managers with other companies or support organizations like RIMS and other regional groups. The expertise of the carriers and specialty vendors to develop new products and programs, along with the appropriate education, will continue to be of key importance to companies going forward.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

As I’m sure many in the insurance field would agree, Hurricanes Katrina and Rita in 2005 changed our world and our industry. It was a particularly intense time and certainly a baptism by fire for people like me who were relatively new to the industry. This event clearly accelerated the switch to the acceptance of more risk, which impacted mitigation strategies and programs.

Bob Berglund, vice president, benefits and insurance, Boyd Gaming Corp.

R&I: What emerging commercial risk most concerns you?

The fast-paced threat that cyber security represents today. Our company, like so many companies, is reliant upon computers, software and IT expertise in our everyday existence. This new risk has forged an even stronger relationship between risk management and our IT department as we work together to address this growing threat.

Additionally, the shooting event in Las Vegas in 2017 will have an enduring impact on firms that host large gatherings and arena-style events all over the world, and our company is no exception.

R&I: What insurance carrier do you have the highest opinion of?

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With the various types of insurance programs we employ, I have been fortunate to work with most of the large national and international carriers — all of whom employ talented people with a vast array of resources.

R&I:  How much business do you do direct versus going through a broker?

We use brokers for many of our professional coverages, such as property, casualty, D&O and cyber. We are self-insured under our health plans, with close to 25,000 members. We tend to manage those programs internally and utilize direct relationships with carriers and specialty vendors to tailor a plan that works best for team members.

R&I: Who is your mentor and why?

I have been fortunate to have worked alongside some smart and insightful people during my career. A key piece of advice, said in many different ways, has served me well. Simply stated: “Seek to understand before being understood.”

What this has meant to me is try everything you can to learn about something, new or old. After you have gained this knowledge, you can begin to access and maybe suggest changes or adjustments. Being curious has always been a personal enjoyment for me in business, and I have found people are more than willing to lend a hand, offer information and advice — you just need to ask. Building those alliances and foundations of knowledge on a subject matter makes tackling the future more exciting and fruitful.

R&I: What have you accomplished that you are proudest of?

Our benefit health plan is much more than handing out an insurance card at the beginning of the year. We encourage our team members and their families to learn about their personal health, get engaged in a variety of health and wellness programs and try to live life in the healthiest possible way. The result of that is literally hundreds of testimonials from our members every year on how they have lost weight, changed their lifestyle and gotten off medications. It is extremely rewarding and is a testament to [our] close-knit corporate culture.

R&I: What’s the best restaurant you’ve ever eaten at?

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Some will remember the volcano eruption in Iceland in spring of 2010. I was just finishing a week of meetings in London with Lloyd’s syndicates related to our property insurance placement when the airspace in England and most of northern Europe was shut down — no airplanes in or out! Flights were ultimately canceled for the following five days. Therefore, with a few other stranded visitors like myself, we experimented and tried out new restaurants every day until we could leave. It was a very interesting time!

R&I: What is the riskiest activity you ever engaged in?

I am originally from Canada, and I played ice hockey from the time I was four years old up until quite recently. Too many surgeries sadly forced my recent retirement.

R&I: What do your friends and family think you do?

That’s a funny one … I am a CPA working in the casino industry, doing insurance and risk management, so neighbors and acquaintances think I either do tax returns or they think I’m a blackjack dealer at the casino!




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]