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Risk Insider: Elizabeth Carmichael

Putting Your Organizational Values Where Your Risks Are

By: | July 8, 2016 • 3 min read
Elizabeth Carmichael is president of Carmichael Associates LLC. She formerly was director of compliance and risk management for Five Colleges Inc. She can be reached at [email protected]

I think that many risk managers (myself included) struggle with guiding their organizations to choose what risks to prioritize for management.

Even when we work for an organization that has a highly functional ERM process, and senior leaders are actively engaged in the identification, management and mitigation of risks, can and/or should compliance and risk officers be leaders in helping them set their priorities?

If the answer to that question is “yes,” how can we be better leaders? We can do it by identifying and aligning risk management as a cornerstone of institutional values.

One of the things that has always bothered me about “reputational risk” is that it measures how the outside world will view the institution (by measuring lost revenue, increased costs, or reduced shareholder value) if it fails to address a particular issue.

This has become a shorthand of sorts for measuring the ethical aspects of failure to address some kinds of risks. The problem is, it doesn’t address the actual values of the organization. Reports have been published on the atmosphere at Penn State where alumni and other donations actually increased in support of the university after the news of the Sandusky sex scandal broke.

Other schools, like Dartmouth University, may have seen a drop in applications from women because of sexual assaults and harassment, but given the strength of the school, it probably hasn’t impacted the bottom line. The outcomes of bad press are impossible to predict.

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There is no discussion, no scoring, in the enterprise risk management process of “How antithetical to our institution and our values would it be if something happened because we failed to address this risk?”

Or, “What are our institutional values and how does this risk conflict with our values?”

We should ask ourselves how risks might be scored if these questions replaced, “What is the reputational risk?”

Assuming — and admittedly it may be a big assumption — that organizations want to align their operations with their stated and implied values, the ERM process can and should be used to support this objective.

Even when we work for an organization that has a highly functional ERM process, and senior leaders are actively engaged in the identification, management and mitigation of risks, can and/or should compliance and risk officers be leaders in helping them set their priorities?

Now, if your company’s sole value and objective is to sell products more cheaply than any other company, ethics and values will not be likely to have any traction with company leadership on risk matters.

But if your company or organization has a mission, vision and/or values statement, you will have a place to start.

Reputation, on its most basic level, is a measure of trust — how well does the organization deliver the products and services, the values, which it promises?

This applies to both the organization’s customers and employees.

Do employees know what the organization’s values are? Are policies, procedures and risk mitigation efforts aligned with its values?

Compliance officers and risk managers may find that, when faced with opposition on a risk mitigation effort or prioritization, that helping mangers understand how the mitigation helps the organization’s actions align with its values will break down the resistance.

I’ve seen it work; try it!

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession: Curt Gross

This director of risk management sees cyber, IP and reputation risks as evolving threats, but more formal education may make emerging risk professionals better prepared.
By: | June 1, 2018 • 4 min read

R&I: What was your first job?

My first non-professional job was working at Burger King in high school. I learned some valuable life lessons there.

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

After taking some accounting classes in high school, I originally thought I wanted to be an accountant. After working on a few Widgets Inc. projects in college, I figured out that wasn’t what I really wanted to do. Risk management found me. The rest is history. Looking back, I am pleased with how things worked out.

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

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I think we do a nice job on post graduate education. I think the ARM and CPCU designations give credibility to the profession. Plus, formal college risk management degrees are becoming more popular these days. I know The University of Akron just launched a new risk management bachelor’s program in the fall of 2017 within the business school.

R&I: What could the risk management community be doing a better job of?

I think we could do a better job with streamlining certificates of insurance or, better yet, evaluating if they are even necessary. It just seems to me that there is a significant amount of time and expense around generating certificates. There has to be a more efficient way.

R&I: What was the best location and year for the RIMS conference and why?

Selfishly, I prefer a destination with a direct flight when possible. RIMS does a nice job of selecting various locations throughout the country. It is a big job to successfully pull off a conference of that size.

Curt Gross, Director of Risk Management, Parker Hannifin Corp.

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

Definitely the change in nontraditional property & casualty exposures such as intellectual property and reputational risk. Those exposures existed way back when but in different ways. As computer networks become more and more connected and news travels at a more rapid pace, it just amplifies these types of exposures. Sometimes we have to think like the perpetrator, which can be difficult to do.

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

I hate to sound cliché — it’s quite the buzz these days — but I would have to say cyber. It’s such a complex risk involving nontraditional players and motives. Definitely a challenging exposure to get your arms around. Unfortunately, I don’t think we’ll really know the true exposure until there is more claim development.

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

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Our captive insurance company. I’ve been fortunate to work for several companies with a captive, each one with a different operating objective. I view a captive as an essential tool for a successful risk management program.

R&I: Who is your mentor and why?

I can’t point to just one. I have and continue to be lucky to work for really good managers throughout my career. Each one has taken the time and interest to develop me as a professional. I certainly haven’t arrived yet and welcome feedback to continue to try to be the best I can be every day.

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

I would like to think I have and continue to bring meaningful value to my company. However, I would have to say my family is my proudest accomplishment.

R&I: What is your favorite book or movie?

Favorite movie is definitely “Good Will Hunting.”

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

Tough question to narrow down. If my wife ran a restaurant, it would be hers. We try to have dinner as a family as much as possible. If I had to pick one restaurant though, I would say Fire Food & Drink in Cleveland, Ohio. Chef Katz is a culinary genius.

R&I: What is the most unusual/interesting place you have ever visited?

The Grand Canyon. It is just so vast. A close second is Stonehenge.

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

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A few, actually. Up until a few years ago, I owned a sport bike (motorcycle). Of course, I wore the proper gear, took a safety course and read a motorcycle safety book. Also, I have taken a few laps in a NASCAR [race car] around Daytona International Speedway at 180 mph. Most recently, trying to ride my daughter’s skateboard.

R&I: If the world has a modern hero, who is it and why?

The Dalai Lama. A world full of compassion, tolerance and patience and free of discrimination, racism and violence, while perhaps idealistic, sounds like a wonderful place to me.

R&I: What about this work do you find the most fulfilling or rewarding?

I really enjoy the company I work for and my role, because I get the opportunity to work with various functions. For example, while mostly finance, I get to interact with legal, human resources, employee health and safety, to name a few.

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

I asked my son. He said, “Risk management and insurance.” (He’s had the benefit of bring-your-kid-to-work day.)

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