Risk Insider: Dorothy Gjerdrum

ERM’s Language Problem

By: | May 18, 2017 • 3 min read
Dorothy Gjerdrum is senior managing director of Arthur J. Gallagher & Co.’s Public Sector Practice and managing director of its Enterprise Risk Management Practice. She can be reached at [email protected]

ERM has a language problem.

Many of us moved from risk management to enterprise risk management (ERM) without updating our lexicon.  We now focus on taking a broader approach to managing risk while we continue to use terminology that limits our ability to implement that approach.  Two of the most important words that need deeper understanding and better articulation are “risk” and “uncertainty.”

It’s not hard to find writing that equates “risk” with negative outcomes.  Indeed, in a quick perusal of “Risk Insider” columns on ERM, there are numerous examples that describe “risk” as a threat and use the terms “risk” and “uncertainty” interchangeably.

It takes awareness and perseverance to update our language when it comes to risk; without that, we tend to fall back on common usage.  Dictionary definitions don’t help, since they typically rely on historic, common usage and that doesn’t support the evolving approach to managing risk.  Insurance dictionaries define risk as a probability or threat of damage, injury, liability, loss or negative occurrence.  Merriam-Webster offers four options: 1) “possibility of loss,” 2) “someone or something that creates or suggests a hazard,” 3) “the chance of loss” (and a few variations on that) and 4) “the chance that an investment will lose value.”  All of these definitions tie risk to negative outcomes.

ISO 31000 defines risk as the effect of uncertainty on your objectives.  It is not the effect alone, or the uncertainty alone, it is the intersection of those uncertainties with your objectives that creates risk.

Some practitioners try to get around that by adding words.  Examples include “risk and reward” or “risk and opportunity” (the connotation of “risk” is still negative in both) or the clumsy terminology “upside and downside” risk.  (The problem is that “upside and downside” describe potential effects or outcomes, not the risk itself.)  These expressions can be confusing and problematic and they do not help change the narrative.


However, even in common language, there are opportunities to expand our understanding.  To “take a risk” or say that something is “risky” acknowledges that the outcomes are uncertain.  Outcomes can be positive or negative, and are often a mix of both.  That starts to sound more like ERM, doesn’t it?

When we drafted the international standard on risk management, risk experts from around the globe spent an enormous amount of time working to get this right.  We knew that the definition itself would expand our thinking and refine our approach.

ISO 31000 defines risk as the effect of uncertainty on your objectives.  It is not the effect alone, or the uncertainty alone, it is the intersection of those uncertainties with your objectives that creates risk.  It’s an incredibly important distinction from the common usage definitions.  It keeps organizational objectives at the heart of the process and recognizes that not all uncertainties will have an impact upon strategy or objectives.  And the uncertainty that does affect strategy, goals or objectives doesn’t always affect the organization in negative ways; the ISO 31000 definition is neutral about the effects of uncertainty.

As our ERM programs evolve and we consider a broader range of uncertainties and outcomes, it is imperative that we become more exact in our use of language.  That will help us (and our clients) view risk – with clarity and precision – from a broader lens.

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.


That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.


Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]