10 Building Blocks to Risk Leader Success

By: Chris Mandel | April 25, 2019

Chris Mandel is SVP, strategic solutions for Sedgwick and Director of the Sedgwick Institute. He is a long-term risk management leader and a former president of RIMS. He can be reached at [email protected].

In 2014, I wrote a lengthy tome (an IRMI whitepaper — available at IRMI.com) entitled “The 10 Building Blocks of Risk Leader Success.”

It has been the most popular topic on which I’m asked to speak, every year since.

This year, I spoke on that very topic at RIMS 2019 in Boston. Here are those building blocks in brief:

1) Breaking In

There is no one right way to enter or ascend to great heights in risk management; successful risk leaders have come from all educational and experiential backgrounds.

2) Educational Strategy

Notwithstanding what I just noted about risk leader backgrounds, most successful risk leaders have a commitment continuing education that ideally includes a specific strategy for getting to their career goal.

3) The “Right” Experience

Further to being “qualified,” I acknowledge my own experience that kept me from penetrating certain industries (e.g. health care and manufacturing) due to views of some hiring authorities that “if you haven’t spent time in our industry, you couldn’t possible succeed with us.”

Update: Over the last 10 years, this mindset has shifted where these positions have largely disappeared in favor of more interest in leveraging experiences of those coming from other industries and backgrounds; the “new eyes and perspectives” view.

4) Industry Involvement

While many might say contributing outside your core job is not required to succeed, I believe the relationships and advantages that come from such efforts are essential to getting the best results for your benefactor employer.

5) Credibility and Influencing

For those that truly aspire to the highest heights, their ability to influence decisionmakers at all levels is critical. That ability to influence is underpinned by the credibility you build by demonstrating your expertise, trust and reliability among other traits.

6) Bench Development

Lest you think its all about you, you couldn’t be more wrong. Developing a team that enables succession and appropriately trained and guided resources to guide the business, is as much about perceptions of your leadership as it is about their aspirations and capabilities for the firm.

7) The Two Sides of Risk

While most risk leaders still spend all or most of their time on preserving value (dealing with the downside of risk) the most influential and most highly regard of them spend more and more time on creating value (e.g. dealing with the upside of risk) by helping decisionmakers take the risk necessary to reach strategic, long-term goals.

8) Vision and Strategy

Many risk managers still tend to be strong tacticians with a short-term, transactional focus. However, an increasing number have recognized the need to develop their strategic skills that facilitate their contribution to the vision and mission of their organizations.

9) Collaboration and Stakeholders

Lest you thought getting the job done was possible with you and your well-designed team; think again. I’ve yet to meet a successful risk leader who didn’t rely on key stakeholders to get the full job done, which by design includes serving and enabling their interests in risk and risk management, to be addressed.

10) Giving Back

You won’t be surprised that there’s plenty of organizations out there whose risk issues are not getting addressed (e.g. churches, nonprofits etc.) for all kinds of reasons. Once you’ve developed the expertise that makes you a successful risk leader, I recommend you find ways to make some of that available to those that need it but can’t afford it.

You might also consider how attracting the next generation of risk leaders into the discipline is an important question you have responsibility for answering.

So those are the big 10 things.

Having given variations on this list to audiences for the last four years, a few things have been added to the mix born of observations from these experiences.

First, these principals are mostly applicable to all successful leaders, but with a “risk twist.”

Second, having helped universities develop a variety of master level and executive development curricula in risk management, there are a myriad of skills and attributes that should be considered in defining what the most qualified risk leaders look like.

Finally, RIMS, among other groups, have developed thoughtful and well-defined skill and competency criteria that should also be considered when organizations determine who they need to lead their risk management function and so that these leaders ultimately become the strategic advisors who all senior leaders and boards hope they can employ. &

How a Carrier Partner Can Help Navigate a Challenging Management and Professional Liability Market

A combination of a choppy economy with increased claims frequency and severity could lead to rate increases in the Management & Professional Liability market.

By: Risk & Insurance | April 3, 2024

Rates in the management & professional liability (M&PL) markets were on the rise from 2020 to early 2023 and are now falling rapidly.

M&PL divisions manage a number of different insurance products including management liability (D&O), professional liability (E&O), employment practices liability (EPL), fiduciary liability policies, cyber, etc. In 2023 and into 2024, a big influence on the marketplace has been the extremely aggressive and softening public company D&O market.

Though these rates have been softening for management liability, that may change over the next few years as companies continue to adjust their business models motivated by economic uncertainty. Layoffs were up nearly 200% last year, Forbes reported, even as other recession indicators, like the inflation rate, improved. A recession could lead to an increased claim activity and force carriers to raise rates.

“Whenever there is a meaningful downturn in the economy, we tend to see claim frequency pop up,” said George Schalick, Jr., senior vice president of the Management and Professional Liability Division at Philadelphia Insurance Companies (PHLY).

With continued fiscal uncertainty, businesses potentially already burdened with pandemic-related claims should seek a carrier with a long history in M&PL products. They will provide much-needed risk management guidance and be better positioned to support their insureds during market fluctuations.

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.