Magazine article Risk Management

Selecting and Using Risk Management Consultants

Magazine article Risk Management

Selecting and Using Risk Management Consultants

Article excerpt

Two or three decades ago, when one of the only responsibilities a risk manager had was to purchase insurance, the concept of a risk management consultant did not even exist. Today, though, with the exponential growth in the number of areas in which a risk manager must be involved, it seems almost a foregone conclusion that you will need to utilize the services of a consultant at some point.

"The first indicator that you may need a consultant is if you have to do something and don't know where to start," says Christine Ferrusi Ross, research director for Forrester Research in Cambridge, Massachusetts, and co-author of How to Hire Compliance and Risk Management Consultants. "Another clue might be that you think you know what you want to do, but you want some assurance that you have all the bases covered." A third indicator, according to Ross, is that you realize that you need someone to fill in the gaps in your knowledge. "You may know most of what you want to accomplish, but you need someone to provide assistance in a specific area where you don't have expertise," she says. Another need may occur when an auditor comes in and explains that you need to address a certain risk that you had not considered, and you need to hire a consultant who has that expertise.

Risk management consultants can provide services in a number of areas. Most of them are qualified to conduct organizational audits and exposure analyses. These include discovering what exposures your organization has, as well as what needs to be done to reduce these exposures and protect the organization.

Consultants can also organize and manage individual risk management projects, such as implementing the recommendations that result from an exposure analysis.

They can review and evaluate the organization's insurance program and make recommendations related to coverage improvements, administration and financing options. Mike Redman, vice president of finance and IT for the North Central Group in Middleton, Wisconsin, sees this as a particularly valuable service. "We feel it is good practice from a business standpoint to review our overall insurance risks with our consultant every two to three years," he says. "As our business and insurable assets continue to grow, we need to have our consultant's input on where our company may have increased exposure. They are the experts in this area, and we value their objective, independent perspective."

Consultants can also provide ongoing counsel related to risk issues as they arise. That is, whether you have responsibility for risk management full-time or part-time, you may elect to use a consultant on a regular basis to provide assistance and to be a sounding board for what you are wanting to work on. Of course, the larger your department is, the less need you probably have for a consultant. Still, even a large, well-run risk management department will never be totally devoid of the need to use someone from the outside. In such cases, it may make sense to place these consultants on retainer.

Certain risk management consultants may have specialized expertise and can offer services such as being an expert witness, evaluating third party administrators, assessing options for self-insurance, conducting claims audits and reviews, etc.

Another growing area for consultants is helping organizations introduce an enterprise risk management strategy. The reason being that ERM is such a comprehensive topic covering so many areas that few risk managers have the expertise and knowledge to fully understand everything.

Consultants can also be valuable in other circumstances, such as when the volume of work cannot be handled internally or when an internal issue is politically sensitive.

Narrowing the Field

According to Ross, the place you begin your search for a risk management consultant may depend on the type and scale of your needs. "In most cases, though, the best place to start is with your current auditor, who may offer risk management services," she says. …

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