Magazine article Risk Management

Meeting of the Minds

Magazine article Risk Management

Meeting of the Minds

Article excerpt

Five years of discovering how Microsoft's risk management and information technology sectors can work together has brought about the pinnacle project-a custom RMIS program-from Brian Warren and Ed Shoemaker.

When Microsoft's claims manager Brian Warren (risk management) and senior program manager Ed Shoemaker (treasury information technology) joined forces five years ago to bring the Redmond, Washington-based software giant's IT and risk management departments together, they knew their work was cut out for them. Their challenge was not just to manage Microsoft's risk more efficiently, but also to affect the kind of institutional change within the organization that would long outlive either of their stays. Risk Management Magazine spoke with Warren and Shoemaker on the difficulties of bringing their departments together, what they have achieved and how their progress serves as a model for other organizations.

RM: What makes Microsoft's risk management and information technology demands unique?

Warren: Our main product is intellectual property. Consequently, we don't have the property exposures that our businesses might. We have relatively low investment in physical plants, and relatively less workers' compensation exposure than most manufacturing or service businesses. But we do have far more concern over intellectual property rights issues, contractual issues, etc.

When you look at this company in terms of its balance sheet, it's a whole other dimension of opportunities and challenges. In many cases, Microsoft has more assets than the insurance companies we consider doing business with, so we have to ask ourselves, "What are we trying to accomplish?" The answer to that is we are trying to achieve flexibility for alternative risk financing from other-than-commercial insurance markets. This creates a lot of new business systems to manage.

Shoemaker: Microsoft's significant cash resources give us the ability for creative risk financing that other companies do not have. As such, our unusual business systems needs take us out of the mainstream of packaged solutions. When Brian comes to me with a business need or a systems need, it may not be mainstream. I have to take more time to understand his needs in creating and deploying those solutions. This opportunity creates additional challenge.

RM: What inspired Microsoft's IT and risk management departments to work together?

Warren: We were not satisfied with the policy side of any RMIS [risk management information systems] products we looked at on the market, largely because of the unique risk financing Microsoft does with captive utilization and some finite programs with extended durations and broad coverage. Standard RMIS does not encompass multiple-year policies or integrated policies with single-aggregate limits across dissimilar additional coverages like property and general liability merged under a single limit.

We realized we were not going to get what we needed from our RMIS vendors, so we opted to develop a RMIS solution internally. We went that route as a last resort because the costs can be prohibitive. But management decided it was important enough for IT and risk management to jointly work on a proprietary risk financing program code-named Sandhurst, which launched on October 18.

Sandhurst is a Web-based software solution you access through Intemet Explorer. It can capture virtually any risk financing program or instrument you can think of. Extra aggregate limits, coverages, any sublimits, per occurrence limits, retentions, all that. It can set up an occurrence and suggest, based on characteristics of that occurrence, which of our policies or programs have available limits and could possibly respond and provide coverage. This allows the user to take additional steps to select coverages, lock them in and make a record of the claim. The actual handling of the claim is still manual; you have to call the carrier, etc. …

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