Magazine article Risk Management

Riding the Trend to Outsource

Magazine article Risk Management

Riding the Trend to Outsource

Article excerpt

Risk managers would be better leading the decision to outsource and contribute to their companies' choice of suppliers than hoping that a downsizing or outsourcing movement in their organizations will not affect them, according to one broker and risk manager on a panel at a session, "Outsourcing for Risk Management Services--The Changing Roles" at the conference in Winnipeg.

Yvon Menard, vice president, Johnson & Higgins in Montreal and former RIMS executive council member, said that risk management should be a core component of corporate management.

"Few organizations can afford to outsource the risk management function," said Mr. Menard. "It's a matter of outsourcing some of the services, not the entire function. However, the function must be lean. Risk managers know their organizations better than anyone else."

Mr. Menard traced the outsourcing trend to the evolution of broker services, first from marketing and renewal of insurance coverages, then loss control and claims. Then there came a whole spectrum of support services.

The risk manager, Keith Shakespeare, chief operating officer of Canadian Universities Reciprocal Insurance Exchange in Ontario, said that even if risk managers survive the first or second cut in a downsizing, the trend is such that they might not survive the third round of layoffs.

He also said that risk managers should be cognizant of the rationale for outsourcing, such as freeing the corporation to concentrate on what it does best, its core businesses. "Rather than being victims, risk managers should get involved in the process up front and become part of the decision," he said.

Mr. Shakespeare said that risk management has traditionally been viewed as a head office function. Today, regarding all management functions, there are questions being asked with serious challenges. The answer is often eliminating the entire department, since companies are under pressure to cut costs and reduce overhead. Whether the decision is appropriate or not, some companies are faced with high debt loads and dwindling profits.

Some of the functions at the head office intrinsically are tied to the business such as corporate governance or tax functions. Mr. Shakespeare explained that risk management should be among the corporation's cost-effective activities and should be at the head office rather than pushed down to the line level.

Some companies have determined in dollar and sense fashion that risk management should be handled at the line level, such as is the case where a plant manager has responsibility for assets under his or her control. …

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