Get Respect from Your CFO
Quinn, Lawrence Richter, Risk Management
It may be the single greatest challenge risk managers face today: Getting the ear of the treasurer and the CFO as they struggle to manage skyrocketing insurance costs and a plethora of new concerns that threaten to sink bottom lines and destroy shareholder value. But the events that have made these executives' time more precious--beyond September 11, the collapse of Enron, the spate of major corporate bankruptcies and the implosion of the accounting industry--also hold the potential to awaken senior management to the importance of the long-somnolent risk management profession.
Today, risk managers can demonstrate, finally, that they are much more than the people who simply buy insurance. They can prove to senior management, boards, audit committees and institutional shareholders that they can be full partners in implementing effective enterprise risk management programs. They can prove that they are the rightful holders of that title--risk manager--at a time when almost every corporate manager, from auditors to information security executives, is glomming on to the name.
But this opportunity does not come without doubt and skeptics: Are risk managers willing to proactively--even aggressively--pursue these possibilities? Will they market themselves to the CFO, treasurer and others? How will they get these executives to sign off on their suggestions, particularly if senior management is doubtful of the risk manager's skills to accomplish the job? In searching for that broader role, are risk managers willing to take the professional risks necessary to capture the executive attention they need?
These questions have no single answer, nor is there one agreed-upon approach to earning the regard and respect of upper management. For every theory on this subject, there is a counterpoint, for every opinion there is a dissenter. The only consenses in the risk management community is that this issue must be addressed.
"It's not so much that the door has been opened for risk managers," says Bradley Wood, senior director of insurance at Marriott International, Inc. in Bethesda, Maryland. "Rather, they have the opportunity themselves to open the door with the treasurer.
"Clearly treasurers and CFOs will be turning more to risk managers in the current environment," he says. "It's the risk manager's responsibility to educate the treasury leadership, to lead the discussion."
A simple assessment of the insurance market should have risk managers rushing to their bosses' doors, prepared with an understanding of the current conditions (and, hopefully, having given their bosses some previous forecasting of market directions). Although risk managers do not want to take on the responsibilities of the treasury staff, they want to be involved in company strategy. And now especially, senior executives need their help and their insurance industry relationships to get through costly premiums, the recession and new threats in terrorism and business interruption.
"With rates going up thirty to fifty percent in the past twelve months, and even more post-9/11, the CFOs and treasurers are working with their risk managers to optimize the financing of the risk," says James Swanke, Jr., a principal with Tillinghast-Towers Perrin in Minneapolis. "They know that the drivers here are the risk managers."
On the other hand, focusing just on insurance policy issues may not move the risk management discussion in the right direction.
"Post-9/11, the risk manager who is still worrying about premiums and coverage is missing a huge opportunity to show value to the company," says Richard Sarnie, director of risk management at Engelhard Corp. in Iselin, New Jersey. "So far, the focus continues to be far too much on insurance policies and language. [The risk manager] needs to stand up and say, `I can help.'"
According to Thomas Seuntjens, president of the risk consulting firm Seuntjens Associates in Wayzata, Minnesota and formerly a member of Honeywell's integrated risk program, the risk manager should be ready with solutions when the top executives give him or her the nod. …