Driving Results in Your Risk Program

Author: Mark Bennett, Founder of the Risk Innovation Group

Set an Aggressive Financial Goal

YOUR ANNUAL RISK GOAL SHOULD START WITH THE FINANCIALS. Financials are a metric that speaks to the overall health of your company. Best-in-class risk leaders have continuously improving financials. An aggressive financial goal along with an aggressive timeframe is what drives structure to plans and milestones that get you results.

CFOs – expect the risk team to improve their numbers year-over-year. Risk Managers – build your plans to reduce financials (overall cost of risk).

Each year, company leaders set time aside to strategize, plan and set aggressive sales/revenue goals. The goals drive the resources, set the target and are intended to hold everyone accountable. Meeting the goals speaks to the company’s success. The aggressive goals are a result of your strategic priorities and forces targeted actions and alignment of resources within specific timeframes.

In the traditional (hazard) risk space, financials often times do not improve because they are not the focus. Typically, there is not strategic planning, thinking, and accountability driven by financials.

Successful Risk Managers take ownership and set an aggressive financial goal. They set this goal to out-perform the prior year’s budgeted dollars, one that will get both the CFO’s attention and force the year’s plan to be strategic and focused to actually make an impact.

Get Workers’ Compensation Right First

This is one of the most complex areas in the risk enterprise and if the risk manager can get these financials tracking down (reduced budgeted exposure), they will have earned credibility to take on a larger role.

For many in the workers’ compensation (WC) area, they live in the slip, trip & fall space. Their annual plan is to look at past activity to determine next year’s allocation of time and resources based on the frequency or severity of losses.

Although a standard industry practice, it is a one dimensional approach in a much more complex environment. Even worse, significant losses are happening and financials are not improving in the name of slips, trips & falls and focusing purely on regulatory compliance.

Although slips, trips & falls are part of the formula, the equation is must larger and deserves more strategic attention. WC is complex, has multiple pieces and all pieces must function well together. To enable this to happen, 4 steps are recommended:

Step 1: Have a “Risk Assessment Process” in place that will take the overwhelming to manageable.

To get to what is most important you need structure to your process. It must be able to capture, organize & prioritize all the pieces so that it is manageable and logical next steps can take place. An effective risk assessment process combined with having the roles and responsibilities of your “3 Lines of Defense” defined is what is needed to make your aggressive goals actionable.

Step 2: Temporarily shift resources to what is most important.

Everything is not equally important and when you want to be successful in meeting your financial goal, you need to temporarily shift your time & resources to your most important risks or obstacles. By having an effective risk assessment process in place it will give you the ability to do this.

An effective risk assessment process captures your current risk system by breaking it into foundational risk and then adding your current controls to each risk. This baseline gets rated and then, not only points to what is most important, but points to areas that have at least “adequate controls”. It gives you the comfort level to reallocate the majority of your time and resources to areas that are most important temporarily.

Step 3: Establish your plan.

There are no shortcuts. You have identified your biggest obstacle (strategic priorities) to improving your financials and now need to apply targeted action steps with specific milestones.

From Plan to Action – Risk Managers must now transition into a strategic facilitator/project manager role. As a strategic facilitator you need to project manage monthly milestones that were set by your very aggressive goals. Use tools such as a project management worksheet to ensure your timeframes are met, tasks are checked off and change orders/requirements are addressed and built back into the plan.

Step 4: Make monthly Progress.

Aggressive goals are only met by having your supporting controls in place, effectively mitigating these controls and having monitoring in place to make sure that what is most important happens. It is all about having structure to the process. We all work in busy environments and if there is no structure, it all breaks down. Successful risk leaders operate strategically and make sure significant items are moved forward in their initiative every month.

In workers’ compensation, you are demonstrating your care about your employees more if you start with the financials. Getting to the financials requires that you get past the slips, trips and falls to a more strategic and comprehensive approach to risk. When financials improve, everyone wins.