Risk Management Reports

April, 1999
Volume 26, No. 4

I am not now nor have I ever been a member of the Risk & Insurance Management Society (RIMS), an association that represents 4,500 North American organizations and 7,700 deputy members, employees of those corporations. I have never been a risk manager and thus have never qualified. Nonetheless I feel almost a member because of my intimate involvement with this group for almost 30 years. Iíve supported RIMS in many ways. Iíve also criticized what I see as its shortcomings.

I was first invited to address a RIMS (then the American Society of Insurance Management) annual meeting in Miami in 1970. I gave my swan-song as an insurance broker in a paper entitled "Whither the Broker?" and became a risk management consultant that October. Since then I have attended all but one conference, served on the Editorial Advisory Board of Risk Management magazine (10 years), spoken before innumerable annual and chapter meetings in North America, been a Board member for the Spencer Educational Foundation (again for ten years), and, finally, been honored by its members with the Goodell Award, in 1994. As a consultant I began the Cost-of-Risk Survey and enlisted the Societyís help as its co-sponsor.

With RIMS approaching its 50th anniversary and I my 30th for the annual conference, I think it worthwhile to step back and take a fresh look at this unique organization. It is run by a Board of representatives from each of its 95 chapters, an Executive Council of ten, and a professional staff in New York City. Billing itself as a "proactive voice on behalf of insurance consumers," it has adopted a broad risk management view, engaged in lobbying, promoted continuing education and become increasingly vocal on insurance and risk management issues. Its annual conference (in Dallas this April) attracts almost 10,000 people.

Yet is RIMS too protective of its past and present and less a leader for the future? With the turmoil occurring in all financial services, has RIMS the vision and flexibility to adapt to rapidly changing conditions? In a series of discussions with several RIMS members and observers over the past three months, I shared my concerns about its direction and future in five areas:

  • membership,
  • governance,
  • economics,
  • focus/vision, and
  • "standards."

RIMS has an unusual membership. Its direct "members" are organizations that employ "risk managers." They in turn are called "deputy members." Both groups are shrinking from the recent wave of mergers, downsizing and outsourcing. RIMS announced late last year a new membership category ("associate") designed for other professionals in risk management, such as insurers, legal counsel, insurance brokers, claims managers, consultants, engineers, etc. - the vendors who serve its members. Its chapters are reviewing this proposal and the early returns indicate general support, although some "fundamentalists" still believe the organization should be restricted to practicing "risk managers." Can RIMS accept vendor "associates" without compromising its mission? The answer may lie in the explosion of interest in a global discipline. I suggest that it is time to consider a truly global organization, composed of individuals interested in and practicing risk management, be they "buyers" or "sellers" of services. Supported by regional, national and local "chapters" to reflect language, legal and operating differences, such an organization could stimulate the expansion and development of the discipline. It could also extend its mantle to the industry specialty groups that many managers find more valuable. Finally, it could coordinate a worldwide educational effort that reflects local conditions and specialty concerns. Ambitious? Yes, but itís necessary. If RIMS doesnít do it another organization will.

Governance is another issue. The President serves but one year. While most presidents have considerable prior experience on the Executive Council, one year provides little continuity. A newly adopted multi-year Strategic Plan should reduce this problem, but would a longer term - two years, for example - be feasible? How many risk managers can afford this extra commitment? Should RIMS re-think its governance structure, and elect its executive director as President and its top member as Chairman? Changing conditions require a new balance between staff and governing body.

Funding is the Achilles Heel of the Society. RIMS has a history of strong resistance from its members to higher dues. Members argue that their superiors always resist increases. While they want more services, they donít want to pay for them. This led directly to the overwhelming financial importance of the Societyís annual conference, which raises more than half of the annual operating budget. The conference is now a week-long extravaganza: a combination trade show, educational emporium (over 150 separate seminars), networking opportunity, and chance to sample extended hospitality from vendors. While its crass commercialism, size and length disappoint some (like me), most risk managers and vendors like it. They vote with their attendance, and the figures speak for themselves. The financial dominance of this conference over the RIMS operating budget puts extraordinary control in the hands of exhibitors and vendors. A count of the speakers for this yearís conference in Dallas shows 221 vendors compared to 90 risk managers - a 71% to 29% disparity! This leaves an image of a Society whose members are unwilling to pay their own way or even speak for themselves! Of course, if RIMS changes and enlists a large number of associate members, this point is no longer valid. Many of the RIMS programs are worthwhile but expenses could be reduced dramatically. For example, pass more responsibility to industry or local groups. Use the Internet and create a "virtual" organization with limited staff. The Global Association of Risk Professionals (GARP) proves that a worldwide organization can function without offices or professional staff and fulfill its membersí needs! There is even a FRM (Financial Risk Manager) program and worldwide examinations. The keys on funding: determining how to deliver more services to members at less cost, while breaking the financial stranglehold of the annual conference.

The vision and focus of RIMS are changing. The discipline of risk management now encompasses operational risks (those conventionally addressed in part by insurance), financial (credit and market) risks, public policy and political/regulatory risks. To survive, RIMS must reach out to sister risk management organizations. Groups such as GARP (now with 5,400 members) and the Society for Risk Analysis (2,200 members) also speak for the discipline. Yet neither they nor RIMS have made efforts to bring their respective members together. RIMS has limited liaison with the Financial Executives Institute, the American Society of Safety Engineers and the American Risk and Insurance Association (teachers of insurance). More out-reach is necessary. Already the RIMS attempt to create a "Fellow in Risk Management" educational program has run afoul of a similar (and earlier) "FRM" (Financial Risk Manager) initiative of GARP and a highly successful global "Fellow" program sponsored by the Institute of Risk Management in London. In this critical area of education we need cooperation, not divisive competition! Some argue that each specialty area is too remote from the others. When organizations approach risk from an integrated view, itís time to begin to adopt an new educational curriculum.

Finally, RIMS must tackle intelligently the new issue of "standards." Risk management "standards" have been adopted in New Zealand, Australia and Canada. Despite their ominous title, they are simply suggested "guidelines" for organizations. Risk analysis "standards" are in use in Norway. The International Standards Organization (ISO) is about to promulgate a set of global risk management definitions. The COCO and COSO guidelines, promoted by the accounting profession in Canada and the US, received little input from RIMS. While I share the concern of some RIMS members that adoption of "standards" could lead to restrictive governmental "regulations," RIMS and other organizations cannot afford the luxury of burying their heads in the sand in the futile hope that these efforts will disappear. Active involvement is a better way to control the future than playing the ostrich..

RIMS can lead its members, and others, into a new recognition of the enhanced role of integrated risk management within an organization. Will it seize this opportunity to reinvigorate its charter and its services, or will it regress to representing only those who buy insurance? What a challenge for the next decade!

Copyright 1999, by H. Felix Kloman and Seawrack Press, Inc.

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