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New RIMS President: 2011 Was "Wake-Up Call" on Enterprise Risk Management

Source: A.M. Best

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Posted on 06 Jan 2012

Deborah Luthi, who was recently named president of Risk and Insurance Management Society Inc. for 2012, said she intends to expand the organization's effort to promote enterprise risk management awareness during her term, including around issues involving climate change.

Luthi told Best's News Services that 2011, which saw a number of unusual natural disasters across the United States, should serve as a wake-up call for companies that are evaluating their ERM programs. "As we ended 2011, and saw all the different takes on what the year looked like, I was struck by how all the unexpected happened," Luthi said. "A take away for insurers and for risk managers, in particular, is that we always need to be helping our organizations to anticipate, identify and prepare for those things that we don't think will ever happen because they do."

RIMS is working to promote ERM and strategic risk management and helping companies evaluate their goals and what threats may prohibit them from achieving those goals, she said.

Another area of focus is helping companies identify the employees that can identify and manage risks. "I think we become of even more value to our organizations as we reach out to auditors, those in compliance and security, so we don't have risk management siloed but make it a collaborative effort," Luthi said.

That strategy is particularly important in the area of climate change, Luthi said. As enterprise risk manager for the San Francisco Public Utilities Commission, Luthi said she has seen how climate change could affect the availability of water, especially given California's long-running drought in 2011.

"Taking an organization through an enterprise or strategic risk management exercise, particularly for those of us where climate change has a real direct impact, that would surface. What does that mean for the organization and how do we go about managing that risk and being prepared for that risk. And again, that goes to the insurance products that are out there," Luthi said. "That is one thing we cannot have a lot of control over managing that risk. Mother Nature takes the lead on that."

Luthi said another area of concern is reputational risk -- an area where awareness and coverage is growing.

Risks could translate into potential opportunities for risk managers in 2012, Luthi said. "With the economy, we have seen companies sitting on hoards of cash. Hopefully at some time, and hopefully in 2012 as the economy begins to move a bit more, we're going to see organizations look for opportunities for that cash," Luthi said. "In that is an opportunity for risk practitioners to help their organizations gather good information about risks so informed decisions can be made."

Luthi has been a member of RIMS for almost 32 years and on the board for 11 years. She has served as vice president and board liaison to the society's finance committee and Spencer Educational Foundation committee.

In addition to helping companies and risk practitioners find opportunities to minimize risks, RIMS has also been pushing for the federal government to more clearly define the role of the the Federal Insurance Office in the market place.

In a comment letter submitted to the FIO last month, RIMS argued that the federal government and FIO should play a larger role in regulating insurance.

Scott Clark, outgoing president and director of RIMS, wrote in the organization's comment letter that the existing regulatory structure, which is led by the states, has inherent flaws. Clark said enacting an optional federal charter could help to address some of those issues.


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