Risk Management Stewardship: Five Tips for Closing the Books on 2021

One of the most valuable skills risk professionals contribute to their organizations is the ability to peer into the future. Looking forward is beneficial when risk managers envision both positive and negative developments, and make plans accordingly to protect their organizations’ people and property. To be sure, no risk manager has a crystal ball, but there also is a benefit to looking back – it can help with the road ahead. 

As every investor knows, past results are no guarantee of future performance, though they can offer some guideposts for planning. As risk managers prepare to change their calendars, reviewing the past year in their organization offers lessons to take into the new year. Can I bring more value than I did last year and what can help me do that? 

Five Year-End Practices to Enhance Risk Management

Before closing the books on 2021, risk professionals should consider five year-end practices that can enhance their risk management programs in 2022. These practices include: 

Examine budget and ultimate spend with trending analysis.

For many organizations with calendar year ends, the fourth quarter is a time for reconciliation of the prior budget and finalizing a new one.   An important question for risk managers to ask is, “How did your risk management department’s actual spend compare with the budget?” Did any funds from 2021 go unused? Did any unanticipated expenses crop up, and might those recur in the new year? Understanding any gaps that arose can help risk professionals recalibrate their budgeting. 

Analyze losses and claims and provide one-click Board- and C-Suite-ready data.

Retained losses and larger-than-expected claims can erode risk management budgets, but they also signal opportunities for implementing loss control and risk transfer strategies that better align with your organization’s risk tolerance. What was your loss experience and how did it impact your organization’s financial performance? What trends can you tease out of the past year’s claims and retained losses? For example, if losses in 2021 were concentrated in one or two lines of business, the risk management department might want to investigate why, and adjust its allocation to encourage loss prevention. 

Review your insurance strategy.

Did your risk transfer program perform to your expectations? Why or why not? Did your organization have any losses that insurance did not cover? These are important questions to discuss with your broker or risk advisor, as the answers could prompt you to consider changing insurers or restructuring your insurance program. 

Nurture risk relationships.

On the subject of risk advisors, good stewardship in risk management entails reviewing your organization’s risk relationships. How did each of your broker/risk advisor and carrier(s) help you manage your total cost of risk compared to other partners? What could they have done better? Where is there opportunity?  Year-end could be an ideal time to reassess ways to nurture and improve those relationships. 

Anticipate business changes.

While the above four practices are largely about looking back, the fifth is mostly about looking ahead – through the lens of what happened in the past year. What will be different in 2022 for your organization’s business and exposures? What will be different for your associated risk management priorities and staff? Some business changes may surface during the budgeting process for the coming year, though you might think of others, such as potential acquisitions or divestitures, or supply-chain shifts. Such changes, sooner or later, will need a risk manager’s attention, so it’s good to start thinking about them in advance. 

Evolve to Next Gen-Risk Management Tools to bring more value.

As risk professionals prepare to close the books on 2021, they might discover new ways to improve their department’s operations and insurance purchasing. For example, does your department have the right single-pane of glass data visibility(s) and tools to quickly understand and mitigate risk and optimize your insurance spend? If the answer to this question is anything but a confident “yes,” consider exploring technology solutions to enhance your team’s efficiency and effectiveness. Good risk managers plan for the worst and hope for the best. The right aggregate data visualization tools make this easier and all risk professionals deserve to enter a new year with confidence in their risk management toolbox.