Total Cost of Risk: How to Communicate About the Big Picture - Webinar Recap
Last week, LineSlip hosted our “Total Cost of Risk: How to Communicate About the Big Picture” virtual roundtable webinar. The purpose of this webinar was to facilitate a conversation about Total Cost of Risk (TCOR).
The event was hosted by our own Michelle Bennett (Director, Customer Success) and Laurie Solomon (Vice President, Risk Manager Channel). They were joined by John Marren (Senior Director, Global Risk & Insurance Management, Novavax, Inc.), Peggy Brockmann (Director of Risk and Insurance, Bonaventure), and Loren Nickel (Director, Business Risk and Insurance, Google LLC).
As our roundtable consisted of highly experienced risk professionals, the conversation was both fruitful and insightful. Here’s a recap and some key takeaways from the event:
Figure out what you’re using TCOR for.
Before getting into the nitty gritty details of calculating your organization’s TCOR, you need to ask your risk department, “What are we ultimately using TCOR for?”. The answer to this question could range from a performance metric, a KPI, the percentage of revenue, or something else entirely. To really answer this question, you must look at your organization, its needs and goals, and align it all together.
Communicate about TCOR in a way people outside your risk department will understand.
TCOR is valuable for an organization because it gives you a tool that helps speak the language of the businesspeople that are running the organization. It speaks in terms that they understand such as how the costs affect the business.
Even so, when you’re communicating to your senior leadership and board members at the highest levels about what’s happening with your insurance program, you need to be mindful of communicating TCOR in a way that people will understand and care about. You can try using the main components of TCOR to talk about the efficiency of insurance such as how much you’re currently paying, what are you getting back, whether it’s a fair trade, and what’s the longevity of the insurance program over a longer period of time.
Understanding TCOR makes it easier to communicate the health of your insurance program to leaders and stakeholders. It creates visibility, and helps leaders and stakeholders appreciate the value that risk managers bring to the organization.
“When reporting back to CFOs and board members at the highest levels about what’s happening with insurance programs, use the main components of TCOR to talk about the efficiency of insurance—how much are we paying, how much are we getting back, is it a fair trade, the longevity of it over a longer period of time. Offer a snapshot.” —Loren Nickel, Director, Business Risk and Insurance, Google LLC
Use TCOR to create strategy discussions and generate conversation.
We’ve mentioned in previous blogs that TCOR allows risk managers to be seen as more strategic. “How so?” you may ask. This will lie in your ability to use TCOR to create strategy discussions and to generate conversations.
We know that risk managers try to buy insurance optimally, but they also need to help people outside of the risk management department understand the strategies behind what insurance they choose to buy.
Risk managers also need to help senior leadership understand where the risks are and what the costs of those risks may be against what you may want to spend to prevent and mitigate those exposures. Show your management how you can address and manage these risks and what protections you can put in place. From there, you can help guide senior leadership with how they should invest with that information. Throughout the process, make it be known that how they choose to manage risks affects the overall costs to the organization.
Another way risk managers can be seen as more strategic is by leveraging TCOR with your organization’s strategic goals (ex. growth). You need to consider where your organization wants to go, what the risks are to getting there, and what protections you need to put in place. You need to show your management what the benefits the organization will gain from managing exposure. Sell it to the business as something that improves their bottom line. By doing this, you can get a bigger seat at the table with core business leaders and show that the risk department is not just a cost center but rather a strategic investment. Be proactive about helping your company set its strategies.
“Set your goals — what’s your journey, where you want to be, and what’s the cost of getting there, and what protections do you want to put in place. All those things come at a cost, and all contribute to TCOR.” — John Marren, Senior Director, Global Risk & Insurance Management, Novavax
Understand that there are controllable and uncontrollable risks.
As a risk professional, you need to understand that there are both controllable and uncontrollable risks. Simply understanding this will make you more nimble and agile when uncontrollable risks arise.
Find allies in your company to spotlight and help you adopt a more comprehensive view of your TCOR.
We all know that one of the biggest pain points is communicating the work of the risk department to other departments in the organization. Not everyone understands insurance speak.
To mitigate this problem, you need to find allies in your company that does understand what you do and can help you spotlight your work. If you want to adopt a more comprehensive view of TCOR, you cannot do it alone. You’ll need to find allies within your company to help you, such as your CFOs and your finance team who may be more familiar with the numbers you have. Next, you can try reaching out to HR, Strategy and Planning, and other departments that are closely aligned with your own. It’s all about building connections and finding allies to help you highlight your work!
Start small.
It’s imperative that you start small when you want to start leveraging TCOR for your organization. The reason for this is that TCOR can get super complex over time. You can simply start with your premiums and claims and then gradually build out your expenses and start adding more components to it over time. It can be daunting at first especially if you’re starting from scratch since there’s so much dataset but remember, it’s a journey and not a one-time event!
And if you don’t want to build everything from scratch, LineSlip has a TCOR dashboard that allows risk managers to discern total insurance premiums paid—and to whom; as well as their retained losses, exposures, rate, and risk management administration expenses year over year. Our TCOR feature gives risk and insurance professionals a detailed and adjustable view of all policies, limits, sublimits, and retentions—all in one place—with the ability to view high-level data year-over-year or the ability to granularly review the critical data impacting a risk manager’s overall TCOR. All you need to do is reach out to us and provide us with your datasets and we’ll do the work for you!
Knowledge is power!
Throughout this webinar, we’ve kept returning to the point that TCOR is a powerful tool. TCOR provides risk managers with an arsenal of knowledge about their insurance program. And time and time again, we’ve come to know that knowledge is power. If risk managers understand all the components of TCOR then they have the power to take action and make meaningful changes within their organization.
“If we, as risk managers, really understand what all the aspects of our TCOR are then we have the power to move forward and make changes.” —Peggy Brockmann, Director of Risk and Insurance, Bonaventure
As we move into 2023, many risk managers will be looking to continue minimizing the cost of risk and utilizing data and analytics to drive decision-making, especially with the uncertainty of the economy we are seeing now. Having a TCOR dashboard, you can be able to effectively manage your company’s risks, allocate your insurance spend appropriately, and help your organization set its strategies moving forward.
To schedule a demo, click here. If you are already a LineSlip user, contact your Customer Success Manager to begin onboarding your TCOR data and leverage the power of LineSlip's new TCOR functionality.
To see a recording of the webinar, click here (Passcode: U3y@3vau).