Time & Change: Risk Institute Annual Conference 2018

The Risk Institute is the nation’s premier risk research center located at the intersection of academia and application. Our 2018 Annual Conference — an invitation-only, two-day event (Sept. 26 & 27) — was attended by C-suite executives and senior risk professionals from around the globe and featured Eddie George, Ohio State Football legend and Jeff Eggers, Executive Director of the McChrystal Group. This year our conference focused on managing talent pipeline and workforce development in the face of massive technological change and economic upheaval.

Our annual conference is an ongoing dialogue between risk management practitioners on risk management successes, challenges and leading practices related to the evolution of risk.

Attendees heard from 15 talented speakers. Each coming from a unique perspective on managing talent pipelines in the face of massive technological change and economic upheaval.

“Some say that Gen Z has an 8-second attention span, but I don’t believe it. I think they have an 8-second BS meter. They can tell in a snap if something is relevant to them — if it’s bogus, if it’s worth their time,” said Marcie Merriman, Chief Culture Hacker at EY. “The millennial boat has sailed and Gen Z is here.”

Professor Joseph Fuller from Harvard University’s Future of Work Initiative offered insight into how Boomers approach a rapidly changing job market, “While Baby Boomers might recognize the job titles of today, many would lack the skills required to do the jobs they had when they retired.”

In addition to discussing demographic changes, Eddie George, Ohio State Legend and Entrepreneur offered attendees some sage advice, “You are going to be uncomfortable in life. So why not learn to be comfortable in the uncomfortable?” He encouraged attendees to eliminate the metaphorical box governing their life, citing his own experience of becoming a wealth manager, getting his MBA, and acting on Broadway after a successful career in the NFL.

We live in a digital world, which means that the risks we face are changing more rapidly than ever before. Over the course of two days, we sought to cultivate a greater understanding of how an organization can approach the many sides of talent risk — and leverage it to create value.

As Greg Khairallah, Senior Manager for Big Data and Analytics at Amazon Web Services, put it, “We simply cannot afford to think about risk the same way we’ve thought about it in the past.”

The Risk Institute Releases Fourth Annual Survey on Integrated Risk Management

Data Reveals Risk Management Funding Growing, Opportunity to Improve Corporate Objectives

Columbus, Ohio – Today The Risk Institute at The Ohio State University Fisher College of Business, a leading risk-management research organization, reveals its Fourth Annual Survey on Integrated Risk Management. The report surveyed more than 500 financial, nonfinancial, public and private firms to understand how U.S. companies view the role of risk management, the influence of governance and culture and how risk impacts business decisions.

The data reveals 70% of firms have an integrated risk management unit and companies are
increasing funding for risk management, but the size of those units continues to decrease. Despite recognizing the need to invest in risk, firms are not investing in people. Among the other 2018 findings:

  • 60% of risk managers believe that artificial intelligence will play a role in risk management in the future.
  • 28% of firms surveyed have been victims of a cyber attack – a risk that continues to grow each year.
  • 55% of respondents do not use predictive analytics, and those that do have been using them for less than two years.
  • 44% expect to outsource some or all of their risk function.

Risk management policies play an increasingly critical role in a firm’s ability to create value and remain competitive. Both financial firms and nonfinancial firms reported that when they integrate risk management into business processes, they are able to improve corporate objectives.

“One of our key objectives at The Risk Institute is to create a greater understanding of how organizations can proactively leverage risk management to create shareholder value,” said Phil Renaud, Executive Director of the Risk Institute. “Volatility in the current economic and political environment, as well as cyber risk becoming a real threat to many firms, lead to a more vulnerable business environment, making the role of risk management more integral.”

To learn more about the Risk Institute and its Fourth Annual Survey on Integrated Risk Management, please visit: http://go.osu.edu/risksurvey

About the Risk Institute

The Risk Institute at The Ohio State University Fisher College of Business is a collection of forward-thinking companies and academics that provide effective risk management strategies to not only protect firms, but position firms to create growth and value. The Risk Institute helps members consider risk from all perspectives: legal, operational, strategic, reputational, talent, financial and many more. The Risk Institute operates at a unique intersection between faculty, students and professionals from a broad cross-section of industries. With a leading-edge approach to risk management, The Risk Institute creates a unique exchange for risk-centered conversations, ideas and strategies that can’t happen anywhere else.

 

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The Risk Implications of Smart Technology

Artificial intelligence, drones, and the internet of Things are some of the most exciting developments happening in the tech world, but with these advancements come new and unforeseen risks for companies, governments and private citizens.

Last week, The Risk Institute hosted a continuing professional development session on the risk implications of smart technologies with experts from DHL, Cisco, EY and The Ohio State University.

“Ten years ago, people thought of drones as something used by the military on covert operations. Today, drones are available for a couple bucks and can fit in your pocket,” said Jim Gregory, Director of the Aerospace Research Center at The Ohio State University.

Gregory believes that the possibilities of drones are far-reaching, from package delivery to search and rescue, but that in order for the economics to work themselves out, the legality of drones needs to shift because under the current FAA regulations, most of these use cases are still illegal.

The most significant risks involving drones are

  • Loss of control link
  • Collision with another aircraft
  • Collision with people or property on the ground
  • Emergent behavior of autonomous system

Many of those risks can be mitigated with “redundancies on redundancies,” which according to Gregory can take the form of robust control links and never allowing one system to become so important that its failure results in catastrophic failure of the entire system. These redundancies are also essential in artificial intelligence.

“Artificial intelligence is not a singular concept,” said Chris Aiken, Executive Director, Advisory Services. “It’s a science-based, multi-disciplinary combination of software and computations presented in a human-like manner.”

Just as the cotton-gin spurred on the first industrial revolution, many experts believe that artificial intelligence will fundamentally shift the workforce, but are also quick to point out that AI is not necessarily smarter that humans, it’s just different.

“The real power of AI is to augment and amplify human intelligence and performance,” said Aiken.

And world leaders are taking notice with the competition between countries like China, Russia, Canada and the United States heating up for a global arms-race to dominate AI.

But what value is there in artificial intelligence really? According to Aiken, the real value of AI exists in five areas:

  1. Revealing insights
  2. Optimize performance
  3. Harness automation
  4. Enhance experience
  5. Sustain trust

As with any disruptive technology, it’s valuable to consider the predominant ethical, legal, risk and social issues associated with it. In the case of AI, companies should:

  • Start any project by examining the ethical and legal impacts
  • Evaluate the consequences on jobs
  • Communicate to win employee approval

Building trust between the user/impacted parties and AI is imperative for the success of the technology and business. Taking a holistic, human-centered approach, focusing on outcomes, and being pragmatic and ethical are common sense steps to take in order to build trust.

The Risk Institute remains committed to leading the conversation on risk in partnership with our member organizations. We examined the risk impacts of artificial intelligence in the risk function in our 2018 Survey on Integrated Risk Management. The findings might surprise you.

 

 

Create a Resilient Supply Chain in spite of Climate Change

Missed this session? Registration is now open for our June 14 session on the risks and benefits associated with AI, robotics, big data and drones. Register today!

In the last year,  there have been 17 natural disasters incurring more than $1 billion dollars in damages. According to experts hosted by The Risk Institute this week at an event on building business resilience to climate change, pre-planning and risk improvement can make a huge difference in loss mitigation.

Scott Anderson, a vice president at FM Global outlined numerous strategies that a company could take on in order to mitigate their risk in the event of a catastrophic weather event. These strategies were much more comprehensive than typical human interventions like sandbags; they are what he called physical flood mitigation — installing metal blockades, floodgates/barriers, etc.

This is much more than fear-mongering, these physical mitigations are scientifically proven to be more effective than human intervention. Take the massive flooding due to a hurricane or stalled rainstorm like Hurricane Harvey in 2017, which dumped nearly 60” of rain in just four days in the Houston area. FM Global clients who had made the recommended mitigations to their facilities only suffered a distraction, rather than devastation during the storm. In contrast, those clients who did not, incurred on average $23 million in damages from physical destruction, as well as in lost revenue.

Can your business afford a $23 million loss?

To illustrate an example of supply chain resiliency, Danielle Virant and Lee Ettenhofer from Abbott Nutrition shared their experience of leading the company through a table-top crisis exercise, which was then able to be acted on during Hurricane Harvey in order to ensure that hospitals — and in one case an immunocompromised baby girl — received the life-saving products they needed.

The key takeaway from their experience with the exercise and the actual emergency is that a plan is only as good as it is current, available, and in writing.

“Institutional knowledge is great, but it’s not so great with that knowledge retires without writing it down first,” said Virant.

Their advice is to set a date on the calendar every year to pull out the plan, review it, and make any changes that way it stays current and can quickly be applied if and when the need arises.

Kirk Pasich, an outstanding L.A. based litigator, shared some fascinating insights on the importance of contract language between the insurer and the insured, saying, “They [the insurer] is nearly always going to win— at least before you call me — when there is vague wording in a contract.”

Proving yet again, that specificity of language is much more important than your 10th-grade self ever thought it would be.

Is your business prepared to deal with climate change?

Two questions to ask to determine if your business has the capacity to be resilient to climate change.

2017 was a banner year.

Well, as far as catastrophic weather events incurring billion-dollar losses go.

According to a recent report, economic damages from weather-related disasters continue to climb towards and sometimes surpass record levels, with more than 800 major events worldwide cause an estimated $130 billion in losses in 2012 alone.

But while many companies are concerned about the cost of such events, they tend to plan for the future based on past trends. In the face of global climate change, 500-year and 1,000-year flood events are becoming more like 10-20-year events.

At a recent event hosted by The Risk Institute, climate researchers from The Ohio State University and industry leader, FM Global, shared their insights into how businesses can do more to mitigate and adapt to our changing climate.

Predicting the severity of climate change on our planet is tricky business, and there’s a lot of variation between scientists as to how bad it’s really going to get over the next 50-100 years, but there is a consensus that it’s going to be pretty bad, any way you slice it.

By 2100, the world’s temperature could increase by 4-6 degrees, which when taken at face-value doesn’t seem like a lot, but David Bromwich, a researcher at the Byrd Polar and Climate Research at The Ohio State University, put it in perspective saying, “During the last ice age when most of America, Europe and Russia were covered by massive ice sheets, the global temperature had decreased by about 4 degrees.”

So yes, 4 degrees can make a huge difference, so what do business need to do in order to prepare?

According to Lou Gritzo, Vice President of Research at FM Global, in order for a business to prepare for climate change it comes down to a couple key questions.

  1. How much are you willing to invest in a given climate change scenario?
  2. How certain are you that you’ve picked the most likely scenario?

A company’s answers to those questions will likely determine their resiliency to climate change and its impacts on their business.

The Risk Institute will dive into the potential answers to those questions at our next session Natural Catastrophic Losses & Resilience on April 12, 2018 from 9am-1pm. Visit our website to register.

Organziational Culture and the Future of Risk

Risk Institute Executive Director Philip S. Renaud was the La Fleur guest lecturer at Hood College this week where he gave a keynote address on organizational culture and the future of risk management.

“Risk isn’t just insurance, actuarial, cost center, process or program,” says Renaud. “World-class risk management is achieved when an organization treats risk as a value.”

His presentation (which can be viewed here) takes the audience on a journey of risk management practices through the years. From risk transfer, insurance and accounting focus of the 1960s to captives in the 1980s to enterprise risk management and cybercrime mitigation of the present, the risk management professional today is just as likely to have an IT background as an insurance or finance background.

Renaud believes that an organizational culture that’s conscious of risk should look at three things: integrity, commitment and transparency.

“Organizations that are lacking in one or all of these spheres are the same organizations you see on the news for one scandal or another,” says Renaud. “Wells Fargo, BP, United, VW — these are companies who’s lack of transparency and integrity have cost them their good brand reputation, their stock price — not to mention the loss of public trust and in some cases landed their leadership in jail.”

Renaud believes that the future of risk management is bright and filled with opportunities for young professionals entering the field. According to a recent survey from the Risk Management Monitor, more than 60% of risk professionals are 55+ and will be eligible for retirement in the next five years, opening the door for bright, young professionals to move into more senior roles more quickly.

When asked if he could offer one piece of advice to companies on seeking to improve their organizational culture, he said, “Cultivate transparency. A lack of transparency is always viewed as deceit.”

Phil Renaud is the Executive Director of the Risk Institute at The Ohio State University Fisher College of Business. The Risk Institute is a research center bridging the gap between academic research and practitioner experience in enterprise risk management.

Impact of Demographic Change on the Macroeconomy

The next installment of the Risk Series will be Weathering the Storm: Building Business Resilience to Climate Change on March 20, 2018 and April 12, 2018. Seats are filling up fast, so save your seat today

At the turn of the last century, the majority of American were involved in agriculture. Today that number is less than 2%. Technological advances shifted the American economy then, it’s happening again, but this time in the manufacturing and service industries.

The Risk Institute welcomed Chris Ryan from ADP and Michael Betz from The Ohio State University on February 21, 2018 to discuss on demographic change impacts the macroeconomy.

Betz emphasized that to understand the digital revolution, it helps if we also understand the industrial revolution of the 19th century and other employment revolutions. 

The Luddite revolution of the 19th century began as cotton gins and steam engines were breaking on to the stage in a big way, able to do the jobs of low skill workers faster and more efficiently. These Luddite revolutionaries called for the end of these machines, but their call was shortlived because they were soon able to find other work and reap the benefits of living in a more productive society.

Throughout history, as worker productivity increased, so too did the median household wage, and so there hasn’t been much sustained resistance to new technology.

So is the digital revolution different?

Both Betz and Ryan say yes.

In the past, low skill jobs were taken over by highly specialized machines and workers were able to retrain and procure new jobs that machines couldn’t do, but with advancements in technology, robotics and artificial intelligence even the highest skilled workers are having a tough time competing.

To compound the situation, since the 1980s, worker productivity has increased exponentially, but the median household income has leveled off, so people aren’t experiencing the financial benefits of a more efficient society.

ADPs data calls this phenomenon the “Fading American Dream.” 

According to their data, a child born in 1940 had a 92% chance of earning more than their parents did. However, a child born in 1985 (so today’s millennials), only have a 50% chance of earning more than their parents.

So what can be done?

Ryan suggests looking forward to the future saying that most employment practices are looking in the rearview mirror rather than looking forward to future trends like liquid pay, the gig economy and work flexibility.

The next installment of the Risk Series will be Weathering the Storm: Building Business Resilience to Climate Change on March 20, 2018 and April 12, 2018. Seats are filling up fast, so save your seat today.

What researchers are doing to tackle distracted driving

February 22, 2018 marked one year since The Risk Institute embarked on a nationwide initiative to predict and curb distracted driving behaviors.

To celebrate our achievements over the last year and to reinvigorate our efforts, we hosted about 100 members of the initiative for an anniversary event. 10TV wrote a great piece about the work we’ve been doing.

We welcomed Fletcher Cleaves, a former collegiate athlete who is now paralyzed from the mid-chest down after a distracted driving crash several years ago; Maria’s Message, who is providing the awareness and reach for the initiative as we work together to create a research-based driver’s education curriculum; and students from Olentangy High School who we worked with to do some innovative research into driver habits and training.

If you want to get involved with the distracted driving initiative at The Risk Institute, reach out to us at riskinstitute@fisher.osu.edu.

Impacts of Protectionism on Global Trade

Join us for the next Risk Series session on February 21, 2018, as we discuss how demographics drive the economy and the risks and impacts your business faces as a result. Register today!

Last week, it was announced that President Trump has placed steep tariffs on solar energy cells and washing machines. These tariffs largely targeted Asian manufacturers like Samsung and LG and represent the first step towards the sort of economic protectionist policies that were the hallmark of his 2016 campaign.

Protectionist trade policies have been in place for decades, but they’re once again coming to the forefront of political discourse as a result of populist movements at home and abroad.

As part of the Risk Institute’s commitment to leading the conversation on risk and risk management, we hosted our first continuing professional development session of 2018 on the impacts of protectionism on global trade.

Speakers included Sarah Brooks, Professor at Ohio State University; Jose Souto from Cargill; and Prentice Wells from EY.

According to Sarah Brooks, Professor of Political Science at The Ohio State University, since the 2016 election, international political economy has hit home in the US reflected through increased populist sentiment, economic nationalism, and discontent with free trade agreements. Dr. Brooks was quick to point out that the US has long championed free and open trade while actually maintaining a protectionist economy.

Each speaker also touched on the “China Shock,” which took place from 1991-2012 when China’s share of world manufacturing value added grew from 4.1% to 24%. Of the 100 counties hit hardest by the China shock, Trump won 89.

Jose Souto from Cargill explained that protectionism can take many forms: tariffs, quotas, subsidies, exchange rate manipulation and others. Protectionist policies exist in theory to protect infant, recuperating, and declining industries; to protect basic and strategic industries; and to deter unfair trade practices. The efficacy of those policies depends on a myriad of factors, but nearly every nation in the world employees at least some protectionist economic strategies.

Gamma Iota Sigma to Present The Ohio Regional Conference at The Ohio State University, January 26-27, 2018

Yardley, PA,  — Gamma Iota Sigma (GIS) will present the Ohio Regional Conference at The Ohio State University Blackwell Inn and Conference Center January 26-27, 2018 in partnership with The Risk Institute and Insuring Ohio Futures. Made possible in part by a grant from The Ohio State University, the conference is an excellent opportunity for the industry to engage with and recruit top collegiate talent from GIS schools in the surrounding area in a single setting, with an agenda that includes a career fair, educational sessions, keynote addresses, and industry and alumni panels, in addition to leadership seminars and networking opportunities.

GIS has teamed with its Sustaining Partners, companies who have made a significant, long-term commitment to support the organization, and the local insurance industry to offer industry engagement opportunities throughout the conference. The event is GIS’s first regional conference, expanding on its hallmark program, the Annual International Conference and Career Fair, which takes place in the fall.

Companies wishing to participate in the Ohio Regional Conference can register now at one of four levels, with discounts to GIS Sustaining partners at the top two levels. With an estimated 400,000 jobs needed to be filled by 2020, the insurance industry is looking to hire and engage with students of all interests: risk management, finance, economics, information technology, data analytics, human resources, marketing, and more.

Following the Ohio Regional Conference, GIS continues its programmatic expansion and its efforts to meaningfully connect students to opportunities in insurance with the addition of The Pipeline, The Insurance Industry’s Virtual Career Fair for Collegiate Talent, which will take place February 13, 2018 on the occasion of Insurance Careers Month and in partnership with the Insurance Careers Movement, Insuring Ohio Futures, IABA (International Association of Black Actuaries), and MyPath. Open and free to all students, The Pipeline Virtual Career Fair will bring employers together with college students pursuing a career in the insurance industry, providing access to companies seeking entry-level and internship candidates. The next Annual International Conference will be held October 4-6, 2018 in Chicago, Illinois. There are many ways for companies to engage directly with GIS and its students, from the Sustaining Partners Program to the GIS Career Center and opportunities directly with chapters.

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About Gamma Iota Sigma

Incorporated in 1965 and boasting an annual membership of over 4,000 students at 76 colleges and universities throughout North America, Gamma Iota Sigma (GIS) is the industry’s premier collegiate talent pipeline and has over 50 years of history of engaging students and preparing them for careers in insurance. GIS is the only organization of its kind and is the solution to the industry’s talent gap issue, pursuing a mission to promote, encourage, and sustain student interest in insurance, risk management, and actuarial science as professions. GIS is committed to growing the number of highly qualified students entering the industry; to that end, the number of GIS students and active chapters has more than doubled in recent years and continues to grow. In partnership with Sustaining Partners, corporate supporters, professional organizations, and trade associations, the full spectrum of GIS programming provides its members with meaningful interaction with the industry, as well as the tools to pursue and succeed in an insurance career. For more information, visit: GammaIotaSigma.org.

 

About The Risk Institute

The Risk Institute at The Ohio State University Fisher College of Business brings together practitioners and researchers to engage in risk-centered conversations and to exchange ideas and strategies on integrated risk management. Founded in 2012, the Risk Institute is comprised of members from a variety of industries including insurance, finance, energy and government. Through the collaboration of faculty, students and risk management professionals, the Risk Institute addresses risk at a broad cross section of industries and is dedicated to developing leading-edge approaches to risk management.