NASHVILLE, Tennessee – Effective communication with C-suite executives when creating a risk appetite statement and cultivating meaningful relationships with underwriters are crucial when tackling municipal risks, experts say.
The cornerstones of high-quality communication include knowledge of a municipality’s or entity’s risk and asking well-crafted questions to executives who may not have a firm grasp of various risks, they said.
Poor communication is the biggest risk municipalities face when approaching their risk management strategy, said Betty Coulter, chief risk manager for the city of Charlotte, North Carolina.
“If you have the basic conversations about what you’re really willing to take risk on, what the parameters are and what the goals are, then you’re able to manage your risk in that organization,” she said Friday during a session at the Public Risk Management Association’s annual conference.
Knowledge of existing policies, prior losses, claims history, the identities of decision-makers and the most significant risks the municipality faces is crucial when discussing risk management strategies with leaders, she said.
“When you’re sitting in a room with your C-suite, you have to understand what their thought process may potentially be. You cannot talk to the chief financial officer the same way you’ll talk to the chief operating officer. Their thought processes and perceptions of risk are two totally different perspectives,” said Nashville-based Edward McDonald, chief risk and safety officer at J.T. Salem, a consulting and strategic planning firm.
Enterprise risk management processes can sometimes be challenging to communicate, the speakers said.
But, even though it may be difficult to communicate ERM strategies, everyone still needs to know about what risks are involved, Ms. Coulter said.
While an ERM strategy may not be the best solution for all municipalities or entities, risk managers must know the organization’s risks.
“I call it creating efficiencies. You get everyone on board when you speak the organization’s language,” said Tamika Puckett, Atlanta-based public sector division leader at Willis Towers Watson PLC.
Municipalities should also communicate effectively with underwriters, particularly on issues such as property appraisals, the panelists said.
Having municipal properties appraised on a rolling basis ensures that claims are properly valued when damage occurs, Ms. Coulter said.
“It’s good to get a rotation on your property to manage that premium cost. Your values are going to go up because materials are going up and exposures are increasing,” she said.
Ms. Puckett said risk managers must be able to articulate the methodology used to generate a schedule of values for municipal properties.
“If you cannot articulate your valuation methodology, then you will be facing things like coinsurance clauses and margin clauses, which limit your coverage,” she said.
