Acknowledge, Assess, Address
July 25, 2012It’s virtually impossible to pick up a life insurance trade publication or attend a financial services conference without seeing something about “enterprise risk management” (ERM) in the table of contents or on the program. (Not surprisingly, ERM is addressed in one of the nine featured Workshops at the Alliance’s 2012 Annual Meeting coming up in New Orleans this September.) I’ve been trying to come to an understanding in my own mind about exactly what ERM means and the best I can do is this: Acknowledge, Assess, Address. The leaders of any organization have to devote the time, energy and resources to “Acknowledge” the risks the corporation faces; then “Assess” the credibility of those risks; and develop realistic plans to “Address” them so that the entity can be profitable, durable, and able to fulfill its mission. The “AAA” process, at least in my view, is a critically important component in the development of a meaningful strategic plan. The Alliance Board of Directors will devote the bulk of its September 6 Board meeting to the strategic planning process, which will include an “AAA” report prepared by the staff. The Alliance’s nine-member staff will meet today to take a hard look at the pitfalls that may lie ahead for the organization and – more importantly – to discuss ways that we can turn roadblocks into opportunities to better serve our member societies. Asking the tough questions… Here are a few of the questions we’ll be acknowledging, assessing, and addressing:
- What happens if one of the Alliance’s large member societies – an organization that represents 15% or more of the Alliance’s total dues revenue – decides not to renew its membership?
- What happens if the chronic solvency problems of one or more member societies results in these organizations assessing their members, creating widespread negative media coverage and the threat of a severe regulatory backlash?
- In an environment where current members are not experiencing significant organic growth and where no new fraternals are being created, how can the Alliance generate the revenues it needs to effectively advocate for the preservation and expansion of the fraternal business model at the state and federal levels AND provide value-added benefits to member societies?
- What happens if one or more public policymakers at the state or federal level publicly questions the value and validity of the fraternal business model’s tax-exempt status and calls for a Congressional study of the industry or introduces legislation to repeal the exemption?
- What happens if the majority of Alliance members continue to “fade away” through declines in membership, assets, surplus, and relevance?
- What is our mission? Why do we exist? Do our members view us as a financial institution or a social club? Do our bylaws allow us to carry out the mission effectively?
- Does our governance structure – the decision-making process in our organization – give us the best opportunity to make the right decisions in a timely manner? If not, what changes need to be made and how can we make them? Are there clear lines of demarcation between the authority of the CEO, the Board, and the membership? Do we have the right people leading the organization? Are Board members qualified or just popular? Does the Board have the ability to hire the best possible CEO? Does the CEO have the ability to run the organization without being micromanaged by the Board or the membership?
- Do we have the financial services products that the next generation of members want? Do they provide the right coverage at the right price? If not, how are we going to develop a meaningful product suite?
- Do we have a professional sales force to effectively market those products? How are we going to find these people, train them, support them and make them successful?
- Do we have the financial strength – assets, surplus, A.M. Best's rating, investment portfolio performance, etc. – that make us attractive to prospective agents and instill the trust of prospective members? Are we confident that we can fulfill the promises we make?
- Do we have the resources – human and financial – to address these issues? If not, what are the best ways to acquire them – including partnerships, alliances, and mergers with other like-minded societies?
- How do we market to the public at large? Do our print ads and website focus on fraternalism and the philanthropic community efforts it provides, or do they focus on business? When Jane Q. Public looks at an ad or the website, does she see a life insurance company that does a little bit of community service or is it a community-service based organization that happens to provide life insurance? Where is the focus and emphasis?