Partners in Risk

A leading risk manager tells how he works with his boss, the CFO.

While finance chiefs are likely to have occasional conversations with their risk and employee-benefits managers, the relationship tends to be arm’s length. Once they confirm that their organizations are well protected against physical damage and financial ruin, many CFOs send corporate insurance specialists on their way. But that’s not the case when it comes to the interaction between Richard Hinds, CFO of the $8.2 billion Miami-Dade County, Florida, public school system, and Scott Clark, the entity’s risk and benefits officer.

Clark, who is also the incoming president of the Risk and Insurance Management Society, has reported to Hinds on and off for the past 20 years. Frequently, the CFO accompanies the risk manager to negotiate insurance coverage with underwriters in London, Munich, and elsewhere. Indeed, Hinds’s support of Clark’s work at RIMS, the major professional organization for risk management, was a primary reason why Clark took on the top slot at the society. And when he formally becomes president at a reception in New York on January 13, Hinds plans to be there.

The relationship has helped Clark assume a strategic role in the fortunes of the school system, which is facing both a severe cut in revenues and a steep rise in health-insurance costs. Last month Clark discussed those challenges with CFO, along with the role of finance chiefs in risk management. The following is an edited version of that discussion.

What should CFOs be thinking about in terms of risk management in 2011?

They should be thinking about the premiums for their strategic insurance programs. We’re benefiting industrywide from a relatively soft market on the casualty side and in some areas of the property side as well. Even though there have not been any hurricanes for the past five years in certain parts of the country, we still have some pockets of very, very difficult markets, such as California for earthquake insurance and Florida for property insurance.

As the new president, I want us to start having conversations within RIMS as to what we can do to support CFOs in terms of their employee-benefits programs. Benefits continue to be a significant cost driver in all companies’ bottom lines. Everybody’s wondering how the new federal health-care law will affect the structure of benefits programs.

Scott Clark

What benefits challenges does the Miami-Dade County system in particular face?

It’s a delicate dance to provide a quality benefits program to recruit and retain excellent employees and teachers for the 340,000 kids that we educate while keeping in mind that the ever-increasing cost of employee benefits goes to the bottom line. I have to support the current benefits program at a time when my revenue is going down and the cost structure of benefits continues to go up, in line with the increased cost of benefits across the United States.

Also, fraud is a huge issue in employee-benefits programs. South Florida is a fraud leader in the benefits area. So an important part of my job is working with the third-party administrator that handles my self-insured health-care program to identify any fraud as early as possible.

