Nick Richardson - Solartis, President and CEO
When making the case for a new risk management information system (RMIS) internally, it’s important to frame the discussion in terms of the potential return on investment. Focusing on ROI is critical to justifying the purchase to the CEO, CFO, and board of directors.
Historically, it has been difficult for risk managers to demonstrate how a RMIS will have a positive impact on the bottom line. But the latest technological advances are rapidly changing the equation and empowering risk managers to make a compelling business case in support of RMIS implementation.
THE #1 REASON IT’S DIFFICULT TO DEMONSTRATE ROI
Even when the risk manager clearly understands how a new RMIS will improve long-term financial performance, it’s hard to convince the C-suite. The reason: company executives tend to focus narrowly on how a system implementation will impact the risk management department’s current budget.
In many cases, this means comparing the RMIS to the current applications and processes used by the customer. If the current applications are just Microsoft Excel and Word and the processes are primarily manual, it’s a losing argument for the risk manager, because these applications are built into the company’s general operating costs. Replacing them and their associated manual processes won’t result in any immediate savings and instead will cost money.
FOUR APPROACHES TO OVERCOME THE NARROW FOCUS ON UPFRONT COSTS
To successfully sell the idea that implementing a new RMIS will be a worthwhile investment, the risk manager must elevate the ROI analysis to a higher level. The following four approaches can help steer the conversation in the right direction:
- Focus on total cost of risk (TCOR).
- Avoid high implementation costs by choosing a cloud-based solution.
- Quantify every dollar of potential savings.
- Emphasize the soft benefits of better information
FOCUS ON TOTAL COST OF RISK (TCOR)
The demonstration of ROI should ideally be based on the Total Cost of Risk—and how that calculation will change over the coming 5 to 10 years based on the organization’s growth and its ability to manage risk efficiently.
Approaching the ROI analysis from this broader perspective enables the risk manager to put the focus on the long-term value that a new RMIS will provide to the company, rather than the short-term impact on the risk management budget.
AVOID HIGH IMPLEMENTATION COSTS USING A CLOUD-BASED SOLUTION
In the past, implementing a new RMIS required significant capital investments. The company would need to acquire or update hardware, pay an upfront license fee, cover the cost of installing and configuring the primary software, buy additional third-party software, and sacrifice productivity by tying up employees in a lengthy training process.
Today, many of these upfront costs can be eliminated or reduced when an organization uses a cloud- based RMIS. The software-as-a-service (SaaS) model has become increasingly popular because it allows companies to significantly reduce their expenses and operate in a more agile manner.
QUANTIFY EVERY DOLLAR OF POTENTIAL SAVINGS
For some organizations, the ability to stop paying license and maintenance fees for legacy systems can have a significant impact on the bottom line. Further savings can be within reach if dropping the legacy system allows the company to move out of a data center or reassign headcount in IT to revenue producing activities.
Even if the organization is currently using low-cost solutions, like Excel, there are still opportunities to show how a modern RMIS will reduce costs. For instance, the time savings can easily be quantified by multiplying the risk manager’s hourly wage equivalent and the number of hours they expect to save on common tasks.
EMPHASIZE THE SOFT BENEFITS OF BETTER INFORMATION
Beyond the immediately quantifiable costs and savings discussed above, there are significant “soft” benefits associated with modern risk management systems. One of the most critical benefits is the ability to spread the work of risk management across the organization by enabling multiple stakeholders to enter relevant data into the RMIS. This eases a potential bottleneck in the flow of information and helps to ensure the data in the system is accurate and up to date.
In turn, having access to better information empowers the risk manager to negotiate more effectively with brokers and insurance companies. Furthermore, when a wide range of personnel are engaged in the process, risk management will become embedded in the company’s culture.
Each of these factors increases the organization’s ability to control costs and liabilities in a strategic manner. Once the risk manager is able to explain these benefits in the language of Finance and gain the approval of the C-suite, all that remains is to select the right system.
SOLARTIS RISK AND POLICY MANAGER: A NEW BREED OF RMIS
Most risk management systems are born out of a claims processing environment, so their functionality is highly focused on that particular activity. Unfortunately, these systems keep the risk manager trapped in a tactical mindset and provide limited strategic value to the organization.
Solartis Risk and Policy Manager was designed to empower risk managers to break out of the claims processing box and approach their work from a broader perspective. This modern RMIS provides a robust set of underwriting data and policy lifecycle management tools that empower the risk manager and other stakeholders to take a more strategic approach to controlling TCOR.
Because it is a SaaS product, Solartis Risk and Policy Manager can be implemented without the large upfront costs associated with conventional systems. And over the long term, the cost of operation remains predictable, as there is no need to replace hardware or hire an army of IT professionals to keep the system running. Solartis customers pay one simple annual service fee based on TCOR or another metric that correlates to the value provided by the system to the customer.
With low, predictable costs and significant financial and operational benefits, the Solartis Risk and Policy Manager offers a clear path to ROI—and enables risk managers to make a clear business argument in favor of adopting a new RMIS.