Risk managers must speak CFOs' language: World Captive Forum speaker
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AVENTURA, Fla. — Risk managers who make captive decisions with an understanding of finance can significantly influence their organizations, a risk management expert told the 22nd Annual World Captive Forum on Wednesday.
When pitching the benefits of a captive program to a chief financial officer, “we need to be more effective in explaining things in the time frame that they want,” said John J. Hampton, professor of business in the department of business administration at St. Peter’s University in Jersey City, N.J.
“You’ve got to talk the language of the CFO,” Mr. Hampton said during a keynote address at the Aventura, Fla., forum.
Such an understanding and knowledge of finance helps risk managers explain the costs associated with establishing a captive insurance structure, Mr. Hampton said.
Captive discussions with CFOs involve capital investment, where CFOs have many proposals and options to focus the organization’s assets, Mr. Hampton said.
“A captive decision is not an insurance decision,” he said. “It’s a capital decision.”
“The moment you mention you have to have capital in it, you’re competing with what else (CFOs) want to do with the capital,” Mr. Hampton said. “Financial tools can add a tremendous amount of power to the discussion of something like a captive, which is a capital investment.”
Building a financial model around the discussion of captives can help CFOs understand the benefits of such an insurance structure. A risk manager cannot seriously influence their organization if they “cannot talk numbers,” Mr. Hampton said.
With such knowledge, risk managers also may accelerate their career track, Mr. Hampton said.
“If we can make the captive decisions and understand the finance and make other risk management decisions and understand the finance,” he said, “will that lead risk managers to the possibility of being chief financial officer?”
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