By Kate Norris, CPRM, CPRIA, CAPI, Managing Principal of Atténuer Risk
The consistent message amongst family office executives is the need for high-quality talent. This talent drought is driving many family offices to consider outsourcing certain services. That way they can concentrate their overtaxed resources on other in-house needs not as easily outsourced. For example, family office executives are increasingly looking for external help with administrative services like bill pay, bookkeeping, and performance reporting. These are easy tasks to delegate, and they can free up team members so they can focus on other demands and important tasks. However, an area that family office leaders often overlook for outsourcing is risk management.
Today, most family offices have team members overseeing the placement and payment of insurance policies alongside their other responsibilities. Properly managing liability, lifestyle, and tangible asset risks on the balance sheet requires a high level of attention, expertise, and guidance. Simply paying premiums is not enough. As an advisor, it is your responsibility to look at the whole risk architecture, employ mitigation strategies, and identify the right risk transfer solutions on both sides of the balance sheet. The truth is that risk management is not as simple as you might think.
What’s Needed in Today’s Ever-Evolving Risk Landscape
Having the right strategy to contain risk is becoming increasingly complex, especially in the context of changes in the insurance marketplace. Outsourcing risk management can bring added benefits, including the following advantages:
1.) Freeing up existing team members to focus on other critical tasks.
2.) Creating strategic risk management architecture.
3.) Providing tactical level execution to work with multiple brokers to place insurance coverage and make program changes throughout the year.
4.) Offering expert guidance on areas an insurance policy does not cover.
5.) Constructing of resiliency plans for when disaster strikes.
Outsourcing is a family office’s best option to get expertise without the burden of taxing internal resources. An outsourced risk manager brings to the table the insurance licensing requirements needed to provide advice, guidance, and counsel on risks across all states as the person does need to be licensed to provide this kind of advice.
As the dedicated family office, it is your responsibility to build the risk architecture in its entirety, review the risk architecture to align with the family and family office needs, employ mitigation strategies, and identify risk transfer solutions on both sides of the balance sheet. Family offices today need a risk management team that does not simply sell policies, but rather can give unbiased risk management advice, guidance, and execution at both a strategic and tactical level.
Outsourcing the risk management needs of the family office is an important option to consider. In addition, the family office needs to work with a risk manager who has deep expertise in working with families of substantial wealth and complexity. In today’s ever-evolving risk landscape, an outsourced risk manager can help the family office team navigate risk management and risk transfer solutions while freeing up the team members to focus on other initiatives and tasks. .
Kate Norris is Managing Principal of Atténuer Risk, a risk and resiliency consulting firm serving families of exceptional wealth, single-family offices, multi-family offices and advisory firms. She can be reached at Kate.Norris@attenuerrisk.com, or 312-535-5692.