What to know about on-demand risk management

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In this episode of Bracewell Covered, host Vince Morgan discusses risk management with David Gresko, owner of Strategic Risk Management Services LLC.

You’re doing what’s at the forefront of risk management these days, which is on-demand risk management. Tell us how your career evolved and how you got here.

I am a mechanical engineer by training. When I got out of college I went to work for an oil and gas company in their project group. I managed the design and construction of offshore platforms. This job was based in Dallas. While in Dallas I looked for business schools and ended up at SMU and got my MBA. Around this time, I moved into the chemical division of the company, ARCO Chemical. I was still in projects, but after a few years I moved into the finance organization. Then a few years later back to projects, but then ARCO was taken over by Lyondell Chemical, so I got back into finance with Lyondell.

I moved into risk management in 2004, and have been there ever since. I was responsible for risk and insurance at Lyondell, then at LyondellBassell. Then I moved to Dynegy and served as Director of Risk Management for Dynegy. I finally landed at Noble Energy. When Noble was acquired by Chevron, we mutually agreed to go our separate ways and I started my risk management consultancy.

Tell us about your risk management consulting firm.

One of the things I noticed working for Noble is that we deal with many large and small companies. I’ve noticed that small businesses, especially a lot of small mid-size businesses, don’t have a risk and insurance department or even a contact person. It was usually assigned to the treasurer, the accounting manager, someone in accounting, sometimes even someone in law, but they had no experience in risk and insurance. This convinced me that there are small businesses out there that need risk management expertise, but they don’t need a full-time risk manager. So that’s how I got into the counseling gig.

Do you have a stable of regular clients that you do definite work for, or is it more in demand than that?

It’s more on demand than that. Typically, when I’m hired, they come in and say, ‘Can you help us? I’m going to start working with them on that. Then they might come back and say, “Hey, when you’re done, can we watch that too?” I’m just going to carry on and when all this work is done, I’ll step down. That’s the point of being an on-demand risk manager.

We hear of people wanting to create groups of captives and risk retention. Are you seeing a return to alternative risk management approaches?

You are seeing an increase in the number of companies that are not considering setting up captives because one of the things the captive can do is fill in the gaps in your program. A captive can access reinsurance markets that you might not necessarily be able to access if you don’t have a captive. When I was at Noble, we had a captive in Bermuda and a captive based in Texas. We were looking at what we could put in the captive and go through it to save money. Again, you want to exercise captivity to the fullest in order to get the most financial benefit for your business. In fact, I hosted a captive exercise for one of my clients. We’ve come to the conclusion from a financial standpoint that it saves money, but it doesn’t save enough money at this point to justify all the administrative hullabaloo you had to go through to run the captive.

Thinking back to how you got into this space and then what you did and what you’re doing now with your new role, do you have any advice for young people along those lines that you might want to pass on au The next generation?

You should always keep your options open. A lot of companies, when trying to fill risk management positions, tend to want to focus on young people because they want to hire someone who will be there for 20 years. In consulting, you want to hire the person who has all the experience. The worst thing a company can do is hire a consultant who says, “I have no idea what you should be doing right now.” They didn’t hire you to tell them, “I don’t know. They’ve hired you to chart a path or paths that they should consider, and say, “Here are your choices.”

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