Navigating business risks: How to focus on what matters: PwC

After a series of crises, from the pandemic to geopolitical issues to the current economic conditions, executives are becoming seasoned in handling challenges. Today we’ll explore how executives can evaluate evolving risks, meet the changing needs of their stakeholders and lean into the strengths of their organization.

In this episode Julia Lamm, Workforce Transformation Principal at PwC, is joined by Melanie Foley, Executive Vice President and Chief Administrative Officer at Liberty Mutual, to discuss the challenges executives are facing today and what they can focus on to keep their companies moving forward.

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About the podcast participants

Julia Lamm serves as PwC’s Workforce Transformation Principal focusing on financial services clients. She is a leader in the development of PwC’s point of view on the workforce of the future and how financial institutions are responding post-COVID. In addition to her work with clients, Julia is a featured thought leader at PwC, and is often cited in the media including The Wall Street Journal, Bloomberg and CNBC.

Melanie Foley is Executive Vice President and Chief Administrative Officer of Liberty Mutual Insurance. In her role, she leads Liberty Mutual’s talent, procurement, brand and communications, real estate, community investments, sustainability, and workplace services functions.

Episode transcript

Find episode transcript below.

ANNOUNCER:

00:00:01:00 Welcome to PwC Pulse, a podcast to provide insights to help you solve today's business challenges.

JULIA LAMM:

00:00:09:19 Hi, I'm Julia Lamm, Workforce Transformation Principal at PwC, and I'll be your host today. As we begin 2023, business leaders are navigating a wide range of challenges. Fluctuating macroeconomic conditions, rising interest rates, the threat of recession and an increasingly polarized world are just a few.

00:00:31:19 But despite this economic uncertainty, many companies are still investing for the future and focused on growth. In the year ahead successful strategies will go beyond managing costs and risks.

00:00:42:20 There's plenty of opportunity if business leaders focus on what they can control. Joining us today to help us sort through the noise and understand what business leaders should be focused on is Melanie Foley, Executive Vice President and Chief Administrative Officer at Liberty Mutual. Melanie, welcome to the podcast.

MELANIE FOLEY:

00:01:00:17 Thank you, Julia. I'm so delighted to be with you today.

JULIA LAMM:

00:01:04:05 Before we dive in, Melanie, we've got some rapid fire questions to get to know you a little better. Are you ready?

MELANIE FOLEY:

00:01:10:20 Ready.

JULIA LAMM:

00:01:11:18 All right. First of all, what is your favorite city in the world to visit?

MELANIE FOLEY:

00:01:16:08 Paris. It's so romantic.

JULIA LAMM:

00:01:19:05 What is a book you recommend?

MELANIE FOLEY:

00:01:21:04 Profit and Purpose. How Business Can Lift Up the World by George Serafeim. Awesome, awesome book about how companies can do well by doing good.

JULIA LAMM:

00:01:32:16 Great. And finally, who is your inspiration?

MELANIE FOLEY:

00:01:36:19 Well, that's a tough one, but I think it's anybody that needs something that I can provide to them just inspires me to do my best to make the world a better place.

JULIA LAMM:

00:01:47:17 I love that. We're so excited to hear more from you and it's great to get to know you a little bit better. Thanks for sharing. Now let's get to our topic for today. First of all, congratulations on your recent promotion to EVP and CAO at Liberty. Could you share a bit more about your journey to this role?

MELANIE FOLEY:

00:02:06:00 Yes, sure. Thanks. So I've been at Liberty Mutual for 26 years. My first half of my career was in the marketing and distribution part of our personal insurance business and several roles there.

00:02:21:00 And then I became the head of Talent Enterprise Services just over 11 years ago now. So over the 26 years, I've had two careers. I've seen lots of transformational change.

00:02:32:21 I've seen my mandate expand to include brand and communications, real estate, procurement, office of sustainability, diversity, equity and inclusion.

00:02:44:21 And now, with the announcement of Tim Sweeney as our next CEO, I'm taking on additional responsibilities as the CAO, which I'll now have responsibility for our Community Investments Group, which oversees our philanthropic efforts.

00:02:56:21 And I'll partner with Tim and his new role to drive efforts to improve the culture and the efficacy of Liberty Mutual and make us become a best place to work and a most trusted brand. And finally, I'll act as an advisor to our CEO, our executive leadership team, and our board.

JULIA LAMM:

00:03:11:13 Very exciting. I think you're very well poised for that. Just knowing you over some of those 26 years. Based on that experience, what words of wisdom would you offer business leaders who are looking for ways to future proof their businesses in light of all of this uncertainty?

MELANIE FOLEY:

00:03:27:12 Yeah. Well, you know, Liberty Mutual, we're in the business of risk, so it's important for us to be on the forefront of it, really understanding how risk is changing, how the needs of our customers are evolving.

00:03:39:12 So one word of advice is, actively seek outside-in perspectives, right? So go beyond your own company to stimulate fresh ways of seeing the market and then translating those insights into action for your business.

00:03:51:20 For us, understanding how our customers want to interact with us and how we can proactively help them understand changes to the risks in their businesses, or personal lives on the consumer side, so that we can ensure that we have the products and solutions that they need to continue to feel secure and make progress.

00:04:10:20 Really, without active stakeholder engagement, you're going to quickly become irrelevant. But, you know, with this uncertainty and constant change that companies are experiencing, it creates opportunities.

00:04:21:04 And whether that's a new product opportunity in the area of emerging risks, for us, that's like cybersecurity or energy transition or innovation within existing product lines to create better, more customized products and experiences.

00:04:34:04 And then finally, I would say, have a strong focus on innovation, it's critical; really understanding what's happening in the market, how companies are looking to disrupt you.

00:04:44:02 And last, last bit of advice is continue to, you know, work on building a high performance culture, focus on DEI, have an environment where employees aren't afraid to take risks and that they can fail safely and generate critical learnings from their failures.

JULIA LAMM:

00:05:00:08 That's great. Let's stay on that topic a little bit around all the uncertainty, and obviously there's been a lot of volatility in the market in recent months. Despite these risks, and Melanie, I've sent you, these were constantly surveying the market to understand trends and issues, and what's the level of confidence in what's on the minds of our clients.

00:05:19:12 Our recent Pulse survey found that 77% of companies are confident they can achieve their near-term growth goals, despite many of those same leaders indicating they're extremely confident there's going to be a recession.

00:05:33:12 What's your point of view on how leaders can successfully navigate and grow in such a dynamic, ever changing environment while building trust with their many stakeholders? What bright spots do you see?

MELANIE FOLEY:

00:05:43:23 Well, what external factors are causing uncertainty like they are today? We really need to lean into the strengths of our organization. For liberty, it's our purpose, our talent and our strong culture that makes up the solid foundation that's allowing us to withstand the turbulence in the markets.

00:06:01:23 We put our people first. It’s one of our values and we're committed to building a diverse, equitable and inclusive organization where top talent wants to come and succeed.

00:06:10:13 And we began our DEI journey over ten years ago, and we'll be progressing on that journey forever. And then with our global footprint, you know, we're uniquely positioned with access to employees around the world.

00:06:22:13 This not only gives us the ability to grow our business, but provide employees with development opportunities so that they can stay at one company while growing and developing themselves.

00:06:30:17 We know that to successfully navigate and grow in this environment is heavily dependent on the talent that you have and how engaged and motivated and resilient they are. Even when times are tough and there are many headwinds,

00:06:42:17 If employees understand the purpose of your organization, the strategy for winning and they feel valued and they trust leadership, they're going to want to give everything they have to contribute to achieving those aspirations.

00:06:53:19 And so for the bright spots, like I said earlier, change and uncertainty can create opportunity. And being in the business of risk, we're continuously working to understand what the new and emerging risks are out there and how that impacts the needs of our customers and what we can do in response. And we find that really exciting.

JULIA LAMM:

00:07:10:05 That's great. Looking at all of the year end reports on what was 2022 and what's going to be the focus in 2023, a lot of those articles are saying, you know, it was talent acquisition, but 2023 is going to be all about talent retention.

00:07:25:05 So, sounds like that is something you're thinking about as well. Just thinking about how executives are increasingly concerned about the macroeconomic environment, including stock market volatility, rising inflation.

00:07:36:11 We're also seeing news of companies announcing layoffs and other workforce reduction tactics. That same survey I mentioned, we found a number of different responses from the CHRO data cut indicating that the organization’s taking at least one action to shrink their workforces.

00:07:54:11 Many have moved on from layoffs, but they're looking at tactics like: voluntary early retirement packages, 43% said that, performance based headcount reductions, 41% said that number, not replacing employees who leave the company, 38%, and hiring freezes, 35%.

00:08:11:15 Can you talk about what talent and employment trends you're seeing? And what impact do you think they're going to have in the coming months?

MELANIE FOLEY:

00:08:18:22 Yeah, sure. This is a huge focus area for me, my team and our entire company. 2022 was certainly challenging and we at Liberty faced similar challenges to the broader industry.

00:08:31:22 We actually like to say that we've been hit by the three I’s: inflation, interest rates and Hurricane Ian. On the insurance side of the business, we're faced with elevated costs to settle our claims.

00:08:41:11 It's driven by a number of things, right? Higher repair costs from supply chain disruptions, increased labor costs, medical inflation. And then we've also faced elevated catastrophe losses like Hurricane Ian.

00:08:54:11 We also make money by investing our premiums into interest generating assets or investment. And on the investment side, we've been impacted by market volatility as well as the looming threat of recession.

00:09:03:01 So when we're not generating strong returns on the investment side, it's even more critical that we're charging the appropriate premiums to cover the costs of our claims and expenses and remaining laser-focused on underwriting profitability.

00:09:16:01 But on the employment trend side, we have, of course, seen news stories about layoffs and hiring freezes, particularly in the tech sector. And we're watching closely for signs whether this will impact the labor market more broadly.

00:09:26:17 You know, it was just a few months ago that everybody was talking about the great resignation and the elevated turnover rates across all industries, including our own. I'm happy to say that we weathered that storm pretty well and saw our turnover rates below BLS statistics for our industry, which was comforting,

00:09:45:17 And I think that goes back to our strong foundation of culture and having a clear purpose. And as the macro environment continues to be uncertain, we're going to continue to watch for signs whether those trends that you're seeing will reverse in the labor market will start to cool down a bit.

00:09:58:21 But, you know, I think companies are going to have to be more careful in the management of their expenses and continue to deal with this volatility and rethinking how we can get work done more efficiently.

00:10:11:21 We're going to have to be continuously looking around the corner to stay on top of these trends. And I'm proud to say that we were ahead of the curve back in 2020.

00:10:17:12 We offered an early retirement program and we've always maintained a focus on efficiency and productivity, but at the same time, putting people first, reskilling and employing robust talent mobility practices or redeploying folks to other areas of the company where the focus has shifted.

00:10:33:12 So while I do think the trends are real, I sometimes think that they're sensationalized with these catchy phrases. But I do believe that if you're really focused on your culture and your people, then you can hold your own in the face of these challenges.

JULIA LAMM:

00:10:47:20 Great. Well, let's turn to strategy. How are current business conditions influencing the strategic plans you are making for the next 12 to 18 months?

MELANIE FOLEY:

00:10:58:22 Well, we're a values driven company and we're also a mutual company. So top of mind for us is making sure that we're there for our policyholders today and in the future as has been the case for 110 years.

00:11:11:22 We're also focused on strengthening our competitive position by being able to make investments in our business and in our people. So with regards to economic conditions, you know, in the near term, we're going to continue to implement actions that are needed to make sure we're able to cover the cost of our claims and be there for our policyholders while generating target returns.

00:11:28:08 You know, I said earlier, we're really focused on achieving underwriting profitability across both sides of our personal and commercial business. But most importantly, we need to make sure we're maintaining a consistently strong financial position so that we can be there for our customers when they need us.

00:11:44:22 And then despite near-term challenges, we have to continue to look longer term and make sure we're continuously innovating, understanding the changing needs of our customers, and continuing to build on the strong foundation for the future.

00:11:55:07 And I mentioned we're in a transition period. We've got lots of new members of our leadership team in new roles and really focused on coming together and leveraging the strengths of our new leadership team.

JULIA LAMM:

00:12:05:15 Great segway into the next topic around trust. Many companies are focusing on building trust and transparency with their customers, with their shareholders, with the community at large and we've seen the ways trust can help companies gain a competitive advantage amid those calls for more transparency. What are you seeing companies do differently?

MELANIE FOLEY:

00:12:27:10 Well, we're seeing employees that are increasingly looking to their companies to speak out on social issues, even if they don't necessarily relate to their day to day business operations.

00:12:40:10 So you're seeing companies grappling with when and where to speak out on various issues. And we're also seeing more and more companies realize the importance of sustainability and engaging with the communities.

00:12:49:07 And we do this by starting with our identity and values. Our core attributes that define us as a company. We use our identity and values as the foundation for how we think about how we're going to engage with larger issues in society. More internally to the company, we also see our employees increasing their expectations of trust and transparency from leaders.

00:13:08:06 Employees want to feel heard. They want to know that the company is taking action based on their concerns. So companies need to show that they're authentically listening to their employees and taking action.

00:13:19:06 We've addressed this through launching a new employee listening strategy centered around what we call the moments that matter. So it's nine key moments that our employees have told us are the most important to them and the strategies have given us lots of great actionable insight on where we can improve.

00:13:33:22 Employees tell us that we have opportunities and feeling valued by senior leaders. And so when you dig in to that, they really want frequent, authentic communication from their leaders. They want to see how their work connects to a broader enterprise purpose, and they want to see how their voice informs the actions the company's taking. And so we use this to respond.

00:13:52:11 We recently launched a companywide enterprise cascade of our strategy. We've asked every manager in the company to have a conversation with their teams on how their work connects to the company's larger purpose and our aspirations and the feedback so far has been fantastic.

JULIA LAMM:

00:14:08:11 Very exciting. And I know it's challenging to respond to all of the different asks that are coming on those individual managers. And actually it's another good segway to the next topic around getting back to the office. So many of our clients are continuing to struggle with their return to office plans and even the role of the office and post-COVID world.

00:14:30:16 Can you share a bit about how Liberty Mutual is thinking through these challenges in order to help meet the needs of your people and the business?

MELANIE FOLEY:

00:14:39:08 Sure. I think it's safe to say that this is something that we've all been grappling with over the last few years. If you think about it, we're going into the fourth year of this pandemic or post pandemic. At Liberty, you know, we're aligned that every action we take will be guided by our values, particularly in this case, putting people first.

00:14:57:15 And that means doing the right thing for our customers and our employees. So we figured out that given how large and diverse we are as a company, there's not a one size fits all approach to how we use the office and our time together. So instead we've leveraged our guiding principles and really empowered our leaders to make the best decisions with and for their teams and their customers.

00:15:17:11 We embraced flexible work arrangements, as you know, Julia, well before the pandemic, which positioned us well today. It's safe to say that we're a hybrid company. We believe that offices still have a purpose. They're here to facilitate purposeful interactions like team building, networking and problem solving.

00:15:36:11 And so we've really empowered all of our managers to talk to their teams about the right times and ways and cadence for coming into the office to facilitate these meaningful interactions. So,

00:15:44:10 no mandates to come back into the office, but we're seeing great interactions and purposeful interactions, and employees are telling us that they're pretty happy about it.

JULIA LAMM:

00:15:53:10 That's great. And definitely hearing across the board, people want to get back together, but they also love the autonomy that's been afforded to them and we're seeing a lot of requests for that.

00:16:05:10 Last question, Melanie, as we get towards the end of our time together, as we face more macroeconomic fluctuations and other risks in the New Year, what advice would you share with executives to help them navigate all of that uncertainty?

MELANIE FOLEY:

00:16:18:09 I think we're at a pivotal point in time where the pace of change and disruption is never going to be less than it is today. So we need to continue to build on that resiliency and flexibility that is going to be so critical going forward.

00:16:32:09 Having an incredibly strong, talented and diverse group of leaders that brings a wide range of experience to the table is going to be imperative to help us navigate uncertainty and business risk. And you have to empower your teams. The people at the top of the organization don't have all the answers.

00:16:48:11 We have to believe that executives are the ones that have to set the strategic direction and define success, but then empower their teams to take the actions that are needed to achieve it. And organizations need to become more agile and adaptable.

00:16:59:13 And this requires building a culture that encourages risk taking innovation and courage to challenge the status quo. So we try to emphasize this message starting all the way at the top that we really expect,

00:17:11:13 we want a culture that values diversity of perspectives and encourages trying new ideas.

JULIA LAMM:

00:17:16:08 Melanie, That's great. Thank you so much for joining us today. There's a lot to consider as we wrap up the year and look towards 2023. It was really great to hear your perspective. A couple of themes came out as we were going through that. You know, I heard you talk a lot about how all the decisions you’re making are values driven.

00:17:35:18 You're also keeping your various stakeholders in mind from policyholders to customers, the community. I love hearing that piece about building a culture that values diversity and innovation of thought happening at Liberty Mutual.

00:17:50:18 And in light of having your new leadership team, I wish you luck on that journey over the next year. And to our listeners, thank you so much for joining us on this episode of PwC Pulse. For more information on these topics, visit PwC.com.

ANNOUNCER:

00:18:04:14 Thank you for joining us on the PwC Pulse podcast. Subscribe to PwC Pulse wherever you listen to your podcast or visit PwC.com/Pulsepodcast to hear our next episodes.

ANNOUNCER:

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