Risk professionals play a vital role in a company’s merger and acquisition process, according to a new Risk and Insurance Management Society (RIMS) report.

They are often outside the inner circle involved in talks with targets, but their expertise in identifying potential red flags can determine whether the process is smooth or not.

“Outlining risks is where the risk manager can really bring their worth to the program,” former RIMS president Carolyn Snow says. “Breaking down what you see as risks and what you see as opportunities will be invaluable to the organisation.

“And most of the time there will be cost-savings opportunities that the risk manager can bring to the transaction by combining insurance programs.

“Your ability to identify these cost-saving opportunities will be greatly appreciated by leadership.”

Areas in which risk professionals can underscore their importance include asking for the target’s insurance policies, loss history for each policy, a summary of uninsured claims and unusually high claims, and a description of current or legacy captive insurance programs.

Workers’ compensation claims are especially challenging during the acquisition process.

“I have been part of a business transaction where the organisation acquired a company that had hundreds of outstanding workers’ compensation claims,” RIMS director Jennifer Santiago says.

“Upon completion of the deal, those claims became our responsibility and we worked on them until they were closed. We had to determine the nature and severity of each claim and the best approach for handling those long-tail exposures.”

US-based RIMS is a global non-profit body with more than 11,000 risk management professionals as members.