URMIA Matters

Financial Literacy for Risk Managers

March 08, 2023 Host: Julie Groves with guests Miguel Delgado and Lisa Rulney Season 4 Episode 10
URMIA Matters
Financial Literacy for Risk Managers
Show Notes Transcript

Join host Julie Groves, URMIA’s current president and host of URMIA Matters, as she interviews Miguel Delgado, Chief Risk Officer at the University of Arizona and Lisa Rulney, Senior Vice President for Business Affairs and Chief Financial Officer at the University of Arizona. Lisa and Miguel share their thoughts on basic financial literacy for risk managers and why financial basics are essential for risk department to understand and support what your institution is doing in terms of the big picture. This session is designed to address outlining the financial literacy knowledge/skills a higher education risk manager needs to do their jobs and support their institution.

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Show Notes
University of Arizona Annual Comprehensive Financial Report (award winning)

University of Arizona Business Affairs

Miguel Delgado, Chief Risk Officer- University of Arizona
Lisa Rulney, Senior Vice President for Business Affairs and Chief Financial Officer- University of Arizona

Julie Groves, Director, Risk Services- Wake Forest University & URMIA President 2022-23


Julie Groves: Hi everyone. I'm Julie Groves, the director of Risk Services at Wake Forest University, and the current URMIA president. I'm gonna be your host for today's episode of URMIA Matters and we'll be discussing basic financial literacy for risk managers. I have an English degree, so this should be very helpful for me. Joining me today to talk about this are Miguel Delgado, the Chief Risk Officer at the University of Arizona, and Lisa Rulney, who is also at the University of Arizona, where she is the Senior Vice President for Business Affairs and the Chief Financial Officer. So welcome to you both. Thanks so much for being on the podcast. Before we start, I thought I'd just get each of you to tell us a little bit about yourself. So, Lisa, would you like to start?

Lisa Rulney: Sure. Thank you, Julie. It's great to meet you. I have been at the University of Arizona for almost 22 years. I started working here as an accountant in a very large research laboratory. I have worked on the academic side in the College of Education and the College of Engineering and in support unit roles in financial services prior to joining business affairs in this role over four years ago, I am a very proud wildcat. My children are Wildcats. My husband's a wildcat. I can talk all day long about the incredible things that are happening here at the University of Arizona.

Julie Groves: Well, that's great. It's always fun to work for your alma mater. I think so. And Miguel, tell us a little bit about you. You're currently an URMIA a board member, and so thank you for all you do for URMIA. So, what else is, what else is important for our listeners to know about?

Miguel Delgado: Yeah. Hi Julie. Thank you again for this opportunity. Yeah, I think most of you out there probably know me. I'm Miguel Delgado. I'm the university's Chief Risk Officer. I've been in the current role for coming up on a year and a half and have been here at the University of Arizona for almost go, going on six years now. So, I've loved every, not every moment, but most most moments since coming here. And it's really cool to, cool thing to be able to do like a podcast with, with your boss. I think I've, you know, never imagined in, in a million years I would do a podcast to begin with, but doing one with your boss's pretty special experience, so.

Julie Groves: Well good. Well, hopefully. It will reflect well on your annual performance evaluation, that you did this podcast together and it all came out well. So, okay. So, let's just jump right in. So first, let me ask you guys, how did this topic come about? I mean, why did you think it was important for people to know this? Lisa, is it because Miguel doesn't know anything about financial statements or why did you decide it was important?

Lisa Rulney: Julie, I'm sensing that all Chief Risk Officers have a great sense of humor. You and Miguel certainly are making me smile. No, I, I feel that every university employee needs to have a basic financial literacy. I really would appreciate the opportunity to share this type of information with anyone who works in higher education because I think it's important to understand the drivers that support our mission. You know what? My boss, the president, is fond of saying, no money, no mission. And the financial sustainability of the university is quite important to support our tripartite mission and instruction, research, and service.

Julie Groves: So, Miguel, as risk managers and Lisa, feel free to add into this, what are some of the key financial areas we should be available we should be familiar with?

Miguel Delgado: Yeah, that's a really good, great question, Julie. You know, I think there's probably a, a number of them. I think it's important for risk managers, I think, just overall to understand the financial health of their institution. You mentioned, you know, a understanding of balance sheet or financial statement and I don't know that most risk managers are probably gonna ever reach a great level of proficiency with those documents, but I think it's worthwhile to be able to look at the financial statement. We have a comprehensive annual financial report. Did I get that right, Lisa?

Lisa Rulney: Mm-hmm.

Miguel Delgado: And I think it's about 60 pages long, so it's quite the document, but I think it's important to understand, you know, for insurance purposes, your assets. It's important to understand your net position. I think it's important that you understand how looking at the balance sheet can help you understand perhaps what types of insurance exposures you have, and then it prepares you to have those discussions with your carrier or your broker, whatever that relationship is.

Julie Groves: And so, do you think it's important for a risk manager to really understand the way the general ledger is constructed and, and all of that? Do you think it's important for them to get into, into the weeds like that? Or do you think it's enough for them just to understand the high level how the university functions financially at a high level?

Miguel Delgado: I probably would go with more the latter. I don't know if Lisa has a different opinion on that, but I think it's more that high level understanding, seeing the big picture, and then more importantly, understanding how your risk department can really understand and support, you know, what the university is doing.

Julie Groves: Mm-hmm. And so when you think about the university's balance sheet, you know, I think you mentioned a couple things, Miguel, like what are some other important pieces of information a risk manager could glean from a university's financial statement or a balance sheet?

Lisa Rulney: Julie, I'm happy to jump in. Let's just talk about, a financial statement is really focused on a reflection of the institutional’s financial health. And our operational performance over a fiscal year timeframe. So, it's a snapshot in time, and I would not suggest that every risk manager or aspiring risk manager take the time to become an expert at reading financial statements. But there's a lot of really important information that's contained in our annual comprehensive financial report that would be valuable for a risk manager to know about. There's a section, so I think it's important to note that different institutions have financial statements that are different, that have different names. And at the University of Arizona, we're a public institution, so we are under GASB, the Government Accounting Standards Board, and we are required to have a transmittal letter and a management discussion and analysis section, which is in the front of the report.

There's a lot of great information in those sections that talk about, there's a summary of our financial position. There are year to year trends, a summary of initiatives that are started or completed during the fiscal year and a brief economic outlook. All of those things are things that I think would be helpful for risk managers to have basic understanding of. And then there are, there are details in the back of the, uh, of the financial report that, in the notes section that talk about major construction project. Those are things that that risk managers certainly need to know about. You know, for insurance purposes, what are we planning in terms of capital projects?

And then also in the back as a statistical section of the report that shows 10 years of historical trends. And I think that is an incredible opportunity to look at what's happening, what has happened in an institution. I think you get a more rich look at the financial health over a 10-year period than a a one year period, if you're just looking at that snapshot in time for one particular fiscal year.

Julie Groves: I do think it's important for anyone who works in finance, even if they don't directly deal with, you know, the financial statements. It's important for someone who works in accounts payroll or maybe in procurement to understand, you know, the financial statement. I mean, here at Wake Forest, our finance department has about 75 people in it. Not all of those people deal with the financial statement, but our controller and AVP every year after our year end close has a pizza party for everyone in the department. A little bribery never hurts, but people come, and she goes over the financial statements so that everyone can have, you know, at least a high level understanding of what's going on with the university. Right? Because regardless of our university that we work at, or whether we're public or private or what our positions are, you know, we all have the same goal, which is to help our university, you know, function so that we can educate students. So, you know, I think financial literacy as far as the financial statements go is always really important.

So, so, what are some of the ways a risk manager can support the annual university audit?

Lisa Rulney: That's a great question, Julie. So, government accounting standards require institutions to disclose information about risks in our financial statements, including the type of risks and how they're handled. whether settlements have exceeded insurance coverage and if the institution retains some risk. So, it's really important that chief business officers and chief risk officers work together with our central finance officers to understand those requirements and ensure that our disclosures are accurate. And Miguel, you always review our self-insurance program, footnote, which is in the back of the financial statement.

Julie, you've mentioned that at different institutions we have different processes. We're under different regulatory agencies at the University of Arizona. Our fiscal year ends on June 30th. And our auditor is the state auditor general, so that's who we report to. I know that at Wake Forest you use KPMG. a public accounting firm. There's a multi-month process to complete the audit at every institution. And Miguel, maybe you can talk about how you've assisted with that process.

Miguel Delgado: Yeah. As far as that process goes, as Lisa mentioned, you know, being, being a state entity or public entity, we follow the same fiscal calendar that the state of Arizona follows. And then as you know, there's obviously the hard date, you know, June 30th of every year when technically the fiscal year ends. But as Lisa mentioned, it's a multi-month process to close out the books. Some of the challenges there come with, you know, the timing of when insurance claims are paid, different pieces of that nature. As Lisa mentioned with the audit reports, sometimes they're, you know, risk, and claim information that has to be included in that. So that's sort of where we would step in and a-assist with that process.

Julie Groves: And you know, obviously as folks are listening to this podcast, you know, whether you work at a public institution or a private institution, obviously will kind of define how your role as a risk manager is what your role is because, you know, since I work at a private institution, a lot of the report reporting requirements that Lisa and Miguel have at the University of Arizona, we do not have at Wake Forest. So, you know, but there are always ways that risk management can assist in, you know, in the audit. And there's al, there are always ways that we can help. It just may not be as public, it may not be publicized as much as, as you know, someone at a public institution So, are there any other specific aspects of a university's financial health that would be helpful for risk managers to be aware of?

Lisa Rulney: That's a great question, Julie. I think that it's really important for, uh, a risk manager to understand the internal risks associated with university activities as well as external risks posed by economic, political, criminal. You know, higher education is an environment where schools are closing and merging. It's not really stable right now. We've been through turbulent times because of the pandemic, and I believe that we have more turbulent times ahead. So, it's always been important for CBOs and chief risk officers to to partner. I think it's even more important now. As well as to have risk managers partner with campus colleagues, so they can stay abreast of what's happening in new activities and the associated risk with those activities, as well as partnering with colleagues in the field.

You know, Miguel and and Julie are talking often about what's happening, so you can stay apprised of things that are coming down the pike. And I really encourage risk managers to continuously stay connect. With professional organizations like URMIA and keep up with professional certifications so you can bring information back to me and to other chief business officers, things that we need to know. Miguel, maybe you could tell us how you partner internally and externally?

Miguel Delgado: Yeah, ab absolutely, and I, I think that, you know, Lisa's answer was I think really perfect when we talk about, you know, this landscape that it has been turbulent, right? It's definitely has been like a one of those airplane rides that, you know, with lots of turbulence that you don't enjoy very, very much. But I think through, you know, through this environment, I feel like it's also been a blessing in disguise in terms of the fact that we've learned to adapt to change perhaps more effectively if we ever needed to be reminded of the importance of being nimble as an organization. I think the pandemic, you know, definitely has showed us that. So, I think to Lisa's point, you know, really being aware of those emerging risk. Which sometimes it's hard. You're trying to manage the risks right in front of you, but you're also trying to, you know, peek into the proverbial crystal ball, and see if, you know, can we figure out what's coming next.

So, some of the ways that I try to stay connected, like Lisa mentioned, you know, URMIA is a great resource for sort of connecting on the national landscape. NACUBO, WACUBO. I think there's other little, other UBOS or I don't know what you call 'em, other organizations out there that are a part of NACUBO. There's plenty of publications that you can subscribe to. You know, the Chronicle of Higher Education. Some people are a fan, some really aren't. But regardless of what you think, you know, there was an article right at the top this morning that dealt with the budget challenges and the financial challenges, and I saw that and thought I need to, to sort of, sort of understand some of the challenges that Lisa's facing at our chief budget officer are sort of dealing with right now. So that's some of the ways, externally.

Internally, I think it all comes down to really doing everything you can to build great networks. That's something that I try to set the example on my team in terms of reaching out to people on campus, perhaps in pockets of the university that we don't deal with frequently, and really trying to make those connections. And I'd like to tell people, I'm never trying to catch anybody doing anything wrong. That's never my intent. If I learn of some activity, you know, none of us are omniscient or omnipresent. We can't be everywhere at once. You know, Lisa's pretty plugged into what's going on here, but she, you know, she can't know everything. So, I think by building those relationships, it helps you sort of uncover areas where it's like, hey, you know, we want you to be able to do this, but we want, you know, risk management would like the opportunity to partner with you and help you do this safely and thoughtfully, and in a way that's gonna advance the mission of the university.

Julie Groves: Well, and to your earlier point in going back to your airplane analogy, I think we are not out of the turbulence yet, so we're not gonna be able to, um, we're gonna have to leave our seat belts fastened for a little while longer, I think. You know, and I think I would just say too, to add to this financial discussion, one thing that is, at least important from my standpoint, I'm sure you all would agree, but it's always also something that's a little tricky is how to budget for what you think your premiums are gonna be the next year. Because you know the timing of that is always when we're working on budget versus when we find out what our premiums are gonna be for the next year. There's always a big space of time between there and, you know, between those two things. And it is very tricky, you know, to kind of look into the crystal ball and, and predict that. So, I think another great resource to add is, you know, have, you know, get help from your broker, you know, as far as information goes, you know, because any kind of information we as a risk managers can provide that will help the budget people do a better job of, you know, making sure that the budget we have for funds is accurate will be really, everybody wins in that.

So, Lisa, what does someone in your role need from someone in Miguel's role? I mean, we've talked a lot about financial, you know, financial health and financial knowledge. But I mean, what are some of the things just, you know, and they don't have to necessarily be financial, but what are, what do people in your role need from risk manager?

Lisa Rulney: Julie, I think we talked a lot about how I need a partner. I mean, I, I really rely on Miguel to not just be passive, but to be proactive and to bring issues to my attention and to never be afraid that an issue might reflect poorly on him, or his organization, or our organization. That we'll always find a solution together, that even if there's a mistake, that to understand that I make mistakes too. We’ll get through it, and I'll provide the air cover that he and his department need to run through any challenge.

I think that it, it's also really important I ask Miguel to understand the intersection of plans that we have at the institution. You mentioned budget, Julie, you know, the financial statements again, are historical look. I think risk managers need to be looking to the future, as Miguel talked about. So, a budget is a forecast, it's a plan. We look, our budget has our enrollment expectations, it has research goals. We have a strategic plan, we have a capital plan, we have a master plan. We’re working on a sustainability and climate action plan, I need Miguel to be plugged in to all of those processes and be an active participant in, in creating the plans and making sure that, thinking about the risks associated with those activities. So, I really look at him as one of the key leaders within business affairs and for the institution.

Julie Groves: Great. Miguel, what would you say that people in positions like the one that Lisa has, what do they need to know about your role and about risk management?

Miguel Delgado: Yeah, great question. You know, I, I think part of it comes back to what Lisa just mentioned. I think a good risk manager, you know, it is aware of all of those various plans that, that the university has in place. I guess a way to to think of it is I want to align what our department is trying to do and where we are dedicating our resources. I very much, much want that to align with the goals and plans that, that Lisa is working to support through, you know, through her role, you know, here at the university. I think that's a big part of it. I think the more the risk manager can understand that it puts you in a much better position to, to sort of think, you know, and I, I don't know how many other risk managers are gonna listen to this and, you know, reporting structures vary.

But one of the things I often struggle with is, you know, Lisa and I meet every other week for about 45 minutes. You know, Lisa's time is extremely valuable. That's probably a good way to put it. So, I try to think in terms of return on time invested. She's making that time investment to gimme 45 minutes. I don't wanna waste that time talent, you are talking about things that, you know are irrelevant or things that aren't gonna help her. So that's sort of the way that, that, I try to think of it. I think it's helpful when you understand those large-scale plans that are taking place at the university. One of our big initiatives right now that, that our, our current president and senior VP for research is really pushing is we have a goal to reach $1 billion in research expenditures. You know, that puts you in a very, very elite group. I think last year there were 19 or 20 universities at, you know, nationwide that had 1 billion plus in expenditures. So, it's things like that. When you understand kind of the direction the university's trying to go, it helps you understand, you know, where your risk management efforts need to be directed.

Julie Groves: Well, Miguel, your comment about the different reporting structures, it brings up a question that I had. I mean, obviously you report up through finance. I report up through finance. But you know, for those folks out there who are risk managers, and they report up to through a different line, either through university police or legal or, you know, I mean, as we have seen from our surveys, risk managers report to a whole lot of different folks. If someone doesn't, if a risk manager fall within the finance line of reporting, it's still important for them to understand this information. So, they probably can't make an appointment. I mean, maybe they can, but they probably can't make an appointment with their chief financial officer to ask these questions. So, who do you all suggest people that don't report up through finance, reach out to if they have questions about these topic?

Lisa Rulney: Julie, I would bet that most chief business officers would be thrilled to have an opportunity to chat with risk managers regardless of the reporting line. But if they have trouble, because our schedules are a little nutty, because most chief business officers don't just have the traditional finance functions, we have risk management, capital planning, facilities, bookstores, student unions, parking and transportation. You name it, it's operations and finance. So, if you can't get on the calendar, I would recommend connecting with your chief budget officer to understand the forecast and the projections and you know where the institution is going, and then perhaps a conversation with your university controller to go over the financial statements and hopefully you're, you're already plugged in to that unit because you're assisting with the notes section of the financial statements on an annual basis.

Julie Groves: And you know, hopefully risk managers, you know, historically have a lot of relationships across the university. So even if you don't know who those folks are, if you know someone at a lower level in finance, just tell them what you need and ask them who they would recommend that you talk to so that you could get, get some of this information if you don't have it already. So, I think this has been a very helpful discussion. And before we wrap it up, do either of you have any final thoughts to add?

Lisa Rulney: I appreciate having the opportunity to connect and I'm really proud of our financial statements. In particular, I would recommend that if someone wants to look for an excellent example of an annual comprehensive financial report that you visit our financial services website at the University of Arizona. We actually have won certificate of Achievement for excellence in financial reporting for nine years straight from the Government Finance Officers Association. And it also has some beautiful pictures of our campus. So, if you're in a cold winter climate and you need a dose of some desert sun, you'll get that too. Along with information about our financial sustainability.

Julie Groves: Well, congratulations on your award. That's really impressive. I didn't realize they give out awards for financial statements, so that's great. We can link that at the bottom. We can link that in our show notes for the podcast. We can put the link for your financial statement.

Miguel Delgado: Yeah, I, I'll send that to you, Julie.

Julie Groves: Okay. And so, what is the temperature today in Arizona?

Miguel Delgado: It's actually not super warm today. We've had some cooler weather for Arizona. It's maybe 59 or 60.

Julie Groves: Oh goodness. Cause mm-hmm, we're 75 right now in North Carolina and this is unseasonably warm for us. So, I think we, we've swapped weather so you can have it back if you'd like it. I'm not quite ready for spring yet. Well, I really wanna thank you both for being here today. This has really been helpful, and this wraps another episode of URMIA Matters.