Risk Manager Salaries Rise Despite ToughEconomy

Jobs still hard to come by, especially for those wholack advanced skill set

Risk managers buffeted by the challenges of the hardestinsurance market in years are not only holding onto their jobs, butare seeing their salary and bonus packages rise at a healthy clipdespite the tough economy, an annual survey of industrycompensation trends has revealed.

The “2003 Risk Management Compensation Survey,” which queried1,580 risk managers from across the country and a wide spectrum ofindustry sectors, found an average salary gain of 5.9 percent from$145,500 in 2002 to $154,100 last year. Over the past three years,the average risk manager salary has risen 19.8 percent, with thebiggest gains coming in the top four company-size categories.

The survey conducted by Logic Associates Inc., the industry'sleading risk management recruitment service, and co-sponsored byNational Underwriter also found that risk manager salariesin a number of company-size categories beat the 5.9 percent averageincrease, in two cases by a wide margin.

The 174 risk managers surveyed at firms with annual sales volumeof up to $200 million although they are now the only segmentearning less than $100,000 on average did see salaries rise a hefty9.2 percent to $88,875. At the other end of the spectrum, the 188respondents from companies with between $7 billion and $15 billionin sales saw their average salary soar 8.1 percent to $214,000,making this group only the second to break the $200,000 barrier inthe survey's history with the other being those at the top categoryof over $15 billion in volume.

This salary growth is quite reasonable given the difficultcircumstances in risk management and the general economy today,according to Bill Perry, president of Logic Associates, the veteranjob placement expert based in New York.

Indeed, while jobs are certainly not easy to find these days,especially if a risk manager lacks a wide and deep skill set, thegood news is that employers appear satisfied with those theyalready have on staff, he said, given the relative lack ofturnover, particularly at the biggest companies.

“In a hard insurance market like the one we just went through,and with such a tough economy, I was surprised that there wasn'tmore of a move by employers to upgrade their risk managementstaff,” Mr. Perry told NU.

“With the insurance market so much more challenging, with ratesrising, policy negotiations so much more strenuous, and with moresophisticated alternative risk-transfer options required, you wouldthink that more risk managers would have lost their jobs,” headded. “I expected more employers to call up and say: 'I want toget rid of my incumbent because he's too one-dimensional, or hasn'tdone a good enough job containing our cost of risk, or I needsomeone with more education and skills.'”

Mr. Perry reported that while he has “seen this happen a coupleof times where I have been asked to go out and get a client a morefinancially-astute risk manager” such requests have been theexception rather than the rule.

“What this really signifies is that the weeding out process isbasically over,” he said. “Most risk managers have proven theirmerit and are weathering the storm. I'm definitely not seeingturnover at the top-tier firms, where the risk managers have earnedtheir stripes, they have the necessary skill sets to adapt to anychallenge, and seem to have the job under control no matter whatthe insurance market is like.”

Still, Mr. Perry said the feeling of satisfaction is not alwaysmutual.

“Except for maybe 10-to-15 percent of the risk managers outthere who are so entrenched and locked into their jobs they justwould not entertain another option, basically everybody is in themarket,” he said. “Even if they are not looking aggressively,85-to-90 percent could be enticed to move if something better camealong. Given the right scenario in the right place for the rightmoney, they would move.”

In other words, he added, “it's not hard to drum up solidcandidates for every opening these days. The problem is there arenot a lot of openings. In fact, if a risk manager is unemployed forwhatever reason, it's tough to find a new job. As much as oureconomy is supposedly coming out of a recession, job creation islagging behind, and risk management is no exception.”

Many of the risk managers surveyed were bonus babies. Four ofthe eight company-size categories reported double-digit growth,while one group those at firms below $200 million in sales sawtheir average bonus just miss that benchmark with a 9.9 percentgain. The $201 million-to-$500 million segment had the best showingin this area, with an average bonus hike of 15.5 percent. Thosebetween $1 billion and $2 billion were next with 13.4 percentgrowth.

This was significant because in terms of benefits, stock optionswhile still a major compensation perk, especially among those atthe biggest companies became a somewhat lesser factor for theprofession in 2003, the survey found. There was a slight drop inthe percentage of respondents getting stock options from an averageof 74.5 percent in 2002 to 73 percent last year.

However, the drop was steeper at certain company-sizecategories. The percentage of those at firms below $200 million insales who received options fell five points to 43 percent. Those atfirms between $1 billion and $2 billion also saw a five-point dropto 70 percent. There were declines even at the highest levels?withthe percentage of those at companies between $4 billion and $7billion in sales dropping five points to 82 percent.

This is not surprising, considering the volatility of the stockmarket the past few years. Indeed, in last year's survey report, wenoted that the allure of stock options had worn off from the headydays of the dot.com-fed boom, as risk managers put more emphasis onbeing rewarded with cash on the barrel.

When analyzing the overall survey, however, “one of the mostsurprising results, perhaps, is that there are no overriding trendsin terms of geography or industry, as there were in past years,”according to Mr. Perry.

“At one time you could say the place to look for work was in theSouthwest, or the Northeast wherever the economy was booming. Or afew years ago you could say that high-tech is exploding and there'sa big need for risk managers at all these new dot.com firms beinglaunched,” he added.

However, he noted, “today, there is no one industry or area ofthe country that is doing so much better than the rest that riskmanagement jobs are more plentiful in one place or industry groupthan another.”

He emphasized that it is still important for risk managers topay close attention to how they stack up against their counterpartsrather than worrying too much about national averages, noting thatnot all risk management jobs are created equal. He urged riskmanagers to see where they stand against their peers not only inthe same size company, but in the specific industry and state theywork in as well.

(The complete survey report, available from Logic Associates,includes breakdowns by state and industry. NU will examinetrends in these areas in future editions, beginning with the May 24issue.)

Risk Managers Earn By What TheyLearn

By Sam Friedman

Risk managers might be professionals when it comes to handlingtheir companies' exposures, but too many are still amateurs atmanaging factors that could boost or threaten their career growth,the industry's leading risk management recruiter contends.

“Good risk managers need to protect against their own careerrisks,” said Bill Perry, president of Logic Associates in New York.“There is the risk of obsolescence. There is the risk of not havingenough education to cope with high-finance issues. There is therisk of being too one-dimensional dealing only with insurance andnot having any alternative market experience.”

Part of the problem is a lack of advanced training, according toMr. Perry, while another factor is the types of companies some riskmanagers work for.

The “2003 Risk Management Compensation Survey,” conducted byLogic Associates and co-sponsored by National Underwriter,found that among the 1,580 risk managers queried, a large number ofrespondents and their staff members are still getting by with asimple BA degree.

Mr. Perry said that having an MBA in finance can be critical forrisk managers who are expected to deal on a level playing fieldwith their CFO and treasurer. He added that earning professionaldesignations such as an ARM (Associate in Risk Management) or CPCU(Chartered Property Casualty Underwriter) can also be crucial indeveloping the expertise and skills to deal knowledgeably withday-to-day risk management and insurance challenges.

Unfortunately, too many risk managers lack these advanceddegrees, the survey found. For example, the highest percentage ofthose with MBAs?65 percent came at firms with between $7-and-$15billion in sales volume. This means that even among the most highlyeducated group of risk managers, one-third of respondents in thecategory lack an MBA.

Risk managers also generally lag in terms of professionaldesignations, with more than half of the respondents in only twosales volume categories having an ARM, and only two categoriesshowing 30 percent or more with CPCUs. (See accompanyingtable.)

Risk managers, according to Mr. Perry, are the “ultimateknowledge workers. Their know-how, their skill sets, is all theyhave to sell in the job market how well they know the exposuresthey deal with; how well they know the insurance markets; howcapable they are in putting together an alternative risk-transferdeal. This is so crucial.”

Still, Mr. Perry contended that despite their relativeshortcomings in terms of advanced education, more risk managers arerecognizing the need to expand their skills in this tough jobmarket. Indeed, while many risk managers still call his firmlooking to change jobs over “quality of life considerations” suchas their commuting time, “more importantly,” he said, “I'm alsohearing today more from people looking to move over job contentissues.”

He noted that risk managers “call to say 'I want to do more andlearn more. I want to have a better professional growth scenario,'and I'm 100 percent supportive of that kind of attitude.”

Some risk managers, he said, “are getting much smarter about thetype of moves they make career-wise.” These risk managersunderstand “what it means to move up from the public sector or anon-profit firm to a private company, or from retail to amanufacturing firm, where they will have to deal with more diverseand esoteric risks and raise their skill level.”

Mr. Perry added that when it comes to picking up skills, “a lotof it has to do with the types of companies you work for. If a riskmanager joins a second- or third-tier firm that doesn't have wideand varied exposures and risk management challenges, it might be agood job, but that's all it is a job. It's not a career.”

Too many risk managers, he explained, “just have jobs” and havenot learned how to build their career. “They think they're doingall right that they're working for a company, they're doing theirjob, they are making a decent living but it's at a stagnant firmfrom a risk management standpoint,” he said.

Working at this level may be fine “as long as the job is there,”he warned. “But if they stick around in that kind of a job with askill set of one, two or three on a scale of one-to-10, and if theylose that job for whatever reason a merger or acquisition, abankruptcy, a new president who doesn't like you when that riskmanager comes to me looking for a new job, he's going to be harderto place; maybe impossible at a top-tier or second-tier firm.”

As important as education is, Mr. Perry added that eithergetting an MBA in finance or a professional designation such as aCPCU or ARM is only part of the solution.

Risk managers wanting to carve out a successful career shouldconsider doing whatever is necessary, including making a lateralmove, or even taking a step down in position “if it means movingfrom a lower-level company to one in the upper-echelon,” hesaid.

“If you're the number-one risk management professional at alower-tier firm, there's no shame in going to a number-two spot ata bigger, mainstream company. You'll learn a lot more, you'll do alot more, you'll have a much higher profile, and you'll be moreattractive for your next move than if you just wallow in the lowertiers,” he said.

Another consideration is changing industries. This can make ahuge difference in a risk manager's job and growth prospects, Mr.Perry explained.

A risk manager working in an industry that is claims-intensivesuch as retail or a professional employee organization might spend“70-to-80 percent of his time dealing with claims,” he said. “Ifthat's all you have to offer, how do you expect to go from there toa first-tier company and take on the new responsibilities andchallenges they present in terms of risk management? Youcan't.”

What is Mr. Perry's advice to risk managers looking to improvetheir long-term marketability? “You need to do everything you cando to get into a company where you will be exposed to cutting-edgerisk management thinking, so you can expand your knowledge base andprofessional repertoire,” he said.

In the meantime, “keep learning, even if you have to pay for ityourself, if your company won't offer tuition reimbursement,” hesaid. “Keep networking and looking for new opportunities at biggerorganizations where the risk management function is moresophisticated. To do nothing leaves you very vulnerable.”

Male RMs Predominate At Big Companies

By Sam Friedman

Women are still largely absent from the risk management ranks atthe biggest firms, but it's only a matter of time before the gendergap narrows considerably, a job market expert predicts.

The percentage of women working as risk managers has held steadyor even dropped a bit depending on the company-size category one isexamining, according to the results of the “2003 Risk ManagementCompensation Study,” conducted by Logic Associates and co-sponsoredby National Underwriter.

Indeed, the smaller the firm, the more likely it is to have awoman as its risk manager, the survey found. More than 40 percentof risk managers at companies below $1 billion in annual salesvolume are female, according to the survey. The highestrepresentation comes in the smallest sales category?47 percent atfirms with $200 million or less in volume.

As sales volume rises, the percentage of female risk managersfalls, from nearly one-third at firms between $1 billion and $2billion, to 28 percent between $2 billion and $7 billion. Thepercentage of women really drops off when you hit the jumbocorporations to just 17 percent at companies between $7 billion and$15 billion, and only 11 percent at firms with over $15 billion insales.

According to Bill Perry, president of Logic Associates in NewYork, there aren't more women working as risk managers at thetop-tier companies for three reasons:

? “The greatest proliferation of women entering the riskmanagement profession has come over the past 10-to-15 years,” henoted. “Many are starting out at the smaller companies, and ittakes awhile to get the skill sets and experience they need to workin the upper-tier firms for the first time.”

? “The turnover rate at the upper-crust companies is much lowerthan at the lower-level firms,” he explained.

? “There just aren't as many jumbo companies as there are in thesmaller sales volume categories, and thus there are fewer riskmanager jobs available at the higher tiers,” he added.

Putting these three factors together, “it's common sense to seewhy women aren't better represented at the top-tier companies,” hesaid.

While he acknowledged that “the pool of top-quality female riskmanagers earning $150,000-to-$200,000 are certainly as a percentileof the business much less than the men earning that much,” hepredicted that the gap will close “as more women now gainingexperience at smaller companies move up to bigger firms, which arecertainly seeking out and eager to consider women candidates whenthey do their job searches as part of their diversitycampaigns.”

He added that women are well-represented at smaller companies,“and they are making their mark there. It's just a matter of timebefore this all levels out.”

Reproduced from National Underwriter Edition, April 16, 2004.Copyright 2004 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.