Although risk managers reported more moderate salary growth onaverage in 2005, bonus compensation continued to soar andopportunities to move to a bigger and better position increasedsubstantially during an active year for job seekers, according tothe “2005 Risk Management Compensation Survey” by Logic Associates,co-sponsored exclusively by National Underwriter.

The survey of 1,411 risk managers revealed an average salary of$167,526–a raise of 3.2 percent over 2004, compared with the 5.4percent gain reported the year before. However, most reported bonushikes in the high single-digit to double-digit range.

In addition, over the course of this decade, risk managers are alot better off salary wise, with their pay rising 30 percent over2000's average of $128,626.

The average bonus in 2005 for all risk managers surveyed was$17,455–up 7.7 percent over the year before.

Including bonuses, the average risk manager's compensation in2005 was $184,980, up 3.6 percent from the year before, andone-third higher than the total package reported in 2000.

The survey was conducted by New York-based Logic AssociatesInc., the risk management field's top recruitment service. For thefourth straight year, Logic's report is based on an exclusivesurvey of NU's risk manager subscribers.

After a number of years of robust growth in base salary, it isno surprise that the pace of raises leveled off last year,according to Bill Perry, president of Logic Associates, the dean ofrisk management placement.

“Last year was one of the busiest in terms of risk managersmoving up, either within or outside their organizations,” he toldNU. “There was an exceptional amount of movement, and 2006 has thepotential to be another breakout year.”

Part of that growth, he observed, stems from the fact that “morecompanies are hiring risk managers for the first time. They're alsoreclaiming outsourced risk management positions back from theirbrokers. In addition, we're seeing growth below the risk managerlevel, as risk management departments of two or three are expandedto departments of four or five.”

Mr. Perry also cited “an upgrading of the positions that were inplace. In situations where risk management people left theirpositions for whatever reason, companies are biting the bullet andhiring replacements with higher skill levels. So if you had someoneearning $75,000 as an insurance analyst, they replace them with anassistant director of risk management at $100,000.”

Some of that activity, he noted, is a natural response to agrowing economy.

“Bigger companies need bigger risk management staffs to handlethe increased number of facilities, personnel, products and theirrelated exposures,” he said. “In other cases, smaller companies, asthey grow bigger, are buying into the risk management philosophy.They realize they need more people or higher-skilled people to takethem where they need to be in terms of loss control, self-insuranceand risk placement.”

In reviewing trends in the salary survey, Mr. Perry said it isimportant to keep in mind that while averages serve as usefulbenchmarks, it still means many risk managers are getting salaries,raises and bonuses higher than average, while some fall belowthem.

He emphasized that it is critical when comparing salaries tomine the data so that the circumstances are as close as possible toa risk manager's particular place in terms of size of company, typeof industry and geographic location–as all of these factors impactpay scales.

Indeed, the accompanying table shows that while the averagesalary overall might have been $167,526, that was well above theaverage for those in the lowest four categories in terms of companysales volume, while trailing by quite a few bucks the averagesalaries reported by the biggest firms–topping out at $273,341 forthose at companies doing over $15 billion in sales.

However, when you slice and dice by industry, you find thataverage salaries even at the higher levels of food companies didnot top $200,000, while the highest risk management official at a$15 billion-plus communications company booked $316,276 in pay.

Similarly, risk managers at firms with less than $200 million insales have yet to reach six digits in average base salary, comingin at $97,832, but that beat by a wide margin those at papercompanies that size, who earned an average of $79,655.

The relative value of a risk manager is also impacted by theemployer's location, the survey found. In New York, for example,those at the biggest firms averaged $302,508 (10.7 percent higherthan the national benchmark for the highest category), while thoseat companies with sales between $7 billion and $15 billion averaged$263,786 (a healthy 12.7 percent over the average for that sizecompany of $234,053).

The same trend holds true at the other end of the salary scale.Risk managers at the smallest firms surveyed in Texas, for example,booked an average salary of $110,160 (12.6 percent above thenationwide norm), while Pennsylvanians averaged $105,885 (8.2percent higher).

Those working at firms with less than $200 million in salesenjoyed the biggest average raise for 2005–5.2 percent, leavingthem just short of the magic $100,000 mark. Coming in second werethose at companies doing between $4 billion and $7 billion insales, who earn more than twice their counterparts at the smallestfirms, with salaries in such outfits rising 4.6 percent to$195,707.

The smallest percentage raise went to those at companies withbetween $2 billion and $4 billion in sales–up 1.7 percent, to$162,620.

Bonuses were another story. While those at the smallest firmsmight have enjoyed the biggest raises on a percentage basis, theyreported virtually no change in their average bonus of $2,814,while those at firms between $201 million and $500 million in salesactually saw their average bonus fall 11.9 percent to $4,882.(However, this might be a statistical anomaly, according to Mr.Perry, as in 2004 this category saw bonuses rise 28 percent to$5,541–a much higher rate than any of their counterparts. In 2003,the average bonus for a company that size was $4,314, 13 percentless than risk managers at such firms received last year.)

However, risk managers in all other company sizes saw bonusesrise at a more generous percentage than base salary, led by 10.9percent (to $12,139) among those at firms with between $1 billionand $2 billion in sales, with those at companies between $4 billionand $7 billion close behind at 10.6 percent (to $24,680).

It is not an unusual trend in today's job market to seehealthier growth in bonuses than in base salary, according to Mr.Perry, as “corporations are paying for performance and arestructuring their bonuses to reward excellence.”

Can risk managers influence their incentive targets?

“It's tough to negotiate a bonus,” said Mr. Perry. “It's usuallyhanded down from on high. Every company handles it differently.Most often, you have your bonus potential broken down by somespecific achievements, with the most usual target being companywideprofits. That way you are rewarded for your contribution to thebottom line by keeping the cost of risk down, whether you do thatby improved loss control to cut claims, or savvier insuranceplacements or more effective self-insurance alternatives.”

Mr. Perry stressed that it is also important to note that whilethis survey covers the top position in the department–whether it isknown as risk manager, director of risk management or anothertitle–Logic also places others in the profession leading up to thepinnacle.

That encompasses the profession's second tier (assistant riskmanagement directors), plus support staff below that–includinginsurance analysts, claims managers and claims analysts–”any ofwhom can pull down $70,000 to $120,000, depending on the size ofthe company and industry where they work,” he noted.

“These people are the future risk managers,” added Mr. Perry.“They make up the training ground where individuals can gain theexperience and skills to either move up within their organizationor move on to bigger and better jobs elsewhere.”

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