Although risk managers reported more moderate salary growth on average in 2005, bonus compensation continued to soar and opportunities to move to a bigger and better position increased substantially during an active year for job seekers, according to the “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 5.4 percent gain reported the year before. However, most reported bonus hikes in the high single-digit to double-digit range.

In addition, over the course of this decade, risk managers are a lot better off salary wise, with their pay rising 30 percent over 2000'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 in 2005 was $184,980, up 3.6 percent from the year before, and one-third higher than the total package reported in 2000.

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

After a number of years of robust growth in base salary, it is no surprise that the pace of raises leveled off last year, according to Bill Perry, president of Logic Associates, the dean of risk management placement.

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

Part of that growth, he observed, stems from the fact that “more companies are hiring risk managers for the first time. They're also reclaiming outsourced risk management positions back from their brokers. In addition, we're seeing growth below the risk manager level, as risk management departments of two or three are expanded to departments of four or five.”

Mr. Perry also cited “an upgrading of the positions that were in place. In situations where risk management people left their positions for whatever reason, companies are biting the bullet and hiring replacements with higher skill levels. So if you had someone earning $75,000 as an insurance analyst, they replace them with an assistant director of risk management at $100,000.”

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

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

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

He emphasized that it is critical when comparing salaries to mine the data so that the circumstances are as close as possible to a risk manager's particular place in terms of size of company, type of industry and geographic location–as all of these factors impact pay scales.

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

However, when you slice and dice by industry, you find that average salaries even at the higher levels of food companies did not 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 in sales have yet to reach six digits in average base salary, coming in at $97,832, but that beat by a wide margin those at paper companies that size, who earned an average of $79,655.

The relative value of a risk manager is also impacted by the employer's location, the survey found. In New York, for example, those at the biggest firms averaged $302,508 (10.7 percent higher than the national benchmark for the highest category), while those at companies with sales between $7 billion and $15 billion averaged $263,786 (a healthy 12.7 percent over the average for that size company 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 the nationwide norm), while Pennsylvanians averaged $105,885 (8.2 percent higher).

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

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

Bonuses were another story. While those at the smallest firms might have enjoyed the biggest raises on a percentage basis, they reported virtually no change in their average bonus of $2,814, while those at firms between $201 million and $500 million in sales actually 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 percent less than risk managers at such firms received last year.)

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

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

Can risk managers influence their incentive targets?

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

Mr. Perry stressed that it is also important to note that while this survey covers the top position in the department–whether it is known as risk manager, director of risk management or another title–Logic also places others in the profession leading up to the pinnacle.

That encompasses the profession's second tier (assistant risk management directors), plus support staff below that–including insurance analysts, claims managers and claims analysts–”any of whom can pull down $70,000 to $120,000, depending on the size of the 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 the experience and skills to either move up within their organization or move on to bigger and better jobs elsewhere.”

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