Risk Managers Must Go Back To School For Survivor Skills
The good news for risk managers is that despite a terrible economy, their compensation–both in terms of salary and bonus–rose over the past two difficult years, and substantially so among those at the largest companies.
The bad news, however, is that risk managers are going to have to earn every additional penny they are being paid and then some. Indeed, most need to work harder and smarter to earn promotions or further pay raises–and, in some cases, even to keep their jobs.
These were some of the key insights drawn from the latest survey of 1,484 risk managers queried in December 2002 by Logic Associates Inc. in New York. (Highlights of Logic's "2002 Risk Management Compensation Survey," which was co-sponsored this year for the first time by National Underwriter, appear exclusively in this week's edition, beginning on page 10.)
Bill Perry–Logic's president and the risk management industry's leading headhunter, with more than 30 years in the business–has seen soft and hard markets come and go. He has also seen risk managers rise from relatively obscure insurance managers in the 1970s to the multitalented, high-profile risk financing experts many of the best and brightest are today.
Mr. Perry points out that gains in risk management compensation during a stagnant economy demonstrates the value that companies place on their risk managers–especially in a hard insurance market. However, he also warned that employers are raising the bar for risk managers in terms of skills and education. Those who fail to clear these hurdles could find themselves out of a job.
All risk managers benefited from the long, soft insurance market of the 1990s. One couldn't blame risk managers for feeling giddy as they saw brokers and carriers fighting for their business, outdoing one another with absurd rate reductions and coverage expansions. Some grew lazy–why go through the hassle of forming a captive, floating a catastrophe bond or managing a large self-insured retention when cheap insurance was plentiful?
However, more savvy risk managers maintained the alternative risk-financing facilities they'd launched in the prior hard market, preferring to control their own destinies and expand their coverage options. These were wise risk managers indeed, because they were able to react quickly when the latest hard market hit in 2001.
Those risk managers who remained basically insurance managers and know little about alternative risk-transfer options are extremely vulnerable these days. They need to get up to speed in a hurry to keep up with their CFOs.
Mr. Perry's most emphatic advice is for risk managers to upgrade their education–both through graduate work leading to an MBA in finance, as well as continuing education programs leading to designations such as ARMs and CPCUs. The Logic survey revealed a surprisingly large portion of the risk management community lacking such educational credentials.
It's not too late for risk managers to catch up. Indeed, many companies will not only encourage their risk managers to go back to school, they will insist on it. Risk management is at its foundation a knowledge business, and those in the know will be the winners in this real-life game of "Survivor."
Reproduced from National Underwriter Edition, April 7, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.
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