Risk Managers Must Hit The Books To Grow

However, risk management has a ways to go as a profession in terms of education levels, as demonstrated by the results of Logic's "2002 Risk Management Compensation Survey," co-sponsored by National Underwriter.

The Logic survey of 1,484 respondents in December 2002 revealed that the highest percentage of risk managers boasting MBAs–62 percent–came from firms with $7 billion to $15 billion in sales volume. However, the percentage for the majority of categories hovered in the 50s or below, with the low being 30 percent in the less-than-$200 million category.

The $7 billion to $15 billion sector also led in terms of those with ARMs, with 54 percent, and CPCUs, at 33 percent, leaving a large group of risk managers without graduate school or continuing education credentials.

"It's time for many risk managers to go back to school," said Mr. Perry. "Having an ARM [designation] is nice. A CPCU is wonderful. But an MBA in finance is magnificent if you're looking to hold onto your job, or move on to a better one."

Mr. Perry said that employers will often pay to send a risk manager for more education, and suggested that it never hurts to ask for continuing ed support. "In fact," he added, "some companies are demanding that their risk management department people get MBAs in finance, and make the time and money available for them to go and get it."

The goal of such continuing education, he observed, is to prepare risk managers to deal as equals with the financial people to whom they report.

"Although most risk managers are not expected to serve as full-fledged CFOs or treasurers, they should develop the skill set to work with the high-finance types they report to if they want to remain valuable to their organizations," he said.

To accomplish this, risk managers should become "totally conversant with risk financing options outside of insurance, as well as alternative risk transfer opportunities like captives," according to Mr. Perry. "More and more companies that are searching for risk managers are insisting on individuals with these skills coming in."

However, this does not mean that risk managers must recast themselves as "enterprise risk managers," or take on the direct financial duties normally assigned to the CFO or treasurer, added Mr. Perry.

"There aren't many going by the enterprise risk manager title," he observed. "However, should risk managers have the skills that have been attributed to the enterprise risk manager? Of course, because at a time when staffs are getting cut and every employee has to justify their existence, those without the ability to deal in the higher financial realm beyond insurance are vulnerable and could be replaced by those who are more comfortable talking the language of the CFO."

Many risk managers are already walking the walk, not just talking the talk of the CFO. Logic found that 27 percent of those surveyed have "direct, hands-on" responsibility for "Finance/Treasury" duties, while 33 percent either "supervised" or "advised" on these functions. The remaining 40 percent said they were "not involved."

Results again varied by size of companywith the highest level of direct finance involvement (41 percent) reported among those at firms with $2 billion to $4 billion in volume.

However, the smallest sector–those firms with sales revenue below $200 million–came in second with 36 percent, while only 22 percent in this category said they had no involvement with these functions. Mr. Perry said this "makes sense because the risk managers at the smallest companies tend to wear the most hats due to the fact that the company's overall financial staff is small."

Mr. Perry encouraged risk managers to fight to become part of their company's financial management chain of command, if they aren't already.

"The best place for a risk manager to work is in a company with a reporting structure that has them dealing directly with the financial departments," he said. "You can't be reporting to Human Resources or the Legal Department. If you're not reporting to the finance people, it is indicative that risk management is a second cousin at your company."

In any case, risk managers looking for a new job, a raise or a promotion should market themselves as solution providers, not merely transaction supervisors, Mr. Perry warned.

"Increase your financial skill set," he advised. "Either upgrade in-house, going to school while you work, or look to move to a number-two position where you'll work under a risk management director who can show you the ropes of high-finance and enhance your knowledge and skills, so that you'll be better prepared to go after a number-one spot in that company or somewhere else down the road."

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.