Risk Manager's Role More Specialized As Number Of Policy Placements Grows

Risk Manager's Role More Specialized As Number Of Policy Placements Grows Even in this troubled economy, with companies looking to cut non-core functions to save money, good risk managers should not be in danger of seeing their function outsourced or absorbed by the CFO, the industry's leading headhunter contends.

“Even at smaller companies, that's only a risk if the risk manager has failed to demonstrate his value,” said Bill Perry, president of Logic Associates in New York.

“But even in large firms, the risk manager can't get away with sitting in some ivory tower and talking in 'Insuranceeze.' They have to be out there communicating and politicking on what risk management is all about,” he added.

Over the last 20 years, Mr. Perry observed, the risk management function has become far more specialized. Indeed, he noted, risk manager job descriptions often no longer include direct responsibility for loss control and safety, employee benefits, and even claims.

“They usually oversee and supervise these functions, but are not always expected to be hands-on,” he said, citing the results of Logic's “2002 Risk Management Compensation Survey,” co-sponsored by National Underwriter.

However, this does not mean that the risk manager's role is being diminished, or that because they have been relieved of some duties, their lives are any easier, he hurried to add.

“It's quite the contrary,” Mr. Perry observed. “The risk manager of 20 years ago used to have a pretty straightforward set of exposures to account for, but that has multiplied exponentially. Now you have to negotiate employment practices policies, directors and officers liability, environmental liabilities and, of course, terrorism, on a stand-alone basis.”

Mr. Perry cited the resume of a risk manager at a firm with $5 billion in sales volume and about 10,000 employees who said he is personally responsible for analyzing, marketing, placing and renewing more than 100 domestic and international insurance policies as a typical example of what risk managers are up against.

“That's mind-boggling, especially since he's doing all this as director of risk management with only an insurance manager and a risk management trainee on his staff. That's a lot to handle with two-and-a-half people, and yet their success is critical to the firm's bottom-line results,” he said.

In addition, many risk managers have captives to oversee, effectively running operational subsidiaries–sometimes domiciled outside the country, he noted.

The percentage of risk managers dealing with captives generally rises with sales volume, the survey found. While only eight percent of those at firms with less than $200 million in volume had a captive, 88 percent of those at companies between $7 billion and $15 billion did–managing an average of two captives.