Risk Manager Salaries Rise Despite Tough Economy

Risk Manager Salaries Rise Despite Tough Economy

Jobs still hard to come by, especially for those who lack advanced skill set

Risk managers buffeted by the challenges of the hardest insurance market in years are not only holding onto their jobs, but are seeing their salary and bonus packages rise at a healthy clip despite the tough economy, an annual survey of industry compensation trends has revealed.

The “2003 Risk Management Compensation Survey,” which queried 1,580 risk managers from across the country and a wide spectrum of industry sectors, found an average salary gain of 5.9 percent from $145,500 in 2002 to $154,100 last year. Over the past three years, the average risk manager salary has risen 19.8 percent, with the biggest gains coming in the top four company-size categories.

The survey conducted by Logic Associates Inc., the industry's leading risk management recruitment service, and co-sponsored by National Underwriter also found that risk manager salaries in a number of company-size categories beat the 5.9 percent average increase, in two cases by a wide margin.

The 174 risk managers surveyed at firms with annual sales volume of up to $200 million although they are now the only segment earning less than $100,000 on average did see salaries rise a hefty 9.2 percent to $88,875. At the other end of the spectrum, the 188 respondents from companies with between $7 billion and $15 billion in sales saw their average salary soar 8.1 percent to $214,000, making this group only the second to break the $200,000 barrier in the survey's history with the other being those at the top category of over $15 billion in volume.

This salary growth is quite reasonable given the difficult circumstances in risk management and the general economy today, according to Bill Perry, president of Logic Associates, the veteran job placement expert based in New York.

Indeed, while jobs are certainly not easy to find these days, especially if a risk manager lacks a wide and deep skill set, the good news is that employers appear satisfied with those they already have on staff, he said, given the relative lack of turnover, particularly at the biggest companies.

“In a hard insurance market like the one we just went through, and with such a tough economy, I was surprised that there wasn't more of a move by employers to upgrade their risk management staff,” Mr. Perry told NU.

“With the insurance market so much more challenging, with rates rising, policy negotiations so much more strenuous, and with more sophisticated alternative risk-transfer options required, you would think that more risk managers would have lost their jobs,” he added. “I expected more employers to call up and say: 'I want to get rid of my incumbent because he's too one-dimensional, or hasn't done a good enough job containing our cost of risk, or I need someone with more education and skills.'”

Mr. Perry reported that while he has “seen this happen a couple of times where I have been asked to go out and get a client a more financially-astute risk manager” such requests have been the exception rather than the rule.

“What this really signifies is that the weeding out process is basically over,” he said. “Most risk managers have proven their merit and are weathering the storm. I'm definitely not seeing turnover at the top-tier firms, where the risk managers have earned their stripes, they have the necessary skill sets to adapt to any challenge, and seem to have the job under control no matter what the insurance market is like.”

Still, Mr. Perry said the feeling of satisfaction is not always mutual.

“Except for maybe 10-to-15 percent of the risk managers out there who are so entrenched and locked into their jobs they just would not entertain another option, basically everybody is in the market,” he said. “Even if they are not looking aggressively, 85-to-90 percent could be enticed to move if something better came along. Given the right scenario in the right place for the right money, they would move.”

In other words, he added, “it's not hard to drum up solid candidates for every opening these days. The problem is there are not a lot of openings. In fact, if a risk manager is unemployed for whatever reason, it's tough to find a new job. As much as our economy is supposedly coming out of a recession, job creation is lagging behind, and risk management is no exception.”

Many of the risk managers surveyed were bonus babies. Four of the eight company-size categories reported double-digit growth, while one group those at firms below $200 million in sales saw their average bonus just miss that benchmark with a 9.9 percent gain. The $201 million-to-$500 million segment had the best showing in this area, with an average bonus hike of 15.5 percent. Those between $1 billion and $2 billion were next with 13.4 percent growth.

This was significant because in terms of benefits, stock options while still a major compensation perk, especially among those at the biggest companies became a somewhat lesser factor for the profession in 2003, the survey found. There was a slight drop in the percentage of respondents getting stock options from an average of 74.5 percent in 2002 to 73 percent last year.

However, the drop was steeper at certain company-size categories. The percentage of those at firms below $200 million in sales who received options fell five points to 43 percent. Those at firms between $1 billion and $2 billion also saw a five-point drop to 70 percent. There were declines even at the highest levels?with the percentage of those at companies between $4 billion and $7 billion in sales dropping five points to 82 percent.

This is not surprising, considering the volatility of the stock market the past few years. Indeed, in last year's survey report, we noted that the allure of stock options had worn off from the heady days of the dot.com-fed boom, as risk managers put more emphasis on being rewarded with cash on the barrel.

When analyzing the overall survey, however, “one of the most surprising results, perhaps, is that there are no overriding trends in terms of geography or industry, as there were in past years,” according to Mr. Perry.

“At one time you could say the place to look for work was in the Southwest, or the Northeast wherever the economy was booming. Or a few years ago you could say that high-tech is exploding and there's a big need for risk managers at all these new dot.com firms being launched,” he added.

However, he noted, “today, there is no one industry or area of the country that is doing so much better than the rest that risk management jobs are more plentiful in one place or industry group than another.”

He emphasized that it is still important for risk managers to pay close attention to how they stack up against their counterparts rather than worrying too much about national averages, noting that not all risk management jobs are created equal. He urged risk managers to see where they stand against their peers not only in the same size company, but in the specific industry and state they work in as well.

(The complete survey report, available from Logic Associates, includes breakdowns by state and industry. NU will examine trends in these areas in future editions, beginning with the May 24 issue.)

Risk Managers Earn By What They Learn

By Sam Friedman

Risk managers might be professionals when it comes to handling their companies' exposures, but too many are still amateurs at managing factors that could boost or threaten their career growth, the industry's leading risk management recruiter contends.

“Good risk managers need to protect against their own career risks,” said Bill Perry, president of Logic Associates in New York. “There is the risk of obsolescence. There is the risk of not having enough education to cope with high-finance issues. There is the risk of being too one-dimensional dealing only with insurance and not having any alternative market experience.”

Part of the problem is a lack of advanced training, according to Mr. Perry, while another factor is the types of companies some risk managers work for.

The “2003 Risk Management Compensation Survey,” conducted by Logic Associates and co-sponsored by National Underwriter, found that among the 1,580 risk managers queried, a large number of respondents and their staff members are still getting by with a simple BA degree.

Mr. Perry said that having an MBA in finance can be critical for risk managers who are expected to deal on a level playing field with their CFO and treasurer. He added that earning professional designations such as an ARM (Associate in Risk Management) or CPCU (Chartered Property Casualty Underwriter) can also be crucial in developing the expertise and skills to deal knowledgeably with day-to-day risk management and insurance challenges.

Unfortunately, too many risk managers lack these advanced degrees, the survey found. For example, the highest percentage of those with MBAs?65 percent came at firms with between $7-and-$15 billion in sales volume. This means that even among the most highly educated group of risk managers, one-third of respondents in the category lack an MBA.

Risk managers also generally lag in terms of professional designations, with more than half of the respondents in only two sales volume categories having an ARM, and only two categories showing 30 percent or more with CPCUs. (See accompanying table.)

Risk managers, according to Mr. Perry, are the “ultimate knowledge workers. Their know-how, their skill sets, is all they have to sell in the job market how well they know the exposures they deal with; how well they know the insurance markets; how capable they are in putting together an alternative risk-transfer deal. This is so crucial.”

Still, Mr. Perry contended that despite their relative shortcomings in terms of advanced education, more risk managers are recognizing the need to expand their skills in this tough job market. Indeed, while many risk managers still call his firm looking to change jobs over “quality of life considerations” such as their commuting time, “more importantly,” he said, “I'm also hearing today more from people looking to move over job content issues.”

He noted that risk managers “call to say 'I want to do more and learn more. I want to have a better professional growth scenario,' and I'm 100 percent supportive of that kind of attitude.”

Some risk managers, he said, “are getting much smarter about the type of moves they make career-wise.” These risk managers understand “what it means to move up from the public sector or a non-profit firm to a private company, or from retail to a manufacturing firm, where they will have to deal with more diverse and esoteric risks and raise their skill level.”

Mr. Perry added that when it comes to picking up skills, “a lot of it has to do with the types of companies you work for. If a risk manager joins a second- or third-tier firm that doesn't have wide and varied exposures and risk management challenges, it might be a good job, but that's all it is a job. It's not a career.”

Too many risk managers, he explained, “just have jobs” and have not learned how to build their career. “They think they're doing all right that they're working for a company, they're doing their job, they are making a decent living but it's at a stagnant firm from a risk management standpoint,” he said.

Working at this level may be fine “as long as the job is there,” he warned. “But if they stick around in that kind of a job with a skill set of one, two or three on a scale of one-to-10, and if they lose that job for whatever reason a merger or acquisition, a bankruptcy, a new president who doesn't like you when that risk manager comes to me looking for a new job, he's going to be harder to place; maybe impossible at a top-tier or second-tier firm.”

As important as education is, Mr. Perry added that either getting an MBA in finance or a professional designation such as a CPCU or ARM is only part of the solution.

Risk managers wanting to carve out a successful career should consider doing whatever is necessary, including making a lateral move, or even taking a step down in position “if it means moving from a lower-level company to one in the upper-echelon,” he said.

“If you're the number-one risk management professional at a lower-tier firm, there's no shame in going to a number-two spot at a bigger, mainstream company. You'll learn a lot more, you'll do a lot more, you'll have a much higher profile, and you'll be more attractive for your next move than if you just wallow in the lower tiers,” he said.

Another consideration is changing industries. This can make a huge difference in a risk manager's job and growth prospects, Mr. Perry explained.

A risk manager working in an industry that is claims-intensive such as retail or a professional employee organization might spend “70-to-80 percent of his time dealing with claims,” he said. “If that's all you have to offer, how do you expect to go from there to a first-tier company and take on the new responsibilities and challenges they present in terms of risk management? You can't.”

What is Mr. Perry's advice to risk managers looking to improve their long-term marketability? “You need to do everything you can do to get into a company where you will be exposed to cutting-edge risk management thinking, so you can expand your knowledge base and professional repertoire,” he said.

In the meantime, “keep learning, even if you have to pay for it yourself, if your company won't offer tuition reimbursement,” he said. “Keep networking and looking for new opportunities at bigger organizations where the risk management function is more sophisticated. To do nothing leaves you very vulnerable.”

Male RMs Predominate At Big Companies

By Sam Friedman

Women are still largely absent from the risk management ranks at the biggest firms, but it's only a matter of time before the gender gap narrows considerably, a job market expert predicts.

The percentage of women working as risk managers has held steady or even dropped a bit depending on the company-size category one is examining, according to the results of the “2003 Risk Management Compensation Study,” conducted by Logic Associates and co-sponsored by National Underwriter.

Indeed, the smaller the firm, the more likely it is to have a woman as its risk manager, the survey found. More than 40 percent of risk managers at companies below $1 billion in annual sales volume are female, according to the survey. The highest representation comes in the smallest sales category?47 percent at firms with $200 million or less in volume.

As sales volume rises, the percentage of female risk managers falls, from nearly one-third at firms between $1 billion and $2 billion, to 28 percent between $2 billion and $7 billion. The percentage of women really drops off when you hit the jumbo corporations to just 17 percent at companies between $7 billion and $15 billion, and only 11 percent at firms with over $15 billion in sales.

According to Bill Perry, president of Logic Associates in New York, there aren't more women working as risk managers at the top-tier companies for three reasons:

? “The greatest proliferation of women entering the risk management profession has come over the past 10-to-15 years,” he noted. “Many are starting out at the smaller companies, and it takes awhile to get the skill sets and experience they need to work in the upper-tier firms for the first time.”

? “The turnover rate at the upper-crust companies is much lower than at the lower-level firms,” he explained.

? “There just aren't as many jumbo companies as there are in the smaller sales volume categories, and thus there are fewer risk manager jobs available at the higher tiers,” he added.

Putting these three factors together, “it's common sense to see why women aren't better represented at the top-tier companies,” he said.

While he acknowledged that “the pool of top-quality female risk managers earning $150,000-to-$200,000 are certainly as a percentile of the business much less than the men earning that much,” he predicted that the gap will close “as more women now gaining experience at smaller companies move up to bigger firms, which are certainly seeking out and eager to consider women candidates when they do their job searches as part of their diversity campaigns.”

He added that women are well-represented at smaller companies, “and they are making their mark there. It's just a matter of time before this all levels out.”

Reproduced from National Underwriter Edition, April 16, 2004. Copyright 2004 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.