These Risk Managers Are Adding Value to the Risk Management Profession; Now You Can, Too
With the influx of new technology, real-time access to critical information and corporations’ unending quest to downsize, risk management positions are once again being scrutinized for their relevance to the bottom line.
Unfortunately, we have only ourselves to blame.
Well, not entirely. But we play a huge part as we watch our peers being eliminated in short-sighted ways to instantaneously improve profit margins, regardless of long-term ramifications.
Why Is This Happening?
According to Sandra Little, risk manager for Bar-S Foods: “I think, as a discipline, risk management overall has not done a good job at communicating our value proposition. Traditionally, we have operated in the background, under the radar, and not gotten out in front to be visible.”
Little further stated there are some companies where risk issues are being handled by general counsel or human resources rather than a risk professional. While this may be reasonable for businesses with limited resources (aren’t all resources limited?) this should be of concern for larger corporations where individuals may be handling matters for which they are unqualified.
If this is a glimpse of the future, it’s quite disconcerting.
To combat this possible devaluation of risk management as a vocation, we should first be cognizant that the corporate landscape has changed.
“Risk practitioners at all levels need to understand the rules of the game and then become expert influencers to leverage the rules to develop a better risk-aware culture,” according to Michelle Bennett, director, risk management for Cable One.
Bennett went on to state this “leveraging of the rules” will benefit the organization either in a pre-loss/risk control/coverage optimization fashion or in a post-loss maximization recovery effort.
Finally, the C-Suite should understand that if the Risk Manager position is eliminated – and there’s no one with experience left to steer the ship – management will most likely turn to the broker and other vendors and insist they pick up the slack. This can be tricky as they really have no skin in the game, per se.
Risk managers should also consider a paradigm shift from the role of traffic cop to one of facilitator.
According to Dale Lindstrom, risk & safety manager for DeWitt Construction, “The identification and solutions to complex risk issues are often best addressed by those responsible for the risk. Risk management is about coordinating and facilitating the owners of that risk.”
In short, show them how to do it themselves. No one knows more about inherent complexities and potential risk than the stakeholder.
For risk managers who report to finance, keep in mind the focus of finance is on numbers, not necessarily innovative risk abatement theories to combat losses that may or may not occur. Finance can find it perplexing when asked to spend money on mitigating the impact of perceived future events.
Understand there is perception vs. reality and, according to Bennett, “You’ll need to start speaking the language of data and proof.”
Finally, the C-Suite should understand that if the risk manager position is eliminated — and there’s no one with experience left to steer the ship — management will most likely turn to the broker and other vendors and insist they pick up the slack. This can be tricky as they really have no skin in the game, per se.
They might tell the client what they think they want to hear rather than what they should hear.
Worse yet, they could hedge their bets with “non-advice” — advice made so that they aren’t held accountable when something goes sideways.
While the vendors may be agreeable to carry the added burden, it won’t come without additional costs. Internally, that “pick up the slack” concept will also extend to internal departments that heretofore relied on risk management and now must go it alone. Management should be prepared for push-back.
Adding Value to Risk Management
Ten risk managers were asked how they add value and thus stave-off any potential job loss. Here were their suggestions:
- Seek out the heads of each department and do a brief presentation at their next meeting. You’d be surprised how many department heads don’t know you exist, and if they do, they had no idea as to the scope of your responsibilities. Hopefully you’ll uncover pain points and help them plan a mitigation strategy. Ask a lot of questions and don’t assume anything. The bottom line is to learn every aspect of your company.
- Increase your visibility by improving the way you report Key Performance Indicators. Be innovative and use concise reporting tools, templates and software. Remember, you may be reporting to a younger generation that already views risk management as an obsolete vocation. Stay woke.
- Take on more responsibilities that may be outside of the traditional risk management job functions. Make yourself so valuable they can’t imagine life without you.
- Insert yourself in the process. Try to integrate risk management not only into existing organizational processes but also when losses occur. Be the person who takes charge and who gathers all the involved parties and attacks the situation. Lead the charge over the hill.
- Tailor your game-plan to the department to whom you report. The finance department will have different requirements and expectations than legal, human resources or marketing, so risk professionals need to be a multi-dimensional translator. Learn to speak the jargon of multiple areas of the company … communicate in their vernacular.
- Understand that ego, and the need to protect one’s territory, may keep some departments from reaching out to risk management for assistance. Show them you’re not a threat. Quite the opposite. You are there to help them be successful, and together you protect the financial integrity of the corporation. Be Robin to their Batman if that’s what it takes.
- Use data to show your value. In that vein, undertake a Total Cost of Risk (TCOR) analysis that includes your total compensation in relation to how your efforts are proving to add value to the company’s bottom line.
- Remember, you exist to provide the C-suite with the knowledge to prioritize potential risks based on a proactive rather than reactive perspective. Help them look and prepare for the future.
- Network with other risk professionals in other industries and company cultures. There are a million best practices that we can learn from without recreating the wheel.
- It goes without saying you should instill a culture of risk awareness in everything you do. But you can only take that message so far unless the C-Suite supports the desired risk culture and disseminates that message. Without C-Suite support, you’re just skating uphill.
While the above is no guarantee of job security — as each company has its own culture and agenda — it will certainly give you a fighting chance the next time management reviews your position for possible reduction. &