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Risk management isn't what it used to be. It's a lot more--and then some. For executives paid to manage the risks of a corporation, the job's become broader and a lot more difficult as more companies take the discipline of risk management seriously, according to international risk managers.

"It used to be that risk was explained in financial terms," said Gary Steel, a member of the executive committee responsible for sustainable development, human resources and civil responsibility with the Swiss-Swedish engineering giant ABB, which employs 113,000 people around the world. "However, the world of risk today is much more systemic. The demands are much greater."

In Steel's case, it's meant having to deal with installing power-generation systems in Afghanistan, to helping contractors in the oil fields of the politically volatile Niger delta, to reviewing ABB's occupational health and safety protocols in the 100 countries in which the company does business.

For all the obvious risks of operating in war-torn nations, perhaps the most costly risk, in human terms, has been the risk to a corporation of failing to comply with the new rules of corporate behavior. In four years at ABB, Steel's been involved with the firing of more than 100 managers for noncompliance, he said.

"In a company of ABB's size, it's not always possible to have full compliance, and in every company there are some people who think they know better," he said. Good ethics are a "moral imperative," he added. Bad ethics equal bad business.

"There's no tax relief on fines for noncompliance," he also said, noting that tarnished corporate reputations are very costly for management and shareholders.

With more than 1,200 risk executives from more than 40 nations gathered at the meeting, the theme of this year's FERMA's conference was around global responsibility and sustainability, and partly as a result the tenor of the keynote addresses was decidedly internationalist in scope, the responsibilities of the risk management profession sweeping.

Jorge D. Luzzi, corporate risk management director of the Italian tire and rubber manufacturer Pirelli and president of the International Federation of Risk and Insurance Management Associations, said the role and the responsibilities of risk managers were "really going international."

From making sure their employers follow compliance edicts, to adopting new ISO standards, to helping C-suite executives think about managing risk throughout the enterprise, risk managers can potentially wield enormous influence over the future direction of their companies.

"We are in a moment of decision," he said. Depending on what risk managers do in the next two or three years will determine if their respective companies remain with the status quo or whether those same companies embark on a very different path to managing risk, he said.

Franck Baron, vice president of risk management and insurance for the Geneva-based fragrance and flavors manufacturer Firmenich and vice president of FERMA, pointed to the "uncertainty for individuals and societies" in the face of climate change, persistent malnutrition and the risk of pandemics of bubonic proportion.

International risk managers today, he said, find themselves at a crossroads between the responsibility for improving corporate profits and the ethical and moral duty to improve the societies in which their employers choose to conduct business.

"We need to go from value-oriented risk management to values-oriented risk management," he said.

CYRIL TUOHY is managing editor of Risk & Insurance®.

December 1, 2007

Copyright 2007© LRP Publications