By CYRIL TUOHY, managing editor of Risk & Insurance®
Risk managers are blessed and cursed. They're blessed because their role takes them into different parts of their organizations. Risk managers belong to one of the few managerial categories with the privilege of seeing a holistic view of the exposures facing their employer.
Risk managers, however, are also vulnerable to what the military often refers to as "mission creep," and in this context risk managers are cursed.
There is no term more vague and amorphous than the word "risk." What kind of risk? Where does the risk begin or end? Who's in charge of the risk? How large is the risk?
Car managers manage cars. It's a simple, clear, decisive mandate. The finance manager manages a company's finances. That, too, is clear and straightforward.
But risk, that's a different story. "Risk" is an umbrella term, one in which plenty of variables come and go. As such, the term 'risk' is ripe for abuse and exploitation.
Is GE's risk manager responsible for mundane nuisances like slip and falls on the factory floor of the company's aircraft engine subsidiary? Or, is GE's risk manager responsible for malfunctioning turbine blades with the potential to send an aircraft crashing to the ground?
Is the risk manager responsible for securing enough capital for his or her company? Or is he or she responsible for making sure a company's risks are adequately reinsured?
Do risk managers buy insurance to make sure corporate risks are adequately covered? Or do they dabble with 'alternative risk' strategies better left to captive management experts. Do risk managers delve into catastrophe bonds or leave that to Wall Street and the capital markets?
So, what exactly does it mean to stay focused on the basics when you're a risk manager? It means thinking inside the box.
Thinking inside the box means risk managers need their employers to stay focused on the risk in question, and to make sure an insurance product or service is available in the marketplace at a reasonable price to protect against that risk.
If the chief executive suite wants more out of its risk manager, it can expand the sides of the box, and pay its risk manager commensurately, thank you very much.
Senior Editor Dan Reynold's point, "Risk Managers Need to Think Outside of the Box.")
May 1, 2011
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