By JANET ASCHKENASY, an independent financial journalist with more than 20 years of experience covering risk management, employee benefits, and insurance.
Looks like it's time for risk managers to become more active on cross-functional risk committees and otherwise strengthen their commitment to management's strategic planning efforts.
Risk specialists and C-suite executives responding to a new study released at the RIMS Annual Conference and Exposition in Philadelphia differed in how they viewed the risk management function.
The joint survey by Marsh and RIMS finds, for instance, that for the most part, CEOs and other C-Suite execs do not consider "insurance knowledge" a key area of risk management competency.
"Just over one-third of risk managers surveyed cited it while only one-quarter of the C-Suite gave it a nod, placing it below a broad-based operational perspective and just barely ahead of project management experience," said the survey. The survey reported on the opinions of 1,322 risk managers, C-suite executives, and others involved in risk-related functions, most of them located in North America.
The survey is in its ninth year and this time around, it is strongly suggesting that risk managers take hold of every opportunity to increase their investment in strategic planning and enterprise risk, in addition to the priorities cited by risk managers, observes Brian Elowe, a managing director in Marsh's Global Risk Management Division. The latter include integrating more deeply with operations, providing better quantification and analysis on risk management, and executing daily activities more efficiently, Elowe said.
Basically, "the two groups differed in their views on whether the role should be primarily defensive or anticipatory," Marsh and RIMS reported in a statement announcing the report.
How to Capitalize On the Findings
One way risk managers can rise to meet management's expectations is by using more data and analytics in support of strategic risk management decision making, said Elowe. Another way is to increase their presence and impact on cross-functional risk committees made up of professional senior leadership.
The report finds that:
*Sixty-seven percent of risk managers in firms without a risk committee
say risk management needs to be involved in the early stages of planning, compared to just 39 percent of C-Suite respondents. The risk managers in these companies are looking for an opportunity to engage, but there is no formal platform for dialogue. Meanwhile:
*In companies with a risk committee,
there was greater alignment on this issue, with 54 percent of risk managers and 49 percent of C-Suite members citing the need for earlier risk management involvement.
*Risk managers at companies without
a cross-functional risk committee are more likely to question their relationship with senior management.
* Also, more than half of C-Suite respondents said their organizations do not
measure total cost of risk, up from 36 percent who said so in 2011. Yet total cost of risk remains much relied upon and employed by risk managers, with 68 percent saying they use it.
Total cost of risk "is almost a misnomer," said Carol Fox, director of RIMS' Strategic and Enterprise Risk practice.
"It's not the total cost of risk but more the total cost of insurance, losses, claims and litigation," she said, adding that total cost of risk measurements generally reflect a narrow view of only "a slice of the organization, rather than management's view of risk for the entire entity, which would include "all of an organization's initiative and projects including not only the uncertainties but untapped opportunities" the firm faces.
April 23, 2012
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