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Ask A Risk Manager

From the October 4, 1999 issue of Business Insurance Magazine

With the ever evolving and changing needs of companies in managing risk, how can risk managers better prepare themselves for those growing demands and enhance their careers in the process?

Risk managers are facing a growing challenge to close the gap in their typical skill set between what has made them a success under old and shifting paradigms and what they need to be successful in the future.

At the core of the challenge are both opportunities in terms of experience and education. And naturally, one is easier to address than the other.

First the hard one.

No matter what one might read or hear, career development at most companies still operates as it has for some time now; that is, the functional bucket you choose-or fall into-is the one you stay with for the life of your career. This has been especially true in risk management, as risk managers are most often still considered technical specialists with anarrow and unique focus-insurance-related matters.

This approach is obviously constraining for those of us who want to broaden our perspectives and horizons. It's great to be viewed this way when others see you as the only reliable source of expertise in a function, yet not so great when the firm needs a continuously rotating series of pinch hitters and back-ups.

When we accept this view, we become seen as less flexible and perhaps even less useful to people planners. But we can manage this career riskin ways not dissimilar to the model we apply to everyday risks to the firm. Before we go there, let's look at the other approach; a company of generalists.

A smaller set of organizations uses the generalist approach to career development and bench planning by assuming that most management personnel should be able to do each other's jobs in a sink-or-swim fashion. GE, PepsiCo and others have practiced this in numerous ways and to varying degrees of success.

In the end, it is equally constraining for one who loves what they do in afunctional specialty and wants to develop that to the fullest. Ironically, it is this approach that can actually work to the advantage of a dedicated "risk manager" who wants to be better prepared to work under the emerging paradigm of enterprise risk management.

Why? Quite simply, the more time you spend rotating around core functional specialties within a firm, the better able you will be to practice enterprise risk.

You'll have a broader understanding of the key aspects of company operations that present the firm with the risks that must be addressed. The inherent problem of course, is how to be "the risk manager" for such a firm and yet participate in this development approach. After all, the firm may end up preferring to leverage your contribution in another specialty area or may consider you part of the small bench for the most senior posts (in which latter case being the "risk manager" may just quickly give way to such higher aspirations).

So what if you're caught at one end of this spectrum or the other, or someplace in-between as most of us are?

Well, most of us are somewhere in-between and this is actually the best place to be. It gives you the most flexibility since you're not caught in astrict view with little wiggle room. Wherever you are in this regard, you need to step out and get involved in other functions, especially those that are part of the core competencies of your firm. Within those, you'll find most of the risks that need to be addressed.

Some ways to get into these areas are by: joining task groups and project teams such as for new products, equipment or services; investigating and reporting on things that others haven't even thought of yet, that could be of interest to management such as a new product, service or process that could contribute to shareowner value; or informally offering support for the key initiatives of others offering your opinions, resources and expertise to make them more successful.

Of course there are many other ways to increase your visibility, but the key is to take the initiative and set yourself apart. It's important to remember as well, that this process doesn't require being a superstar. Becoming distinct from the pack is actually not as hard as some think, but it is crucial to risk managers of this era that want to gain responsibility and recognition.

Another "must-do"-no matter how your company operates along the development spectrum-is to begin informally making your case for risk-related concerns outside your defined area of accountability. Make your case to key decision makers, while in the process, developing key relationships with those same power brokers.

Make sure your case has clearly defined metrics and is not just "pie in the sky" thinking. Make sure you think through whatever it is you will present and be prepared to answer the hard questions that will come. Not being prepared will engender sure failure and tarnish the reputation you're trying to build, even though the approach itself shows initiative on your part.

Lastly, in this realm of getting the right experience, don't underestimate the possible need to plow your trade elsewhere. There are no shortages of firms that will rebuff most if not all of the initiatives described above. These rebuffs are reflective of an insular and rigid culture that is unlikely to be moved much by larger group efforts, much less those of a single miscreant like the risk manager.

While I believe that in the right environment and with the right encouragement, you can gain much from self-initiated efforts as above, there are times when you'll simply need to move on to advance your interests.

Although the thought of moving on may strike fear in the hearts of many, be prepared to consider this alternative when you are faced with a string of defeats and disinterest that becomes too long. Forget loyalty as a first priority; the employment relationship is fundamentally an economic transaction and therefore driven by market and other forces that, for the most part, we don't control, the key one being supply and demand.

Let me suggest that in today's era of mergers and acquisitions, the supply of traditional risk managers exceeds the demand, a hard cold fact of life in the late '90's. As a result, it becomes all the more important to improve your marketability to leverage economic realities to your favor.

This is best accomplished as an additional strategy to considering alternate positions. Simply moving to where you perceive the grass to be greener is often an ineffective tactic. However, it can pay when, for example, you are able to start a risk management operation from scratch and/or forging this in an emerging industry such as e-commerce.

Meanwhile, whether you move or not, you should be assessing your credentials for their applicability to your current job requirements and, more importantly, to the job requirements of the future, which are continuously being redefined.

What about education? There are of course many ways to prepare yourself to be a more effective practitioner and different employers will value different credentials. Notwithstanding high impact results, which can get you further than any other component part of what defines your market value, I strongly endorse a set of educational credentials that displays your broadness and diversity. So, while an undergraduate degree in business may be preferable, most undergraduate degrees are an equally good start.

The important part comes after that. It is then that I recommend you focus on an MBA if you have other than an undergraduate business degree. I would then suggest you move right into getting specialized riskand insurance education such as the Fellow in Risk Management, or FRM, from the Global Risk Management Institute; Associate in RiskManagement, or ARM, from the Insurance Institute of America; Chartered Property & Casualty Underwriter, or CPCU, from the American Institute for CPCU; or other Insurance Institute type certifications.

Regardless of undergraduate specialty, I would strongly recommend those who want to be senior risk manager one day, secure both an MBAand the FRM at some point in the first 10 years of their careers. That is when it will have the most marketability.

Beyond formal degree or certification programs, don't overlook the many opportunities to practice continuing education. Selective use of seminars and short courses need to be a part of your total strategy for career and self-development. The Risk & Insurance Management Society Inc., whose primary mission is supporting the risk management discipline through education, offers many opportunities to develop yourself and improve your market value. In addition to the FRM program, RIMS offers numerous 2- or 3-day seminar courses, current topic and basic skill development workshops, online asynchronous learning and, of course, more than 150 educational seminars at the annual RIMS conference in the Spring. Take advantage of these and the many other opportunities to continue your education available from other sources. The best risk managers never stop learning and developing themselves.

So what steps should you take to address both experience and education? Why not apply the risk management model that we practice daily. That is: identify the risk/requirements that need to be addressed; treat your findings with a thoughtful strategic and tactical plan, no matter how informal; measure the results/progress against the intended strategy and tactics; and monitor/implement the needed changes to get you to the better result.

When you think about it, life is just a series of risk management decisions to which this model can be consistently applied.

This column on risk management issues was written by Christopher E. Mandel, director-global risk management at Tricon Global Restaurants Inc. in Louisville, Ky., and vp-external affairs, Risk & Insurance Management Society Inc.'s Executive Council.

It is reprinted with the permission of the author and the copyright holder Crain Communications. It appeared in the October 4, 1999 issue of Business Insurance Magazine.

We gratefully acknowledge their cooperation. JJG

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