A Call to Action for Risk Managers

Risk managers are waking up to the fact that as the world continues to change, they must also change. Upgrades to skill sets as well as the overall approach to risk management is essential for these professionals to provide the value that companies are demanding in the tumultuous global economic environment. Just this week, at the Federation of European Risk Management Associations annual conference in Sweden, a call to action is being made to risk managers around the world.  Here’s a sample of the views expressed during the conference as reported by Business Insurance magazine.

During a news conference at FERMA’s forum in Stockholm, FERMA executives said risk managers cannot isolate themselves from the financial turmoil in many parts of the world or the rapid changes in many industries because of technology. “You cannot put your head in the sand; you have to understand and live with it,” said Julia Graham, chief risk officer for London-based law firm DLA Piper U.K. L.L.P. and VP of FERMA.

Ms. Graham said the skills that risk managers need have changed in the past five years. Now, she said, risk managers need to look forward more than backward, have greater financial literacy to understand and talk the language that company boards use, and improve their management skills, among other things.

The purely quantitative, historical view of risk is no longer adequate in today’s complex global marketplace.  Strong business acumen is required for risk managers to provide a better view of potential risks and opportunities facing companies today.

What Makes a Risk Manager Effective?

An interview published in today’s Wall Street Journal discusses the importance of risk management as a business discipline and the need for more formal training for professionals who dedicate themselves to the discipline. Gideon Pell, Chief Risk Officer at New York Life Insurance, provides his perspective on the increasing demand for risk management professionals.  He also offers some great insight on what makes a risk manager truly effective in an organization.  Here’s what he had to say.

It’s obvious that we’re living in an uncertain economy. The idea of having a disciplined approach to risk management, to be able to look at risks holistically across the organization, to make sure you’re not missing significant risks, is even more critical today than it was two or three years ago.

One lesson that we’ve learned from the last couple of years is that the institutions that failed had a lot of risk managers who were very smart and very quantitative but it didn’t help them save their organizations. If you’re not able to influence the organization that you’re in, you’re not going to be effective at your job. To be an effective risk manager, you have to have a good understanding of the business. You’ve got to have sound judgment and you have to be able to communicate effectively up and down the organization.

Mr. Pell is spot-on in his assessment of what makes an effective risk manager.  The challenge for many companies is developing talent to master both the quantitative and qualitative.  Risk managers must be practical and business focused in their approach to be successful.  For help designing a talent development plan, email us at NavigateSuccessfully@WheelhouseAdvisors.com.