Risk managers help businesses control risks and losses while maintaining the highest production levels possible. They work in industrial, service, nonprofit, and public sector organizations. By protecting a company against loss, the risk manager helps it to improve operating efficiency and meet strategic goals.
History of Risk Manager Career
Entrepreneurs have always taken steps to prevent losses or damage to their businesses. During the industrial revolution, business owners recognized that as production levels increased, risks increased at the same rate. The risks were often managed at the expense of worker health and safety.
Only since the mid-1950s, however, has risk management developed into a specialized field. With the rapid growth of technology came greater and more varied risks. Risk management changed from simply buying insurance against risks to planning a wide variety of programs to prevent, minimize, and finance losses.
The Job of Risk Managers
Risk management protects people, property, and inventory. For example, factories that use hazardous chemicals require employees to wear protective clothing; department stores use closed-circuit surveillance to minimize shoplifting and vandalism; and manufacturers have a plan of action to follow should their products injure consumers. The five general categories of risks are damage to property, loss of income from property damage, injury to others, fraud or criminal acts, and death or injury of employees.
Risk managers first identify and analyze potential losses. They examine the various risk management techniques and select the best ones, including how to pay for losses that may occur. After the chosen techniques are implemented, they closely monitor the results.
Risk management has two basic elements: risk control and risk finance. Risk control involves loss prevention techniques to reduce the frequency and lower the severity of losses. Risk managers make sure operations are safe. They see that employees are properly trained and that workers have and use safety equipment. This often involves conducting safety and loss prevention programs for employees. They make recommendations on the safe design of the workplace and make plans in case of machinery breakdowns. They examine company contracts with suppliers to ensure a steady supply of raw materials.
Risk finance programs set aside funds to pay for losses not anticipated by risk control. Some losses can be covered by the company itself; others are covered by outside sources, such as insurance firms. Risk finance programs try to reduce costs of damage or loss, and include insurance programs to pay for losses.
Large organizations often have a risk management department with several employees who each specialize in one area, such as employee-related injuries, losses to plant property, automobile losses, and insurance coverage. Small organizations have risk managers who may serve as safety and training officers in addition to handling workers’ compensation and employee benefits.
Risk Manager Career Requirements
If you are interested in becoming a risk manager, you should plan on getting a bachelor’s degree and may at some point consider getting an advanced degree, such as master’s of business administration (MBA) or a master’s in risk management degree. In high school, therefore, you should take classes that will prepare you for college as well as help you explore this type of work. Take plenty of mathematics classes. Also, take accounting, business, and economics if your school offers these classes. To round out your education, take a variety of science, history, government, and computer classes. And of course, take English classes, which will help you hone your research and writing skills and make you ready for college-level work.
Risk managers generally need a college degree with a broad business background. Depending on the college or university you attend, you may be able to major in risk management or insurance. There are about 100 schools that offer courses or degrees in insurance and risk management. If your school does not offer these degrees, consider a major in other management or finance areas, such as accounting, economics, engineering, finance, law, management, or political science. No matter what your particular major, your class schedule will most likely include economics, accounting, and mathematics, such as calculus. Computer classes that deal with using a variety of software programs will also be necessary to take. Insurance and even banking classes will give you an understanding of these industries and the financial tools they use.
Certification or Licensing
Many organizations require their risk managers to earn the designation associate in risk management (ARM) or certified risk manager (CRM). The ARM program is run jointly by the American Institute for Chartered Property Casualty Underwriters and the Insurance Institute of America. You must take courses and pass exams in the following areas: risk management, risk control, and financing. The Institute also offers the associate in risk management for public entities certification for risk managers who are interested in working in the public sector.
The Certified Risk Managers International, a member of the National Alliance for Insurance Education and Research, offers the CRM program. To earn this designation, you must pass exams in five courses covering all major areas of risk management.
The Risk and Insurance Management Society (RIMS) offers an advanced designation in risk management, the RIMS Fellow. The program consists of workshops covering advanced issues in business, insurance, and risk management.
Communications skills are important for risk managers. They must regularly interact with other departments, such as accounting, engineering, finance, human resources, environmental, legal, research and development, safety, and security. They must also be able to communicate with outside sources, such as attorneys, brokers, union officials, consultants, and insurance agents.
Risk managers must have analytical and problem-solving skills in order to foresee potential problem situations and recommend appropriate solutions. They must be able to examine and prepare reports on risk costs, loss statistics, cost-versus-benefit data, insurance costs, and depreciation of assets.
Knowledge of insurance fundamentals and risk financing is necessary. Risk managers must know loss-control issues such as employee health, worker and product safety, property safeguards, fire prevention, and environmental protection.
Management skills help risk managers set goals, plan strategies, delegate tasks, and measure and forecast results. Computer skills and familiarity with business law are also very helpful.
Exploring Risk Manager Career
You may wish to ask your family’s insurance agent to help you contact a colleague who has commercial accounts and might introduce you to a risk manager for one of their larger clients.
The Risk and Insurance Management Society Inc. is the largest organization for risk managers. It offers books, monographs, a bimonthly newsletter, education programs, and an annual conference. Students may be able to attend local chapter meetings. The Spencer Educational Foundation, affiliated with RIMS, provides annual scholarships to academically outstanding fulltime students of risk management and insurance.
Airlines, banks, insurance companies, manufacturers, government agencies, municipalities, hospitals, retailers, school districts, and universities all employ risk managers.
College placement offices can put students in touch with recruiting officers from industries that employ risk managers. Recent graduates can also send resumes to employers of risk managers, such as corporations, service providers, government agencies, and other public and private organizations. Some risk managers join insurance companies, insurance brokerage firms, or consulting firms that provide risk management services to clients.
Some individuals gain experience and education while working in accounting or personnel departments and later move into risk management positions.
There is good potential for advancement in the risk management field. Many risk managers work in a related field, such as in a human resources department handling employee benefits.
Risk managers may eventually become a personnel supervisor or finance department head, become a human resources director, or join the insurance industry. Some become independent consultants. Membership in professional associations that offer networking opportunities can lead to better positions in the field.
Risk managers usually hold mid-level management positions and often report to a financial officer. Some, however, become vice presidents or presidents of their organizations.
Risk managers’ salaries vary depending on level of responsibility and authority, type of industry, organization size, and geographic region. The U.S. Department of Labor, which classifies risk managers with financial managers, reported a median yearly income for financial managers of $81,880 in 2004. The middle 50 percent of financial managers earned between $59,490 and $112,320.
Risk managers usually receive benefits, bonuses, paid vacation, health and life insurance, pensions, and stock options.
Risk managers work in a variety of settings from schools, stores, and government agencies to manufacturers and airlines. Most work in offices, not on the production line, but they may be required to spend some time in production departments. They may have to travel to study risks in other companies or to attend seminars.
Risk managers usually work a 40-hour week, Monday through Friday. They may have to spend much of their time at a computer, analyzing statistics and preparing reports.
Risk Manager Career Outlook
Since advanced technology continues to increase productivity as well as the potential for disaster, the need for risk management will continue to grow. Organizations now recognize risk management as an integral and effective tool for cost-containment. The profession will continue to gain recognition in the next decade, so salaries and career opportunities are expected to continue to escalate. The U.S. Department of Labor predicts the growth rate for financial managers (including risk managers) to be about as fast as the average through 2014.
For More Information:
- American Risk and Insurance Association
- Public Risk Management Association
- Risk and Insurance Management Society Inc.