As seasoned risk managers retire, the industry needs to seek out and replace them. But CEOs continue to show they are not happy with their company's risk management function, and they want newcomers to well-trained and -groomed. Henry Good, formerly of Rohm & Haas Co. and now a principal of Global Strategic Insurance Risk Consulting, and Jeff Triplette of Triplette Advisors L.L.C. discuss the keys to success as a modern risk manager.

What is happening in the world of insurance risk management? Why are insurance risk managers signing up for all kinds of training such as enterprise risk management and/or strategic risk management?

And, despite all this activity, why are recent CEO surveys showing that they are not happy with their company's risk management function? In a recent survey by Deloitte L.L.P., 90% of CEOs report that they will reorganize their corporate risk management approach within the next three years.

What is happening?

Nowadays, it seems that every industry has multiple risk managers to cover specialized areas of risk. Manufacturing entities, for example, have a risk manager in charge of production risks. Financial institutions have a risk manager responsible for credit risks. The “insurance” risk manager probably is only one of several people within the company who have the “risk manager” title.

Moreover, we must be concerned with development of new risk managers to replace seasoned risk managers, who are retiring in increasing numbers after many years of service. Where are new risk managers being trained and groomed? In the current corporate climate, these replacements tend not to have the knowledge base, contacts and resulting corporate clout to replace the retiring icons while maintaining high standards and perpetuating their predecessors' sterling reputations within and outside of their corporate hierarchy.

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At the same time, our industry might question the loyalty of risk management newcomers. How many have been with their current company for more than five or 10 years? In many instances, these new risk managers may have spent a few years as the top risk manager at Company A; they either do not seek, or they reject opportunities to move laterally to, other functions in Company A. Instead, they job hop to bigger Company B as the way to move up.

One must wonder whether these risk managers are more loyal to their insurance brokers than to their corporate employers. After all, most chief financial officers seek candidate recommendations from their insurance broker when filling an open risk manager position.

Put yourself in the position of the CEO considering your company's “risk” profile. You may even decide you need a chief risk officer.

Perhaps your risk manager responsible for manufacturing operations has been with the company for a number of years and has served in several different job functions. Your risk manager responsible for credit/commodity exposures also has worked in various treasury, audit and business functions at different divisions within the company. However, your insurance risk manager may have been with the company only three to four years. Or maybe this is a long-term employee who spent an entire career in risk management. What's the likelihood you, as CEO, will select the insurance risk manager as your CRO?

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Now change that scenario just slightly. What if your insurance risk manager has been with the company for 10 to 15 years, spending time in various departments or assorted financial functions? This manager may even have worked in sales, manufacturing, operations, or even investor relations. You, as CEO, interview the insurance risk manager and conclude that this risk manager understands the company inside out, and that one of their key responsibilities is to “sell” the company to insurance underwriters. Of course, this insurance risk manager has a better chance (read opportunity) of being selected as the new CRO.

The Deloitte survey referenced earlier asked what key attributes are required to lead a company's risk management function. C-suite leaders did not identify “insurance knowledge” as one of them. Only 25% even identified “insurance knowledge” as a priority. What they did identify as the top attribute is “an intimate knowledge of the company's business and industry.”

So, where are today's insurance risk managers spending most of their time? Many appear to be learning the fine points of ERM or SRM from personnel with little knowledge of the risk manager's company and/or industry. This is in stark contrast to the risk industry's icons, who learned at ground level about manufacturing and operations and the risks associated with specialized businesses.

Traditionally, top-notch risk managers also trained with corporate human relations personnel to better understand employees' safety and health risks. They also worked closely with company tax and treasury teams to understand finance — where the cash comes from and where it goes.

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The current trend of risk managers increasing their “special” insurance knowledge is counterproductive to what corporate executives really need and want in a viable risk manager. What is most important to the CEOs, as noted in the recent Deloitte survey, is for risk managers to have intimate knowledge of their company and their company's industry. So it is no wonder that CEOs search elsewhere for a new CRO instead of selecting a “green” manager who has not shown company commitment or broad-based understanding of the industry he or she currently is serving.

It is true that the field is changing, and it must. Past risk management icons adapted to the changing risk landscape caused by mass torts, the Internet, or terrorist exposures just as today's icons have to deal with social media, reputational risk or complex supply chains. They all have one thing in common: knowing how the pieces fit together, and the risks of those pieces not fitting.

The key to success as a modern risk manager is no different today than it was then: intimate knowledge of your company and industry. This knowledge provides the tools for developing strategies and plans to mitigate risks your company might face while anticipating where the next challenge might arise. An informed, committed, seasoned risk manager will always be a significant contributor to a company's success. This is the professional who will become a CRO.

So, roll up your sleeves and really get to know your company and its industry.

Henry Good is a principal of Global Strategic Insurance Risk Consulting in Naples, Fla. He can be reached at henrygood@globalsirc.com. Jeff Triplette is a principal with Triplette Advisors L.L.C., a financial and risk management consulting practice based in Oxford, Miss. He can be reached at jeff@tripletteadvisors.com.