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How can risk managers improve their lot in the corporate hierarchy and their ability to influence decision-makers more effectively?
I've been concerned for some time that risk managers and our profession are losing ground among the senior managers who run the business world. The most obvious evidence of this may be the treatment risk management often gets in corporate reorganizations (downsizings, re-engineerings, right-sizings, etc.) While we don't always get hurt, too many risk management departments have been nearly eliminated in these initiatives.
Risk managers shouldn't be surprised at this result, as we can't escape the fact that we are typically situated as a staff support function and not core to the business.
On the other hand, there are ways to improve the way the function and its practitioners are perceived and thus treated in restructurings.
Many of us have thought that if we just cut the cost of risk enough, we will be perceived as heroes, but the fact is that much of the "savings" are not our doing at all, but rather the results of soft markets and intense competition for the insurance dollar, especially the large-buyer dollar. There has to be more to our roles if we are to improve our stature, which will translate into being better-protected as business structures continue to evolve.
I think the key to this dilemma is becoming core to the business. Because risk management is unlikely in most cases to become a profit center (though there are ways to do this), our focus needs to be on becoming indispensable through complete integration into the mission, vision and objectives of our companies. This means completely selling the idea of the prevention of loss through the high prioritization of the safety of employees, customers and the general public. And while some would argue that companies have no moral obligation to anyone, we can't have a well-functioning society without some element of corporate responsibility for "safe" operations.
So how can we accomplish this integration and sell safety and loss prevention as corporate priorities?
First, it would be helpful to draw the proverbial line connecting risk financing and insurance-buying to loss prevention and control. Too many risk managers are out on islands, focusing primarily on the financing issues and largely ignoring the prevention and control aspects of their accountabilities. None of these should function in isolation, and so we need to integrate our own risk management house first.
You might start with balancing the exotic trips to make the "deals" with the greater importance of getting out into your locations and getting to know your business.
Getting out into the business and really learning how it works and where and how the profits are made will help you earn the respect not only of the operators who ensure profitability, but of the senior team that ultimately holds sway over your fate and the fate of what you and your team do to make the company a little more successful.
More importantly, risk managers can't do their jobs effectively without truly understanding what goes on at the core. Knowing and understanding this will not only help you in your obvious and more traditional responsibility of identifying and "treating" hazards (both present and possible), but you will develop a bond with the core personnel that will help you be more successful. You'll earn their respect when you know and understand what they do and how they do it.
Another aspect that can improve your lot in corporate life is effectively communicating with senior management. Most of us know instinctively that this is necessary, but getting it done is another matter.
You need to think through what it is that management needs to know, wants to know and, most importantly, doesn't need to know. (Note: Need is the operative word in that last one, as there always will be things they won't "want" to know but must be told regardless.)
To do this, you first need to know which managers are your primary constituents. Typically they will include the chief financial officer, the chief personnel officer, the chief operating officer, the general counsel and perhaps the chief executive officer. Which ones you communicate what information to will be driven by your company's culture and the structure of the organization.
Next, consider carefully what you have to communicate and, most importantly, how you communicate it. Nothing could be more damaging to meeting your integration objective than the timing and accuracy of your communications.
For example, you're faced with an imminent hurricane approaching an area of significant property concentration for your company. You've done everything you can think of in assisting operations to prepare for the storm, and yet you haven't let your chief operating officer know that operations is fully prepared.
Guess what? He expected you to keep him informed.
You fully intended to tell him later, but his expectation was to be informed beforehand-a critical mistake in his eyes that easily could have been avoided. It is safe to say most managers don't like surprises, and thus keeping the right people informed accurately and on a timely basis is critical to your status as a respected risk manager.
Ultimately-and this concept is a little time-worn-you must be a value-added player. Risk managers, like all managers, need to continuously think in terms of how they can add value in all business situations. Admittedly, that's not always easy, especially if you're involved in as many areas of the company as you should be, continuously scanning the corporate horizon and foreground for risk-related issues that need to be addressed. Nevertheless, it is critical to the way you are perceived.
One way to assess whether you're adding value is to ask yourself a few questions, like: When did I last suggest a new way of doing something that was accepted and used? When was the last time someone on the senior team asked me for my opinion? When was the last time I identified a problem with a solution to fix it that was accepted and implemented?
In general, always be thinking in terms of new ideas, solutions and best practices. If you can develop a reputation for thinking and acting this way and maybe even thinking outside the box, you'll move far down the road and away from being a dispensable player and function.