Want to know the who, what, when, where, and why of risk management? I’m here to fill you in. I will give you the key information about a career in risk management, specifically what is included in the job description, and you can see if it is the right fit for you.
Risk managers live and die by the concept that prevention is better than cure. They are trained and certified to assess and address potential risks, so that they can mitigate losses to the company at a low cost. For tools and techniques, take a look at our courses on Project Risk Management and Business Risk Management.
Who are risk managers?
Risk managers advise companies on potential risks to the success of the company, be it risks to making profit or sustainability of the organization. A risk manager is hired to identify and evaluate threats, then implement plans to prevent consequences.
If a negative consequence does in fact occur, the risk assessment plan should address a way to lessen damages to the organization. Further, they attempt to avoid, mitigate or adjust future risks to the company. Risk managers may work directly for large corporations or they may work independently as consultants for many different organizations.
What do risk managers do?
Risk managers identify threats that involve financial loss or other liabilities. Risk managers must formulate plans to minimize costs and coordinate loss control. This includes a wide array of different risks, such as coming up with disaster plans, emergency evacuation scenarios, addressing defaults on loans extended by the company, losses on investment securities held by the company, and even safety risks.
Risk managers will analyze the situation and if appropriate, they will recommend the purchase of insurance, manage relationships with personnel outside the company, create budgets and analyze projected losses, manage claims, find and analyze risks, and recommend options that reduce loss at a low cost.
The process follows several steps from beginning to end of the risk management job. First, one must identify and analyze the potential risks or threats to the organization. Second, evaluate the vulnerability of the company’s assets to those risks. Third, compare the probability of each risk occurring and the result if it does arise. Fourth, develop a plan to mitigate each of the risks. Finally, strategize and implement a plan to address each risk, starting with the greatest risk or the greatest potential loss to the organization.
A risk manager will look to tweak each risk assessment individually to the company they work for. Each company will have a different “risk appetite,” meaning the level of risk that the are willing to take on.
Careers in risk management are primarily analytical, because they must both analyze and create detailed risk assessments. You might start by looking at what was in place before you arrived and what risks they faced. Perhaps there were risks that the company was inadequately prepared for and as a result they suffered losses. A risk manager must also be comfortable with math because they will be reviewing documents, reports, and statistics.
Further, a risk manager must understand the field in which they work. If they are working for a company, they need to understand the business and the market for that business. This is a client oriented job, so the more that you learn and know about the client and their goals, the better prepared you are to protect them.
To appropriately convey the level of risk and the consequences of loss, risk reporting must be catered to the audience. If the risk manager is speaking to a specific department within a company, only the risks relevant to that section will be addressed. Whereas, if speaking to the entire board, all pertinent risks should be mentioned. The job is not done there, after all is said and done, the risk manager provides education, training and support to the corporate staff. The more the staff understands about risks, the better prepared they are to avoid or mitigate them.
When and where are risk managers needed?
Risk managers are all about efficiency. Their goal is to reduce the risk, at a cost lower than the consequence of the risk. The benefit should exceed the cost to the company. Risk managers specialize in decision making, which is based on the totality of the circumstances, all the available information.
Risk arise in many different situations, but it is especially important in the financial industry. As such, risk managers are most often found in financial markets, corporate risk, technology risk, credit environments, securities trading, and loan origination. Risks are found in legal liability, natural disasters, project problems, accidents, and in intentional attacks from competitors.
Since risk managers deal with assumptions and uncertainty, they must be systematic and structured in their actions. Once they come up with a plan, the plan must be flexible because when taking into account human factors, things change. The plan must be completely transparent and capable of improvement and fine tuning. Change is inevitable, so it is important that the risk management plan is dynamic and interactive.
Why should I become a risk manager?
Risk management is a great field to get into because of the challenge and independence that the job offers. Experienced risk managers are paid well, about an average of $100K and up to $175K on the high end, and the potential for future growth of the industry is very high.
Since you are helping to save the company money and keep top jobs secure, when you speak, the CEO listens! It is a respected position to have and can be extremely rewarding if it is what you enjoy doing. So, if you’re looking to become a risk manager, check out our resources for getting your level 1 certification online as a Professional Risk Manager or Financial Risk Manager.