Ahead of FERMA 2015, ACE took the pulse of 500 senior risk managers across Europe, the Middle East and Africa, to understand how the role is changing, and to identify the skills and behaviours risk managers of tomorrow will need. Clive Hassett of ACE European Group highlights the key findings and argues that tomorrow’s risk managers must prove they can add real business value.
Moving from business control to business partnership
Traditionally, risk managers have been associated with restriction and control. However, even though this role continues, it is clear that risk professionals are increasingly being called on to operate within modern governance functions that integrate risk and crisis management with internal controls to better anticipate emerging and operational risks.
In addition to their traditional role, risk managers are increasingly regarded as key business partners, and their influence in strategic decision-making across the organisation is growing. The survey results reflect this – with over 70% of respondents believing their influence is greater now than three years ago.
It is not just at board level that risk manager influence is increasing, however. Some 79% of risk managers said they are increasingly being seen as a business partner across the company, working collaboratively with corporate business functions such as digital, HR, R&D and supply chain, helping assess strategic and functional business partners.
Harnessing technology to improve forward planning
Technology is a major driver in the expansion of risk manager influence. The twin spectres of cybercrime and data protection require close co-ordination between Chief Information Officers and other technology leaders in the business. Some 83% of respondents think risk managers and IT professionals must work more closely to comprehend and manage the risks posed by technology going forward.
Technology is not just a threat, however. The proliferation of big data is helping risk managers to identify trends and opportunities, and it is felt that data analytics have the ability to transform risk management in the future. 83% of respondents believe data management knowledge and skill is important, citing the need for the risk management profession to draw more on predictive and big data analytics and data mining to inform ‘horizon scanning’ techniques. Risk managers also recognise that there is a need to find ways to present data in a more accessible way to appeal to a wider business audience.
Harnessing these skills will enable risk managers to be more forward-looking, strategic thinkers, able to support long-term decision making and mitigate emerging risks via scenario and trend impact planning.
Professionalising for quality and consistency
The survey showed that globalisation is adding complexity with many multinational organisations looking to strike the right balance between top-down control and empowering local decision-making. An overwhelming proportion of respondents believe certification and professionalisation are essential to the future success of the risk management function and many are supportive of creating an international risk management certification to ensure consistency.
Beyond technical capability, risk managers are also cognisant of the need to build more effective connections at all levels of the organisation and survey respondents talked of the need to demonstrate their understanding of the business and speak the same language as business leaders. Listening and mediation skills were recognised as key skills going forward, to help risk managers wield influence, challenge decisions and drive risk management messages home.
To help build the skill base some respondents thought that risk managers should rotate into functional areas to broaden their skills, and others suggested risk managers should have closer engagement with insurers, to get greater advisory support, beyond traditional risk transfer.
Playing a pivotal role
Undoubtedly, the risk management function has come a long way. No longer is it perceived as an obstacle to innovation or diversification. On the contrary, it is now perceived as critical to an organisation’s success.
However, risk managers need to be laser-focused in their continued effort to prove to their peers that they are not just there to react to events and restrict activities but to add real value to the business.
How can they do that? In all sorts of ways. They can help improve the P&L, protect the supply chain, business expansion and capital spending as well as employees and their health. They can ensure business resilience or even provide input into building and product design by analysing past losses and getting root causes designed out.
Risk managers need to get stuck into the business, be inquisitive and have the confidence to promote themselves and new, often seemingly radical ideas.
Top 10 priorities for the next generation of risk managers:
Ensure you are perceived as an enabler, and not a blocker
Understand all areas of the business and look to refresh skillsets and training
Build professional contacts inside and outside the organisation
Use business language and data to drive risk management messages home
Encourage ‘risk thinking’ among senior management by speaking their language, and develop communication skills to help drive influence at all levels
Accept technology is a key driver for the role’s future development, and build partnerships with people who are really in the know
Think laterally and logically – tomorrow’s risks will not fit into neat categories, but robust processes will still capture them
Learn how to integrate data and advanced analytical tools into risk management practices
Explore horizon scanning techniques to develop a more dynamic risk view of the business
Look internally and externally for best risk advice and expertise
Clive Hassett is director of Multinational Services, ACE European Group.
Clive Hassett - ACE