Getting Started in a Risk Management Career
RISKVIEWS got an email request…
I am a senior ‘Risk Management & Insurance’ and ‘Finance’ double major at Butler University. I was wondering if you would be able to lend some advice for my future career endeavors. One question is “what made you chose the consulting risk management side over more of a singular corporation risk management position?” My basic concern is that unlike finance, I feel the path for a student to get involved with the risk management industry is much less defined. I keep hearing how most risk managers usually start in a completely different corporate function. I am just trying to do my due diligence and research to get insight into all career paths before I choose which way I want to go. Daniel Gable
Daniel, some Risk Management career paths are very new. New enough that there are not yet any people who entered the field out of college and who are now in retirement. Now, if you are majoring in “Risk Management and Insurance”, then you are aware that there is a long established career centering upon the management of corporate insurance purchasing programs. But the risk management programs that go beyond insurance purchasing, in banks, insurance companies and in many other industries are all new enough that they mostly had to go outside the field for at least initial leadership. Those people will value skills and experiences that come from a wider range of experiences than someone might have who has always worked in risk management. So their senior staff positions will have some people who also did not start out in a risk management career.
RISKVIEWS’ perspective is that risk management will be best served if a balance of highly trained risk management specialists along with a significant number of people with broader business perspectives and especially experiences working in the areas where the risk is taken on.
The highly trained risk management specialists are needed to keep the technical rigor of the risk management program up to a similar level to the areas that originate the risk taking.
WARNING: SPORTS ANALOGY AHEAD
The best sports teams prevail against their rivals only if they have great natural players in both offensive and defensive positions. There are an extremely small number of players who can excel at either offense or defense. Most players in most sports are much better at one or the other. Risk management programs need to find the natural defenders who also excel at the technical skills that are needed to monitor the risk taking effectively.
But only some risk management work can be accomplished by highly technically competent trained risk managers. Some of risk management requires people with the experience and gut instincts about the business who can tell when something just “smells” wrong. To get this experience, one needs to have lived in the business, understand the motivations and choices that are available to the people in the business as well as their competition and the markets that they operate in. This is all experience that is very difficult to get working from within the risk management program.
At the top of the risk management system is a Chief Risk Officer. Like most senior executives, this person will need a high degree of leadership/managerial/political skills. Perhaps much more so than most of the people who work in the risk management program. In the last year or so, there have been a steady stream of bank CROs moving to CEO positions. So in many places, it is a position with a serious future.
Finally, Daniel asked about consulting vs. working inside a company? First of all, many consulting firms hire few if any entry level people. They usually look to find people with at least a few years of experience inside of the firms that they are likely to consult for. Once you have enough experience to have a choice, the option is for breadth vs. depth. RISKVIEWS has over ten years of experience in both situations. Inside of a company, a person may get the chance to develop a deep understanding of one or several aspects of the company operations. Many people get a feeling of satisfaction from mastering their environment in this way and developing the ability to work with people and situations that they know very well. Many corporate jobs are also in a fixed location, so that people who have strong reasons to want to be home most nights would prefer that. While there is some uncertainty about continuation of corporate jobs, many jobs are secure for a decade or more at a time. Consulting positions on the other hand provide the person to get a very broad perspective on the many different ways that things are being done in the industry. Consulting often offers the possibility of doing different work without it having a significant impact on career path. Consultants often travel, some a little and most quite a bit. An advantage for some and a big disadvantage for others. Consulting work is insecure, often it is unknown what work a consultant will be doing in six months. Some people are very excited by the variety and uncertainty of consulting work. Consultants need to have excellent communications skills, especially the “client facing” consultants.
In both the question of starting out in risk management or moving to risk management after working in a business and the question of starting early in consulting vs. after some work inside of a business, the considerations end up being similar. A few people have the talent to pick up enough of the details of the business life to be able to be effective consultants or risk managers from outside of the business, but most people need to live it to be really effective risk managers or consultants.
Daniel is studying Finance as well as Risk Management. RISKVIEWS cannot give any advice in finance careers, but will observe that with the effect of the financial crisis and the resulting changes to regulation of banks, the future finance career path may well be very different than it has been for the past 20 years.