The Risk of Non-Risk Management

Almost two decades ago while working as the corporate risk and claim manager for a large international corporation, I was waiting for a meeting with my boss, the corporate CFO. I picked up a magazine called Risk Management. But it was not the Risk Management Magazine with which I was familiar — the one published by the Risk & Insurance Management Society (RIMS). It was instead a magazine for financial executives dealing with issues such as derivatives, debentures, foreign exchange, bonds, investments, and similar financial factors. Long ago this column alluded to “the other side of claims” in reference to loss control. But this was the “other side of risk management,” the management of speculative risk as opposed to the pure risks of loss with which his tiny department dealt. I supposed it was a part of enterprise risk management (ERM), the new jargon being tossed about in various insurance publications. ERM was taking hold, and corporations began by no longer having a “risk manager.” Instead, they employed Chief Risk Officers (CRO), who sat on the throne of a large corporate internal empire to oversee everything from company investments to the selection of its insurance broker.

The risk management subject is rightfully the bailiwick of my co-columnist, Kevin Quinley, who has often spoken of this new process called ERM. It crops up often in our companion publication, National Underwriter, with sundry writers taking the insurance industry to task for not embracing ERM passionately. However, when the headlines in the April, 2009 issue of National Underwriter appeared, I began to wonder if my aversion to speculative financial risk might not have had some merit. Across the nation, corporations were terminating their risk managers. Sam Friedman, NU‘s editor, had written an article titled “Out-of-Work Risk Managers Must Face Up to the ‘Reality of Necessity,’” and a companion article, “Risk Managers in Survival Mode.”