The Risk Manager
Issue #37
December 17, 2007
What are the responsibilities of a Risk Manager, and who typically fills that role in an organization? The answer to the second part of this question depends upon the size of the company. Larger companies have full time risk managers, sometimes referred to as the Chief Risk Officer (CRO). Smaller companies typically rely on the Chief Financial Officer to assume risk management responsibilities, which are often limited to insurance matters.
Responsibilities
The purpose of the risk management function and program is to plan, organize, and direct the activities of the organization in order to minimize the adverse effects of accidental losses at a reasonable cost. Risk management includes the following activities:
- IDENTIFYING the risks that affect your firm;
- DECIDING what to do with the risks;
- IMPLEMENTING the decision;
- MONITORING the results.
Based upon this, the Risk Manager's responsibilities typically include:
- Identifying and measuring all risks of accidental loss;
- Maintaining an effective loss prevention program to help in the elimination, reduction and control of losses;
- Designing a risk management program, including self-insurance, insurance and other financial tools, to control the impact of accidental losses on the company;
- Allocating insurance premiums and other costs to Subsidiaries, Department and other cost centers;
- Selecting all risk management services including brokers, claims adjusters, loss prevention services, and consultants;
- Adjusting all major losses and claims;
- Maintaining accurate records of all losses, claims, insurance premiums and other risk-related expenses; and Coordinating and accounting for all of the Company’s risk-related expenses.
Too Many Hats
hile the responsibilities mentioned above may be handled by the Chief Risk Officer in the large organization, they are often beyond the Chief Financial Officers ability in the smaller organization due to limited time and resources. Yet, both organizations are subject to the same state and federal regulations, operate in the same legal environment, and are exposed to many of the same hazards.
When we ask Chief Financial Officers about the percentage of time they are able to devote to risk management functions, the answer is typically less than two percent. When we further inquire as to the percentage of time, not including insurance, the answer is zero. This clearly leaves the small to medium size organization at a disadvantage, often being exposed to loss in areas where there is no insurance or loss prevention programs.
Outsourcing
One alternative for these companies to consider is that of outsourcing some of the risk management functions. Beginning with a risk management audit, a competent third party can be used to identify areas of risk that have been previously overlooked. Alternative solutions can then be considered, with assistance provided for implementing the appropriate program(s).
Kempkey Insurance Services provides a unique process that helps growth oriented companies identify their risk, implement programs to mitigate them, and monitor the results for success. For more information contact Ed Kempkey at (888) 536-7539, or by email at ed@kempkey.com