The risk industry and the professionals within it have changed drastically over the last few decades.
Once, risk professionals simply purchased insurance to transfer losses onto another company. Now, they are expected to monitor the risk environment, identify and predict risks, and implement proactive strategies to prevent issues from occurring or minimize their impact when they do. Top-leadership positions based on risk management, such as Chief Risk Officer (CRO), are becoming increasingly common.
With this in mind, what skills and competencies are now necessary for a risk professional to be successful? Certainly a general knowledge of the insurance industry and financial risk will no longer suffice. In addition to an understanding of many topics and environmental factors, there are necessary personality traits, such as influential, flexible, and collaborative.
Skills of a Successful Risk Professional
Commitment to continued learning
Maybe it goes without saying, but there is a certain level of knowledge and competence that effective risk professionals require. Many come from another type of business background, such as finance, marketing, or sales.
While this can be beneficial, it is not enough to rely on past education and experience. Risk professionals must be able to apply these types of knowledge to new situations as well as learn new strategies and techniques. A risk environment is always evolving; so should the risk professional acting in that environment.
There are several designations that interested individuals can obtain, such as the CRM (Canadian Risk Management) in Canada or RMP (Risk Management Professional) in the US. These designations provide “a foundation of knowledge and skills needed to identify, assess, monitor and limit risks”, and are constantly being updated to meet the needs of today's risk environment.
In addition to this education, there are several skills that risk professionals must continuously develop. They should excel with finance and numbers; even for non-financial companies or those looking beyond market risks, this knowledge is helpful for risk prediction and mitigation.
They must also be proficient in risk forecasting, modelling, and analytics. Trend analysis is particularly important for many organizations; without it, they may be incurring the same risks time and time again due to an unknown issue.
Finally, risk professionals should also maintain an up-to-date knowledge of technology to prevent the organization from being left behind new competitors with innovative processes. By constantly learning and adapting, risk professionals can ensure that they perform their job as effectively as possible.
Along with general knowledge, a successful risk professional will have a thorough understanding of the environment their organization is acting in. Laws and regulations are constantly changing, and can present a risk to survival. For example, the General Data Protection Regulation, set to come into place on May 25, 2018, imposes strict new fines on any company operating in the EU that fails to meet its standards. By monitoring these changes, risk professionals can act accordingly.
Other external factors, such as competitor behaviour and industry trends, must also be carefully tracked. New threats or opportunities can arise at any moment.
In order to effectively handle these, risk professionals must also have a strong grasp of internal systems, capabilities, and other factors. Without knowing what takes place inside the organization on a day-to-day basis, they are unlikely to be able to sense when changes are needed or what steps can introduce and streamline the process.
To stay on top of industry trends and changes, consider following a risk management news source. This blog provides a list of the top 40 risk management blogs and websites for risk professionals in 2018.
The ability to communicate and gain support for initiatives is crucial in risk management. Even if a risk professional designs the best strategy the organization has ever seen, it will be of little value if it can’t be implemented effectively and achieve results.
Management or leadership skills such as negotiation, networking, and inspiration are important here. However, the organization must be careful that the risk professional is ethical; if they begin to take actions for their own gain, this influential power could become a threat.
Risk professionals must also understand how people think and make decisions and the culture of the employees. Without knowing what people will respond to, it is difficult to share an idea in a way that will resonate.
Being able to communicate in the languages of the organization is important: a topic may need one spin to get top management’s support and another perspective to educate individual employees. For example, a new mitigation strategy should be explained with big-picture benefits to leadership, but in a detailed and technical fashion to the workers who will be introducing it into their processes.
Sometimes it can seem as though some people have all the influence in an organization. To increasing it, consider building connections and developing expertise in a chosen area, as recommended in "How to Increase your Influence at Work", published in Harvard Business Review.
Risk management is not a task that can be taken on by a single person or team isolated from the rest of the organization. It must be integrated into every department and be considered for all decisions. If risk professionals are unable to work effectively with employees from across the organization, their success will be limited. Risks are an unavoidable part of every action and transaction, and must be treated as such.
Risk departments have been traditionally known as “the Department of No”. It is the risk professional’s duty to change this mindset and make employees recognize the value of risk management activities and how they can actually assist in goal achievement. By working with a successful risk professional, departments can take on the activities they choose and be confident their method will benefit the organization.
One constant about any risk environment is that it will never be stagnant. One day, a risk professional may have to handle a reputation crisis; the next, an employee presenting a threat to data integrity. They are expected to be creative and flexible, able to prevent or solve any problem that presents itself.
In addition to traditional decision-making techniques, they must be able to break away from established practices and implement innovative ideas. Without this capability, a risk professional may find themselves surrounded by threats with no effective way to control them.
Particularly in large, complex organizations, the ability to work quickly and under pressure are also key. A crisis is often impossible to predict, and when they happen, the risk team must act quickly and handle many priorities at once to minimize the impact of the risk and prevent it from happening again.
Risk professionals must constantly reposition their organizations to survive and grow in a turbulent environment. They need to know how to respond to situations in the most effective way and set meaningful goals for the organization. Anybody could say that they are going to “reduce the organization’s risk”. It is another task altogether to understand where the organization needs to be and create SMART goals (Specific, Measurable, Achievable, Relevant, and Time-Limited) to accomplish this. A successful risk professional will know what strategies to implement, how to go about them, and when to start the process. Check out this MindTools guide to learn more about how SMART goals can benefit any individual or organization.
Ideally, every employee in an organization will be accountable and honest. Ethical behaviour is particularly important, however, in those positions that access the organization’s most valuable data, financial records, and personal information. A risk professional will have access to many such resources across the organization. They must be trustworthy to effectively perform their job and benefit the organization.
Some risk professionals may be missing one or two of these traits and still be enormously successful; similarly, they could meet every criteria on this list and not deliver the benefits the organization was hoping for. These are simply guidelines that, if met, make it more likely for the risk professional to excel in their position.
Learning and environmental awareness allow them to understand and act on the issues most relevant to the organization. Influence and collaboration skills will ensure that risks are considered and managed across the organization, not just in one siloed area. Adaptability and strategy make the risk professional ready to handle any issue in a rapidly changing environment, while integrity is important for all employees in a position of power.
Most of these skills can be looked for in the hiring and recruitment process or tested within the first few weeks of the job. If a risk professional embodies these skills, it’s likely that the organization will become more safe, efficient, and cost-effective with their guidance.
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