The Path to Risk Management
Ask most risk managers how they ended up in the discipline and you’ll hear about time spent in human resources, safety programs, finance departments, insurance brokerages and underwriting, to name a few.
Risk management has been “flying under the radar” for years, and those in the profession often had not originally planned to be there. But that may be changing as risk management education programs gain a foothold. Driven by a tough job market for college graduates in the wake of a slowly turning financial crisis, students are increasingly gravitating to fields where there are jobs upon graduation and a visible career path.
The financial crisis drove people from Wall Street, and some of those who might have taken the Wall Street route are now turning to risk management, observed Professor Albert J. Beer, Michael J. Kevany/XL Chair at the School of Risk Management, Insurance and Actuarial Science with St. John’s University.
The recent financial crisis did not grow out of the ineffectiveness of risk management, but rather “was the result of ignoring basic risk management principles,” Beer said. “There is no doubt that the recent increased interest in—and respect for—risk management is a lesson learned from that painful time in our economic history.”
Organizations, from financial services companies to manufacturers and retailers, he said, “have all embraced the risk management function in a much more meaningful way during the last few years.” As a result, the creation and expansion of risk management departments has become commonplace.
Preliminary results from a study by Accenture support this observation. According to the Global Risk Management Research survey of executives from 446 organizations and eight industries, “Companies are raising the role of risk management and integrating it into their corporate strategies. They are directly involving the board in risk management.”
The study found that 97% of executives give a higher priority to risk management now than they did two years ago and that 81% of risk managers discuss risk regularly with their board.
But even with this renewed focus over the past few years, the number of jobs in corporate risk management has not yet caught up with the interest organizations are expressing. And with a growing number of risk management programs across the country, the ratio of risk management jobs to graduates is low.
“If you look at the number of schools offing risk management as a major or a minor, there are probably 75 schools,” said Dr. R. B. Drennan, associate professor and chairman of the department of risk, insurance and healthcare management for the Fox School of Business at Temple University in Philadelphia. “If you think about that, there is no way that we could place all of those students in risk management jobs,” Drennan said.
Although graduating students don’t normally find jobs in risk management, those who do usually find them at very large companies with established risk management departments that can afford to train someone who doesn’t have a lot of experience.
The other reality is that graduates who go to work for insurers, brokers or consultants will be paid more. “And getting the experience they need makes them much more valuable when they do go into the risk management field. This is the path for most of Temple’s alums,” he said. They have chosen to work for underwriters, brokers or consultants—and many eventually go into risk management.
Drennan added, “I’ve watched this and in most of the cases with people who have done that, in less than 10 years after they graduate, they become the risk manager or have a significant role in the risk management function of a company.”
Those who work for brokers “are doing risk management” and they often end up with offers from their clients, he said. This makes sense as they have come to know the industry and the company’s risk management needs.
And so, working in the insurance industry is seen as a win-win by companies looking to hire risk managers, educators and students.
“To be a successful senior risk manager you have to have diversity of perspective,” said Robert E. Hoyt, professor of risk management and insurance at the Terry College of Business with the University of Georgia.
To help students circle back to risk management, the University of Georgia and other schools, including Temple, stay in touch with alumni and maintain online job listings. “As a program, we realized that we add value by doing more than just helping with placement on the first job. We try to stay engaged in the process of career path and career vision over time,” Hoyt said.
Hoyt’s former students attest to his personal involvement in their careers. One beneficiary is Daniel Baltz, senior vice president of insurance risk with SunTrust Banks Inc. in Atlanta, a U.S. bank with 1,500 locations and 26,000 employees.
“Rob was my professor and we keep up quite a bit. He seems to know exactly where everybody is and how they’re doing,” he said.
Right out of the University of Georgia’s risk management program, Baltz was offered a job for a technology firm called Risk Laboratories, LLC—now owned by Aon as part of Aon eSolutions. There, he was a client service advisor, servicing large companies for their claims management/risk management software.
He found out about the job at SunTrust through an alumni network sponsored by the university and he has hired people through that process as well. “I’ve found that working for a technology firm has been very beneficial over the years, because all risk management departments have some sort of technology platform,” Baltz said. “It helps to understand how it all works behind the scenes with risk management systems and technology. It’s been good to know something I wouldn’t otherwise have known much about.”
Now on the risk management side for the last 13 years, when Baltz hires, he looks for “someone who has been at a broker, or a third party administrator or who has worked for an underwriter. Those are the paths to risk management,” he said.
Over the past 10 years he has hired four risk managers for the company, and they have all come through the underwriting, claims and broker channels. “We value the fact that someone is bringing in a specialty,” Baltz said.
One of those risk managers hired by Baltz is Lisa Echols, now assistant risk manager at SunTrust. Also an alumni of the University of Georgia, she did an internship at IOA insurance agency when she was a student and, after graduating, worked at the agency for three years.
“Opportunities weren’t so prevalent on the corporate risk management side, so I knew I needed to put my time in elsewhere, whether it be an agency, brokerage or insurance company, before making the leap into corporate risk management,” Echols said. “I would say most students see it that way. They know they want to get into risk management, but they need that ‘ground zero’ experience first.”
While at the agency, she also stayed in touch with the university and Dr. Hoyt, which is how she found the job posting for SunTrust’s risk management group. “I started here nine years ago and it’s worked out well,” she said. “I began as a risk analyst, worked my way up to senior risk analyst and I’m now the assistant risk manager.”
Working at the agency first, provided Echols with a good foundation to move to the risk management side by learning all the basics on the job. At the agency, she learned to check policy certificates and was charged with reading and checking policies. “I’m not sure I would have been as marketable, had I just gotten out of school,” she said.
Internships and Scholarships Support Education Programs
Most insurers and brokers work with colleges and universities, offering internships and fast-track job opportunities, many with specific risk management training. Brokers Arthur J. Gallagher & Co. and Marsh are two such companies. Marsh offers 10-week summer internships at six of its locations, and a program to attract and develop full-time employees. The two-year Talent Recruitment and Accelerated Careers (TRAC) program includes a risk TRAC and a risk specialty TRAC, which focuses on specific industries such as energy, marine and aviation, according to Marsh.
Gallagher offers a summer internship program that it says often leads to broker positions—as well as a 12-month career track. This begins with a two-week training camp and continues with webcasts and other programs geared to fast-track trainees.
Lloyd’s has another sought-after internship, which takes place in London. Lloyd’s offers an eight-week summer program in areas such as underwriting performance, working with managing agents and exploring trends in claims.
The industry also contributes to scholarship programs, many of which are awarded by the Spencer Educational Foundation. RIMS [publisher of this magazine] recently made a pledge of $300,000 to Spencer for development of risk management and insurance courses in business schools and universities that do not currently offer them. In 2013, Spencer awarded 50 students from 19 universities a total of $282,500. Since its inception in 1979, the foundation has awarded $5 million to some 650 students.
Support from the Industry
Much of this would not be possible without solid support from the insurance industry, professors agree.
The fact that it isn’t easy for most students out of college to find a job has been a help to risk management, said David W. Sommer, Ph.D., the Charles E. Cheever Chair of Risk Management at St. Mary’s University. The insurance industry, which is the primary employer of graduates, is not as cyclical as some other industries, he said, meaning that, “when things get tough, our students are usually still doing very well in terms of finding jobs.” Part of that help comes from internships, which many organizations in the insurance industry sponsor (see sidebar below).
While they used to hear about insurance being a stable industry and think “boring,” students now believe it sounds good to have more security, he said. They also pay attention to the students ahead of them, observing “who is getting jobs that fit their major and who takes a job because it’s a job.” As a result, St. Mary’s has seen growth in its risk management program, which had 20 graduates in May.
“I think that’s true of a lot of schools across the country in recent years, both because of the availability of jobs and because of the recognition of the importance of risk,” he said.
Dr. Kathleen McCullough, assistant department chair and associate professor of the National Alliance Program in Risk Management and Insurance with Florida State University College of Business, said, “What’s encouraging and almost daunting is we have, for example, State Farm saying they will be hiring thousands of people in the next couple of years. We have the big insurers and brokers saying they need hundreds of people and we’re thinking that we need to get more students.”
She continued, “The opportunities for students in risk management are amazing, the opportunities to have a great career are endless and these are exciting careers, where they will be intellectually stimulated but also can make a good living.”
Program Tracks Open Up Risk Management
James Jones, director of the Katie School of Insurance and Financial Services at Illinois State University, pointed out that the first exposure students have to risk and insurance is often a college introductory course.
“The odd thing about business is that, with the exception of only a few schools, students don’t have to take any risk management courses,” he said. “The economy and a lot of the problems that businesses have had are related to risk management.”
To address this issue, McCullough said that Florida State is launching a risk initiative, requiring every Florida State student going into a business major to take a class on risk and how it affects businesses, individuals and society—before they can become a business major. “We’re doing this because knowledge about risk is important, no matter what discipline they are going into in the business world. It also gets students thinking differently and seeing the importance of risk management,”she said.
Making the course a requirement highlights the importance of risk and risk management. “It raises the issue that uncertainty impacts all of us, no matter the major,” she said.
Every business student at Temple is required to take a core risk management class, Drennan said. They are also encouraged to major in risk management because “finance is an overcrowded field and risk management is not.” In fact, he said, there are more jobs in the insurance field than there are graduates to fill them, which is a good problem to have.
St. Mary’s has made significant changes to its program, Sommer said, by combining two tracks within the finance major: corporate finance and risk management. The school now has one major called finance and risk management.
“Given the growing importance of issues of risk, we thought every finance student should have risk management and the risk management students should have the finance,” he said. “I’ve always described the financial crisis as a massive failure of risk management, so this seemed like a logical integration.”
Taking it Higher
Educators have also noticed a trend of risk managers and other professionals seeking master’s degrees in risk management. As risk managers move into executive levels of their company, “They need the same credentials as the CFO, CRO and CEO, which is generally an advanced degree,” said McCullough.
In fact, Florida State has even begun offering a fully online risk management master’s program, designed for the working professional. About 50 students are enrolled in the program, which takes two calendar years to complete. “As the field of risk management evolves, we’re seeing two things: first people come to risk management jobs through so many different paths. If they come up through safety, through law or another route than the traditional risk management route, they may need to round out their education with a background in insurance or benefits,” she said.
Florida State is not alone in catering to online learners. Temple University is also beginning an online program of their own in 2014 that will require a small amount of classroom time.
Gaining a Deeper Understanding
While the number of risk management jobs may seem inadequate to some, the reality is that in many cases there are more jobs than students to go around. Students and teachers agree that working for a broker, underwriter or others in the insurance industry not only rounds out their knowledge and understanding of the industry, but deepens their knowledge and adds flexibility—and in many cases that translates to better risk management jobs down the line.