Eighty percent of organizations now either have, or are in the process of developing, an enterprise risk management program, according to the 2011 “Benchmark Survey” from the Risk and Insurance Management Society (RIMS, the publisher of this magazine). And as the shift in the corporate world moves from mere insurance buying towards ERM, so too does the world of higher learning.
ERM courses are seeing a surge in enrollment as students are naturally attracted to more employable majors during tough economic times And, as in the corporate world, professors of ERM are working to teach how the discipline can add value to an organization rather than merely protect current assets.
St. John’s University School of Risk Management, Insurance and Actuarial Science in Manhattan, for example, now offers a one-year master’s program in ERM. And at Oklahoma State University, ERM has become a vital part of the risk management and insurance program’s curriculum.
Betty Simkins, Williams Companies professor of business and professor of finance at OSU’s Spears School of Business, believes that educating tomorrow’s risk managers requires highlighting both theoretical and the real world examples. So her class, “ERM: Concepts and Applications for Best Practices,” aims to teach students the “what, why and how of ERM” while also providing useful guidance for its implementation. “The purpose is to provide a blend of academic and practical experience on ERM in order to educate students about this evolving methodology,” said Simkins.
In some cases this requires a new philosophy regarding risk management. “One of the things that we’re trying to do is to get people to think more rather than know more,” said Rick Nason, associate professor of finance at Dalhousie University’s School of Business in Halifax, Nova Scotia. “In risk management we’ve gotten into a regulatory mode of knowing more, and unfortunately we’re stuck on techniques and forget how to think about risk. Going beyond knowing is what we’re trying to stress.”
Nason and his team make sure that students realize that risk management is still an evolving field and that there are currently more questions than answers. For Nason, focusing on asking intelligent questions is the epitome of risk management. In his view, risk management has become a ticking-the-boxes exercise instead of something that requires being aware, living in the moment and thinking.
“What I’m hearing on the street, the hiring managers are really tired of people...being textbook smart but risk stupid,” said Nason. “Those who understand how markets, people, and corporations work don’t understand the mathematics of risk. And those who understand the mathematics of risk, don’t understand the markets, the people and the corporations. What the banks want is people who can communicate across that gulf, people who are capable of being translators for the quants. That’s very hard to find.”
The University of Toronto’s Rotman School of Management is another school that has embraced the future of risk management. Peter Christoffersen, professor of finance at Rotman, recently developed an “Options and Risk Management” doctorate-level course. In the class he aims to “interest students in pursuing dissertations in the field of financial risk management”—a field that is in need of qualified risk management Ph.D.s now more than ever. “In the course I try to point out the most promising areas for financial risk research,” he said.
The school also taps into the minds of those in the industry to learn what is happening outside of the classroom. “One of the things we are doing this year for all our students is arranging an evening workshop to discuss recent changes [in the industry],” said John Hull, professor of finance and Maple Financial Group Chair in Derivatives and Risk Management. “Three senior executives from Canadian banks will be present to give their opinions.”
Bringing the Boardroom to the Classroom
Understanding real-world applications has become a theme for many RMI programs. And some schools have taken this trend one step further.
In June 2011, the Spencer Educational Foundation funded a proposal from Virginia Commonwealth University’s Risk and Insurance Studies Center (RISC) to create a “case competition,” where participants from schools with risk management and insurance programs were given the chance to come up with the best management solution to a real-world business case study.
The first risk management case competition, held March 13 at VCU’s school of business, featured a well-known industry figure from one of the world’s biggest brands. Laurie Solomon, risk manager for Coca-Cola, created a case based on the risk management changes brought about by the 2010 merger of The Coca-Cola Company and Coca-Cola Enterprises.
The rules of the case, which were reviewed by Spencer representatives, limited teams to no more than four people and required each to submit a written paper giving their solution to the case one week prior to the competition. Participating teams represented VCU, St. John’s University, Howard University, Illinois State University, Old Dominion University, Olivet College, Temple University and Utica College.
Based on the presentations and submitted papers, judges from the risk management industry chose the top three schools. The three finalists presented again to all eight judges. VCU won the top prize of $4,000. Illinois State and Utica came in second and third, taking home $3,000 and $2,000, respectively.
The real prize, however, was the real-world education, which continued even after the competition ended, as Solomon critiqued the presentations in light of the actual solution Coca-Cola implemented.
In her closing remarks, Peggy Accordino, president of the Spencer Educational Foundation, stated that the competition exceeded all expectations the foundation’s board had when it funded the proposal. She remains confident that the competition will become an annual tradition. Though using real-life case studies as teaching guides is something more and more schools are using, the VCU case competition is a first of its kind.
Develop and Diversify
For other schools, expansion is the priority more so than reinvention. Manhattanville College, a Purchase, New York-based school, recently launched its Education and Research Center for Managing Risk, which focuses its approach to teaching around the principles of ISO 31000, an international standard for risk management. The center taps risk professionals, professors and authors from the United States, Ireland, France, South Africa and Australia to help design courses dedicated to everything from risk assessment and economics to behavioral psychology and organizational change management.
The program will offer certificate programs in managing risk, ranging from introductory to executive level. The center will also be a repository for research and heavily involved in the development of subject matter expertise, corporate training programs, workshops and events aimed at advancing risk management. “In general, the U.S.A. has lagged behind the rest of the leading countries in this discipline,” said Anthony R. Davidson, dean of Manhattanville College’s School of Graduate and Professional Studies. With its new research center, says Davidson, “Manhattanville is seeking to address that.”
Schools across the country are not only trying to draw more students into their RMI programs due to increased demand, they are also attempting to diversify the field. For instance, St. John’s University has teamed up with Lockton Insurance to introduce a risk leadership development program for the New York business and education community.
Founded by Lockton Vice President Marianne Halvorsen, the program was developed as a training initiative for young women attending the university’s School of Risk Management, Insurance and Actuarial Science. The program gives students the opportunity to gain industry experience, build a network and take part in giving back to the community.
Bailey Noone, a St. John’s actuarial science major from Tuscon, Arizona, currently interns at Los Alamos National Laboratory and is a member of the risk leadership development program. “It is great to have a female role model show me what it is like to work and give back to the industry,” said Noone, who is entering her sophomore year this fall. “The goals [Marianne] is setting for herself and us are inspiring.”
These trends on campus are a good sign for the future of risk management, when the students of today will be forced to manage the risks of tomorrow. By better aligning the classroom with the boardroom, universities will graduate professionals able to help financial firms avoid scandal, agricultural companies withstand drought and governments prepare for disaster. Because these future risk managers are not just studying for tests; they are preparing for reality.