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IABFM Articles > > Risk Management > The Future of Risk Management - Educational Review Issues
The Future of Risk Management - Educational Review Issues
By Michael Vincent
28 December, 2006
The AIRM Twilight Seminar Series
Risk managers are at a crossroad; we can chose to continue the way we are a functional line management responsibility with little or no boundaries to the function. Each firm and position is defined and constructed differently, calling yourself a risk manager only leads to confusion when you are asked, "what's that?" The average risk manager is aging and there are no logical successors on the horizon, the succession pathway is confused because of the lack of clarity for the function.
Other more formally recognised and defined professions are circling and seeking the chance to claim the mantle of risk managers. This can happen if we do not set a pathway to the attainment of formally recognised professional status. If we fail and the other professions succeed then companies potentially lose out because the full application of the risk umbrella is not implemented; rather a methodology is implemented that represents the winning parasitic discipline rather than the holistic risk management approach.
There needs to be a focused effort to define the functions of a risk manager; out of that effort grows a demand for formal qualifications that focus the training and education along the path to professionalism. Numerous examples exist but probably the most striking is the profession of accounting. The industry bodies defined the profession and demanded the level of qualifications necessary to practice the discipline in the workplace. An accountant can define their profession and explain the boundaries. In other words they as a profession dictate their functions and tasks to industry rather than the other way around. That has to be the ultimate goal of the risk professional.
This process has commenced within the ranks of the risk managers and the following broad areas of development need to be examined and developed to ensure the attainment of professional status for a "Risk Manager."
Future trends:
Risk as a profession instead of a function:
We need to define the functions and impose that definition across the profession so that the job description is similar amongst all firms.
Generational change:Existing risk managers are on the whole an aging population with no clear succession path in place. We need a group of young people to be groomed for the professional future.
Increase awareness of the use of risk management within a greater: framework of strategic management:The risk managers need to involve themselves in the strategic management process and understand that risk management is a strategic management tool as well as a tactical application.
A higher level of education will be demanded:The change from a function to a fully-fledged profession will involve the demand for formalised risk management education within the tertiary sector. This has happened in the UK and will be demand driven in Australia.
Emerging developments:
More educational institutions getting involved in risk management education:
There is a groundswell emerging with institutions from TAFE to universities starting to look at the concepts and trying to ascertain the demand for subjects and courses.
A move to a suite of educational products from under graduate degree to Masters and eventually a PhD:The function of risk management can truly claim an educational basis for legitimacy when the traditional range of academic courses are developed for the discipline. This process can only happen in response to demand.
A focus and a home for detailed research into the concept of risk as a separate discipline:The tertiary sector and the industry organisations must co-operate to create a place of research and scholarship to ensure the emergence of dynamic theories that will drive the formalisation of the discipline.
The pathway to success:
In order to turn the function into a profession the educational aspects needs to be improved and formalised with the following components essential for success:
The ability to produce research of an applied nature:Creating a demand for graduates of programs:Changing the view of the traditional risk manager to the emerging paradigm:Galvanising industry and academia to embrace a holistic approach rather than a narrow discipline base:
The barriers to success from an industry perspective:
Industry at times stands in the way of progress because of the "resistance to change" barrier that is all too often a hurdle to real and constructive change. There is an old saying, "that generals are always trained to fight the last war." Unfortunately industry leaders are sometimes in that same scenario and resist change to safeguard their own power base. The most common barriers thrown up to dismiss the idea of risk management as a formal discipline are listed below. If as a practicing risk manager you hear them you have a duty to answer and change the thinking process within your firm.
Its what we have done for years:We can't afford it:A good broker can do the same:Its not appropriate for our company:It competes with insurance:Its an essential part of management:Its common sense and just another fad:We only need good insurance management:
The educational barrier:
Academia is no different to industry and at times worse in accepting the need for change. Most tertiary institutions are compartmentised into very narrow discipline areas; for risk management education to succeed the following barriers need to be broken down and the need for a changing paradigm of education accepted by traditionalists. The following aspects need to be accepted and improved for risk management education to succeed in a formal sense.
Holistic approach neededInter-faculty involvement:Inter-department co-operation:Where is the home and does it matter:Narrow focus versus industry need:Hard for industry to understand:
Hope is eternal:
Risk management is not alone, in previous years functions have gained respectability and acceptance as legitimate academic and professional pursuits. Chief amongst these were:
AccountingMarketing in the 1950':Finance in the 1970's:
And hopefully
Risk management in the naughties:
The pathway:
It will only happen if the industry bodies and industry want it:Get involved and demand action:Don't wait for others to make it happen:Turn it from a good idea into a concept:
In conclusion we are at the crossroads, if we make it happen it will, risk management can be a recognised profession with formal qualifications both from academia and industry; or it can fade away to be replaced with another discipline that has won the day.
The animal kingdom and industry have a lot in common in that the survival of the most prepared and fittest ensures long term survival of the species or entity.
About the Authors
Department of Accounting and Finance
Faculty of Business and Economics
Monash University
