Results of "2010 Risk management Compensation Survey" (conducted by National Underwriter in partnership with Logic Associates)
By Sam Friedman
For risk managers to keep their jobs in this difficult economy, they must remain “highly visible” by making sure their senior management and board members appreciate the bottom-line savings that loss control, safety programs and alternative risk-transfer efforts produce, one leading placement service warns.
“Risk managers need to stand up and take credit for all they are doing by quantifying their bottom-line contributions,” said Bill Perry, president of Logic Associates, in analyzing the results of the “2010 Risk Management Compensation Survey,” conducted by National Underwriter, in partnership with Logic Associates.
“Hard numbers that put risk management in a very positive light will give companies pause before cutting into their departments,” said Mr. Perry.
When push comes to shove, he added, “not much has changed in terms of how you keep your job as a risk manager. You not only have to perform, but you have to show everyone above you that you are performing. It’s like the tree falling in the forest—if no one is there to witness what you are saving the organization, it’s like it never happened.”
Mr. Perry suggested that “those who are losing their jobs today are often out of work because of their invisibility. They are on the target list for layoffs because they’ve run an invisible department. They haven’t been out there consistently letting the powers that be know exactly what they’re doing and how much money they’re saving for the organization.”
One factor operating in favor of risk managers is the downward trend in terms of insurance pricing. “We’re lucky to have a soft commercial insurance market to fall back on right now,” noted Mr. Perry. “That makes it a lot easier to lower the cost of risk and cut the budget by paying less for insurance, rather than having to lay off one of their risk management people.”
For those fearful of seeing their department downsized or their function outsourced, “whether you stand out in today’s hyper-competitive job market depends on your skill set. What can you do beyond just calling your insurance broker and going over policy quotes? Did you put a captive in place, or are you managing a significant self-insured retention? Have you initiated any safety programs that have prevented property losses or kept people on the job, while cutting claims?”
He said the second crucial factor is a risk manager’s education. “Risk management is a knowledge business, but too few are continuing their education so they have the expertise and credentials to set themselves apart,” according to Mr. Perry.
Just one-third of the 287 risk managers surveyed this year have a Master’s degree, while fewer than one-in-five earned a CPCU designation. Only 40 percent have an Associate in Risk Management credential.
“The most important degree a risk manager can get these days is an MBA in Finance, because you can then speak the language of those above you—whether they are the CFO or the treasurer,” Mr. Perry advised. “Getting a CPCU or an ARM can be very important as well in doing your day-to-day job, but you don’t want to just be seen as ‘the insurance guy.’ You want to be the one who gets the bigger picture financially and operationally.”
The survey found there’s plenty of room to grow for risk managers looking to expand their job portfolio and increase their importance to the organization.
For example, only 6 percent said they now have direct responsibility for data security, even though exposures are growing to critical levels in that area. About 44 percent say they at least “advise” on such risks, but about the same percentage reported no involvement.
Regulatory compliance is another growing challenge, yet only 15 percent of respondents affirmed they have a direct say over managing those risks. A little over one-third do advise their companies on compliance issues, however.
Involvement in enterprise risk management is picking up, with over one-third taking at least an advisory role in that emerging discipline, and nearly one-third directly responsible for ERM.
However, there is a limit as to how far risk managers can stray before potentially putting their jobs at risk, Mr. Perry warned.
“Those who are most vulnerable might be the risk managers who ventured outside their realm into non-insurance-related work like human resources, systems administration or even senior management,” he said. “In fact, a promotion like that could be the kiss of death if a risk manager isn’t careful.”
He conceded that many risk managers feel “pressure to keep moving up. You’ve got a risk manager who has done well, trained their assistant well, who is looking to promote their assistants, but moving into another sector means giving up your risk management franchise.”
That can be a big problem in a shrinking economy, he cautioned. “When layoffs come, the person with the least experience in a department is often the first to go,” Mr. Perry noted. “In risk management you had the advantage of experience, but that’s lost when moving out of risk management. Once you lose that new job, your experience doesn’t qualify you for similar non-risk management jobs elsewhere against those with more time in those positions.”
Basically, he summarized, “once you give up risk management, who are you? A small percentage may pull off the transition and are very successful, but in this economy they are also very vulnerable.”
However, he hastened to add, “this does not hold true for those who have grown within risk management. You are still in your clear area of expertise, and the growth is built on a more solid foundation. You get to maintain your franchise.”
That means “if you grow vertically within risk management—including those who have become a chief risk officer, or launched a captive or an enterprise risk management department, or set up a new security or safety program—you become harder to replace and easier to place elsewhere in a new job within the profession,” according to Mr. Perry.
He concluded that “we’re now more in the age of the specialist rather than the jack-of-all-trades. It becomes harder to replace that expertise, and harder to delegate to another department, if you are an absolute expert in what you do. That’s especially true in risk management, which is a rather small community by comparison with bigger professions like accounting, security, HR or systems administration.”
Still, for those looking to move on within the profession, “it’s very hard to get a new job in risk management today,” warned Mr. Perry. “First of all, most risk managers are staying put if at all possible--mainly because the salaries being offered in this economy by those who are hiring are not up to the numbers being thrown around in better times. That means there are fewer openings available.”
He advised that “if you are going to move, look to trade up. Even a lateral move salary-wise to a more attractive industry or more challenging environment will help boost your career in the long run.”
Risk managers at organizations of all sizes are earning
six-figure incomes on average these days, while most are substantially boosting
their base salaries with bonuses and additional benefits based on their own
performance and the bottom lines of their employers, according to the latest
compensation survey by National Underwriter, in partnership with Logic
The average salary among the 287 risk managers queried for the Logic/NU “2010 Risk Management Compensation Survey” ranged from about $116,000 for those with firms doing less than $500 million in sales volume, rising steadily to a high of around $163,000 among respondents at the biggest organizations, with sales over $7 billion.
The overall average salary for the survey base came to a little over $130,000, with an average bonus (for those getting or reporting a bonus) of nearly $22,000.
Total compensation averaged about $146,000. (Since not all respondents received or listed bonuses, the average total compensation for the survey base does not reflect the addition of average salary and average bonus.)
Logic President Bill Perry warned that survey-wide statistical benchmarks can be deceiving. “You need to slice and dice salaries, first by the size of the organization, but also by the type of industry you are in and even the geographic location of your employer,” he said.
Indeed, those in 14 industries recorded average salaries above the survey-wide figure, with “Metals/Mining” recording the highest average salary—about $203,000. Those managing risks in the insurance business averaged nearly $163,000, while entertainment risk managers posted an average of close to $149,000.
As noted, the base salary is just one portion of a risk manager’s overall compensation at most firms. Bonuses for the entire survey base averaged nearly $22,000—but as with salary, the average bonus reflected the size of the employer.
At companies doing less than $500 million in sales, the average bonus was just over $5,000. However, at all other organizations, the average bonus was never less than $20,000 for those receiving a bonus, with the highest average bonus going to those at the biggest firms, those with sales above $12 billion—nearly $44,000.
“While salaries have remained flat for many risk managers in this tough economy, bonuses have remained very healthy, and in fact have grown in some instances,” said Mr. Perry. “That means compensation is very much performance-based.”
He added that “this can work to a risk manager’s advantage because their work is so clearly measurable—whether in terms of loss frequency and severity, an improvement in productivity due to better return-to-work ratios, insurance premiums paid from year to year, or the total cost of risk.”
Meanwhile, over one-third of those surveyed also received stock options, further tying total compensation to the company’s performance. And there were other perks for some, including about 12 percent who reported driving a company car.
There still may be a gender gap in risk management, the survey confirmed. About 25 percent of those responding were female, and their average salary was a little over $112,000, significantly lower than the $136,000 average among their male counterparts. The same trend held for bonuses, with women averaging over $14,000, against the nearly $24,000 posted by male respondents who got bonuses.
However, Mr. Perry does not believe a risk manager’s gender is playing any role in corporate hiring decisions these days, based on his own extensive placement experience.
Instead, he attributes the gender gap to the fact that many of the most experienced risk managers are working for bigger companies that pay more by nature of the size of their operations and the complexity of the jobs being performed.
“Women continue to gain ground in risk management,” he said. “As they keep working their way up the ladder in this profession, these average salary gaps will narrow and eventually disappear.”
The good news is that job security for risk managers and their staff members is better than expected despite the mass layoffs affecting most of the economy following the financial crash, credit crunch and lingering recession, the survey found. Eighty-four percent said there have been no layoffs in their departments over the past 12 months.
In addition, job satisfaction is very high even with all the extra work and challenges risk managers are taking on. Half said they are “satisfied” with their jobs, and 44 percent described themselves as “very satisfied.”
Only 5.6 percent said they are “dissatisfied” at work, with compensation likely a prime factor, as these respondents reported an average salary of just under $100,000 and a bonus of $8,675—far below their more satisfied peers.
Not only are most risk management departments being spared substantial cutbacks despite the deep contraction in corporate America, but the overwhelming majority of risk managers are happy in their jobs even in these challenging times, an exclusive survey by Logic Associates and National Underwriter has revealed.
Indeed, 83.3 percent of the 287 risk managers responding to the “2010 Risk Management Compensation Survey” said there have been no layoffs in their departments over the past 12 months. At the same time, 90.6 percent said their staff has not been expanded in the last year, either.
In addition, despite the tough economy, 44.4 percent described themselves as “very satisfied” with their jobs, with another 50 percent saying they are simply “satisfied.” Only 5.6 percent characterized themselves as “dissatisfied” with their current positions.
“It’s very heartening to hear that 83 percent have experienced no layoffs in their risk management departments,” said Bill Perry, president of Logic Associates, the longtime executive recruitment firm for risk managers, based in New York. “A lot of that has to do with the fact that cutting risk management today would be like cutting off your nose to spite your face.”
He explained that “the common phrase in the business world is that ‘no one is indispensable,’ but at a time when every dollar is precious, letting people go in risk management could actually end up costing the company a lot more than they’d save in salary and benefits if property and liability losses rise as a result. It’s counterproductive.”
While a number of risk managers have lost their jobs because their companies went out of business, were acquired or merged with another firm, most have come through the economic crisis better than colleagues in other departments, Mr. Perry suggested, because of the evolution of the profession beyond mere insurance purchasing.
“It used to be that risk managers lamented not being seen as a profit center. That’s why many chose to go the captive route—to make themselves a player within the company, and show what they can add to the bottom line,” he said. “But now, with consumer spending so far off and revenue growth so hard to come by, all of a sudden cost control is king—and that’s the sweet spot for risk managers.”
Senior management also has recognized that downsizing opens the organization up to additional exposures, putting risk managers on the front lines of claims control and litigation management, said Mr. Perry.
“When you have mass layoffs, casualty claims are likely to rise,” he noted. “You can expect more people to file for workers’ comp, not only among those who were let go, but because fewer people are being asked to do more work in the same period of time—perhaps in jobs they are not accustomed to handling—which usually means more injuries. And you can expect more employment practices suits among those who were laid off if they are a member of a protected class.”
All of these factors work to the advantage of risk managers, whose expertise will be required to properly execute downsizing and work reassignments, and whose relationships with brokers and carriers will be essential to manage any rise in claims, Mr. Perry pointed out.
“The pressure to stay on top of all of this, while maintaining safety standards and quality control in the midst of budget cuts, is very high,” he said. “So all of a sudden, risk management is seen as a critical player in the battle to keep costs under control.”
That doesn’t mean risk managers will see their departments fortified any time soon to meet the new challenges and additional workload they face in this tough economy, warned Mr. Perry.
“The fact that 90 percent reported not expanding the risk management department in the past year does not surprise me,” he said. “Very few companies are expanding their payrolls today.”
He added that “risk managers are undoubtedly working harder, if only because they are under more pressure to perform and justify their budgets. But in this economy, holding your own in terms of staffing is a huge achievement and demonstrates your bottom-line value to the organization.”
Mr. Perry also said he is not particularly surprised that the satisfaction levels of those surveyed are overwhelmingly positive despite the poor economy and generally stagnant salary levels. Indeed, he believes that the 94.4 percent job satisfaction rating is “not an anomaly.”
“Historically, I’ve found that risk managers as a whole tend to like the work they do, in good times and bad,” he said. “They are problem-solvers, and the bigger the challenge, the more energized they get because it raises their profile in the organization.”
Money still makes a big difference in a risk manager’s outlook, the survey found.
Those who characterized themselves as “very satisfied” averaged nearly $146,000 in salary and about $29,000 in bonuses, making much more than those who said they are merely “satisfied” ($120,000 in average salary and $15,600 in bonuses). The 5.6 percent who are “dissatisfied” averaged just under $100,000 in salary and only $8,675 in bonuses.
Bottom line, according to Mr. Perry, “would risk managers like to be paid more, or work at a bigger company or in a more challenging industry? Of course many would, but that’s always the case.”
However, he added, “in times like these, if they have a job and they like the work they’re doing, they’re feeling pretty good about themselves right now, and that was reflected in the survey.”