Don’t assume that all risk managers are like you, or that they confront the same challenges. Not even close! For some perspective, here’s a list of 6 risk manager types:
- The Wrestler
- The Specter
- The Underdog
- The Minder
- The Persuader
- The Facilitator
All 6 are described below as composites of actual risk managers I have had the pleasure (or misfortune) of knowing. See if you can identify yourself in one of them.
- The Wrestler: The Wrestler’s approach to risk management is simple and direct: the Wrestler identifies risks, assesses them, and deals with them. Some risks must be accepted—”capitalized” in the Wrestler’s terminology. All other risks must be avoided, hedged or diversified. The biggest challenge is managing conflict. Business units sometimes disagree with the Wrestler’s assessment of—or approach for dealing with—their risks. With implications for the bottom line and employee bonuses, these disputes become heated. Senior management is often drawn in to mediate. The Wrestler and his staff don’t like being called “risk police.” On the Wrestler’s desk we might find a statuette of Atlas holding up the world.
- The Specter: The Specter watches and listens, protecting senior management and the board from information that might embarrass them, cause them blame, or be used in litigation. The specter ensures that, if there is ever a crisis, senior management and the board have plausible deniability—with no paper trail linking them to decisions that lead to the crisis. The Specter relies on an opaque decision making process. Employees fear the Specter and know to be careful what they put in writing. No one ever calls the firm’s internal ethics hotline. Step out of line while the Specter is watching, and your days are numbered. On the Specter’s desk you might find figurines of the three Japanese monkeys: “see no evil, hear no evil, speak no evil”. To the Specter, silence is golden.
- The Underdog: The Underdog has a board mandate to manage risk but lacks adequate staff, funding or support. No one has much time for the Underdog, who is rarely invited to meetings, and finds out about decisions after they are made. The Underdog distributes a Daily Risk Report, but few people read it. The CEO describes the Underdog as smart and hard working, but not a team player. Line managers, just as unfairly, paint the Underdog as timid. They ask rhetorically if someone who has never taken risks should be managing risks. If disaster ever strikes, the Underdog fears being fired as a scape goat. Still, the Underdog labors on, torn between trying to improve the situation or searching for a new job. On the Underdog’s desk you might find a statuette of Rocky Balboa, a fictional boxer who takes repeated beatings but still remains standing in the ring.
- The Minder: To the Minder, risk management is a collaborative process laid out in a framework downloaded from the Internet. While “the whole may be greater than the sum of its parts”, every part is essential. The Minder works with the board to maintain an up-to-date Risk Appetite Statement. Line managers help out with the company’s Risk Map. There is an Event Inventory to maintain, and Daily Risk Reports, and data to capture, and so much more. Everyone, from the board on down, participates. They may begrudge the time, but complaints are mild. The most stinging complaint may be that the firm is “just going through the motions of managing risk”. The Minder agrees there is a problem but perceives it as more about Risk Culture—improve the company’s Risk Culture, and risk management will deliver on its promise. To the Minder, risk management is like running a railroad yard, making sure every engine and every car is in the right position, on the right track, when it needs to be.
- The Persuader: The Persuader should have been a sales person. You will likely find him employed at a hedge fund or alternative asset management firm. With confidence and an engaging personality, the Persuader can win over even the most cautious skeptics. Sales people take the Persuader to meet prospects. Lawyers take the Persuader to meet regulators. The CFO takes the Persuader to meet analysts and auditors. In those meetings, the Persuader talks of the company’s risk management prowess—its commitment, its culture, its world-class analytics. Without going into details, the Persuader describes how the firm dynamically adjusts its risk profile to meet an ever changing business climate. It is all sizzle and no steak. Beyond a few board resolutions and a neglected procedure manual, the firm has no formal risk management program. Its risk analytics were licensed as part of a software bundle. A junior analyst runs those analytics two hours a day, with no participation by the Persuader. But, because of the Persuader, the firm’s reputation for state-of-the-art risk management is undisputed. On the Persuader’s desk you might find a well-thumbed copy of Neil Rackham’s book SPIN Selling.
- The Facilitator: To the Facilitator, risk management is about supporting the risk taking process. This requires communication, transparency and accountability. It does not require the Facilitator to form or communicate opinions about individual risks. Decision makers must receive information, support and expert opinions to ensure they make the best decisions possible. Someone has to facilitate this, with procedures, risk reports, risk limits, dialogue and more. That is what the Facilitator delivers. Some might complain that the Facilitator doesn’t really manage risk. The Facilitator couldn’t agree more. Decision makers manage risk. The Facilitator merely facilitates. On the Facilitator’s desk you might find a copy of the Chinese yin and yang symbol for harmony.
You may feel you are a blend of two or more types, but likely one type dominates.
If you would prefer to be a different type, plan the transition carefully. Your role as risk manager is largely dictated by your firm. Changing it will require changing the people around you as much as changing yourself. For help, schedule a call with me, and we can talk.