“One Thing is Certain: 2017 Will Be the Year of Uncertainty for CEO’s’”
Shouted a recent Wall Street Journal article.[1]
Why?
Let’s look at the reasons at why we live in VUCA time (Volatility, Uncertainty, Complexity, and Ambiguity).
- President Trump is disrupting business rules and business models.
- Technological change is increasing.
- Mass immigration is resulting in political divisions.
- Climate change is real and increasing.
- Globalization benefits are unclear due to job and work transference.
Business Response
CEO’S want stability to forecast costs, market demand, and profitability. These are now all subject to uncertainty. The risks of poor decisions and failure will increase exponentially.
What types of failure will increase? Product development failure. Offshoring will be questioned due to the loss of jobs. Domestic sourcing risks will increase as new suppliers don’t have the competencies to make products. Margins will become tighter. Trade wars will erupt.
We believe that traditional business models and business assumptions will be questioned and tested. CEO’s and companies are trying to decipher the VUCA trends and find niches and segments that will provide opportunities for sales and margins.
Hence, the risk of the risk manager/director.
#2 Best Job in America – Risk Management
Money Magazine last month determined that Risk Management is the ‘second best job in America’ of the top 100 careers with big growth, great pay, and satisfying work.[2]
According to Money Magazine, the risk management director was choosing as the second best job because:
- Median Pay: $131000.
- Top Pay: $200,000.
- 10-year job growth: 7%
The job director is now responsible for managing all the risks the organization may face, including financial, cyber security, and operational risks.
What Does this Mean for Companies?
Companies often don’t know what to do regarding today’s uncertainty. So, they are searching to the next big technical idea, such as big data, automation, or robotics.
We think that there may be a simpler solution. Each employee will become a risk manager.
So, companies will have to develop core competencies in risk based, problem solving and risk based decision making.
Bio:
Greg Hutchins is the developer of Certified Enterprise Risk Manager(R).
[1] One Thing is Certain: 2017 Will Be Year of Uncertainty for CEO’s, Wall Street Journal, December 27, 2107.
[2] Best Jobs in America, CNN Money, January 2017.
Hey Greg, good article. Where do risk managers come from? What are their backgrounds? What could or should their backgrounds be? Are you talking about enterprise risk management (risks material to the well being of the company) or operational risk management (perhaps the difference between quartile 2 or 3 in cost of service).
I’ve come to believe most people, and by extension organizations, aren’t actually very good at risk management, despite their belief that they might be and the fact they have people in risk management positions.
Thanks,
Paul Daoust
Hi Paul:
Good morning. Thanks for the comment. I’ll try to answer your questionx.
Where do risk managers come from?
Good question. Most are home grown.
Many come out of insurance. They are usually myopic since ERM is now a company wide initiative driven by statute (feds) or contract (ISO risk based thinking).
More societies have their ERM and RM certs as they rebrand around risk.
We offer CERM. Visit http://www.CERMAcademy.com. Colleges are offering executive ERM certs, such as Carnegie Mellon, etc.
What are their backgrounds?
Backgrounds are very broad.
ERM is now a critical org function. Since ERM has an enterprise and board reporting function, C level background is often a prerequisite for head of ERM.
So, we find internal audit and financial folks in the function. however, they are often challenged with new cyber and operating reporting reqs.
Risk is now the new normal. So, the new opportunities will increase exponentially.
ORM and ERM
They are now conflated with ERM on top and ORM subsumed.
Decision Making
Yes, it’s all about risk based decision making. We are not good at it since it is filtered by over 150 biases.
BTW: Stay tuned. We have a new initiative: DecidingHowToDecide.com in 2018.
Thanks again for your kind comments.
Best,
Greg H