Who would have thought, a year ago, that they would spend much of the coming year in near-solitary confinement as the world grappled with a crisis of epic proportion. The COVID-19 pandemic changed the world overnight, and exposed the lack of preparedness of most organisations, to deal with unforeseen circumstances.
The present situation has served to drive home the knowledge that a threat may present itself without warning. It has taught us that risk is a constant, and that it affects every business in all aspects. Risk management is finally being understood to be of vital importance, and many organisations are shifting to adopt a much more risk-aware strategy and develop teams of risk professionals. For pursuing risk management as a career, young professionals need to understand what risk management is and what makes it so important.
Risk management is a 3-step process involving identifying various threats, analysing them to understand their impact under different scenarios, and preparing appropriate responses to defend the organisation’s objectives. In simple words, risk is defined as an outcome that could potentially hamper the financial and operational performance of an organisation, and risk management is the process of identifying these risks and mitigating them through strategic planning.
With economies around the world having become increasingly interwoven, and pandemic-related closures driving a worldwide slowdown, Enterprise Risk Management has been pushed into the limelight as a key safeguard against uncertainty. It has become essential for organisations to implement robust risk management processes to protect themselves from unforeseen threats, and Enterprise Risk Management (ERM) covers everything from setting the policies, defining the risk appetite, implementing a framework of risk management and inculcating a risk culture that drives risk-aware decision-making.
A risk professional has a complex job requiring a host of skills, such as complex problem-solving, analytical thinking, decision-making and judgement based on various events that could compound the impact on the organisation. Risk managers need to be good negotiators and have the tact to manage multiple stakeholders. They should also work well under pressure, especially in a crisis event. Finally, they need to be financially literate and have a sound understanding of the business.
The path for becoming a risk manager
The path to a career in risk management can begin directly after Class XII. Risk management can be pursued by undergraduates, post-graduates and young professionals with professional qualifications & multi-level examinations in ERM
Besides ERM, individuals interested in a career in finance can pursue Financial Risk Management. Digital Risk Management can be pursued by cyber security professionals, while those looking to work in supply chain can obtain a qualification in Supply Chain Risk Management. Personnel in every role, function or department can benefit from knowledge of risk management, as risk is inherent across companies and sectors.
A career in Enterprise Risk Management (ERM) offers individuals the opportunity to become a key player and leader in any organisation, as ERM works across sectors, including pharmaceuticals, retail, banking, finance, automotive, E-commerce, FMCG, energy & power, and technology. Risk professionals can work in various roles, such as Associate Risk Manager, Risk Consultant, Risk Management Analyst, Credit & Risk Head, and eventually, Chief Risk Officer (CRO). Risk professionals serve as guides to other teams, providing valuable counsel, to secure the organisation against emerging threats.
Future & Progression
As the world grows more uncertain and we face other potential threats, risk professionals will be more in demand than ever. Companies are already building risk teams by hiring CROs and other risk managers, and this trend is expected to continue as more organisations realise the true cost of being unprepared for unexpected events. With companies investing more in risk management, remuneration for mid- to senior-level risk professionals is likely to be in the range of Rs 15 lakh to Rs 40 lakh.
The COVID-19 pandemic has proven the defences of many companies to be inadequate. To survive in the future, businesses will need to be prepared for a host of challenges and threats, and risk professionals will play a significant role in this future.
— The writer is CEO, India Affiliate of Risk Management, UK
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