Where is the profession of risk management going?

A colleague recently asked me:  Where is the profession of Risk Management going?

Or, to focus the question a bit more:  What will the profession of risk management look like in the U.S. in 2019?

First, the profession of risk management will grow, both in its profile and in its number of people.  The world may not be any riskier than it was 10 or 100 years ago, but failures have become more visible, and that makes managing risk more important.

In the era of commercial satellite photos and crowdsourced datasets, searchable public records and ubiquitous email, it is easier to find and document when things go wrong.  Executives will want to be more alert to risks that might show up, and that will lead to elevating the role of risk managers.

Second, these risk managers will deal with large data sets, and will be expected to make sense of them.

Internal data will be one focus, since it will be easy to collect.  Risk managers may be given email metadata and asked to identify the individuals at greatest risk for improperly disclosing data.  They may be given energy usage by the device and by the hour and asked for ways to reduce energy costs.

Other data will be external.  Risk managers may be given data about mortgages in default, delinquencies on credit cards, or high users of health insurance, and asked to propose policies which will reduce those risks.  In these areas, marketing teams may own the data and have more experts on big data, and if so risk managers will collaborate with those teams.

Third, the risk management profession will focus on different risks than it has in the past.   These will include:

a) Technological risks.   Executives will be judged on their ability to ensure that technology works as intended.  This will especially require more management of the risks in software development.  Where risk managers now compare credit risks across different divisions of a company, they will need quantitative comparisons of technological risks in the future.

b) Climate risks.  Annual variation in weather risks has long been a concern for agricultural producers and utility companies, and weather derivatives are available in many markets to hedge some of the risk.  Secular variation in climate will now be a concern for a wider variety of companies, and risk managers will be called upon to propose both financial and operational strategies to manage it.

Meanwhile, the current concerns of risk managers will continue.  Credit risk, liquidity risk, market risk, and operational risks will still be concerns for all companies.  Asset-liability management, project management and auditing will still be concerns for many risk managers.  And as the profession of risk management grows, risk managers will find themselves with new roles and new topics as well.

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