Some Fall into Risk-Management Roles Naturally


Yale University behavioral economics professor Robert Shiller says the current mess in the financial markets is the result of "psychological contagion" and a failure to manage risk, according to Bloomberg.


Unlike Federal Reserve Chairman Ben Bernanke, who said this week that the recession could be over by the end of the year, Shiller says there's a risk that "we could be in for years of a slow economy." Educating investors and implementing stricter risk controls for banks are the next steps in correcting the problem, he says.


At the risk of sounding like a broken record, with commentary like this, it's no wonder corporate risk officers are highly sought today. But it's not the only explanation. In fact, to some it's not even surprising. Jeff Smith, who serves as legal officer and risk officer for the Michigan-based Consulting Services Support Corp., told me this week:

Since corporations ideally exist to promote the interests of their shareholders, once a number of companies begin to better manage and mitigate their own unique risks of loss, it only makes sense that other corporations that wish to retain competitive advantage and attractiveness to shareholders would follow suit. This results in a race between corporations striving to be the best at mitigating and managing risk... evidenced by an increase in the number of [risk officer] positions and the compensation being paid to such individuals.

Of course, not every corporation sets out specifically to hire a risk officer; some execs just work their way into the risk-management role. That's what happened in Smith's case. He said:

I was initially only serving in the general counsel/legal officer role, [but my CEO and I] quickly discovered that I was able to identify and eliminate, or mitigate, the various risks within the organization. Although it seemed like second nature for me to do this...[it] was apparently a role that no one had ever effectively fulfilled.

Not long thereafter, he was given the title to denote what he'd been doing all along: risk officer. And since he's also the company's legal officer, CSSC gets two execs all wrapped up in one.