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Implementing an Enterprise Risk Management Initiative – The Role of Leadership and Management
Richard A. Coskren , CPCU, and Celene Adams

For forward-thinking risk managers, the days of identifying and dealing with only a portion of the risks facing businesses today  are over.  We need to anticipate, prevent and mitigate risk throughout the entire enterprise. Traditional risk managers are generally comfortable dealing with property, liability, and heath and safety risks, often in isolation.  Yet, while important, these risks are often just the tip of the iceberg. The current crisis in world financial markets is just one example of an often ignored risk that must be anticipated and planned for. Others include emerging technological developments, potential legislative changes, neighborhood and regional catastrophes, key person departures/defections, international currency fluctuations, employee misbehavior and data security. 

While numerous courses and other resources are available to discuss the technical elements of an enterprise risk management initiative, not enough attention is paid to the leadership and management skills necessary to pull it off.

Because enterprise risk management cuts across so many disciplines and can often be incorrectly perceived as administrative vs. strategic, creating and implementing a company-wide or enterprise risk management initiative requires both leadership and management skills, with an emphasis on leadership. As a matter of fact, studies show that executing a major change initiative such as switching from targeted risk management to enterprise risk management requires 70 percent leadership and 30 percent management. Consequently, while management skills are essential to executing a plan, we need leadership skills to define it, sell it and motivate others to execute it.

What is the difference between leading and managing?

Essentially, leaders “see,” while managers “do.”

Leaders envision a long-term direction, communicate it, and motivate others to implement it.

Effective leaders paint a clear picture of what the future will look like, articulate their vision using all mediums and venues available, and speak, write and/or broadcast their vision across all levels of the organization at every opportunity. Further, leaders establish direct and subtle reward and recognition systems to motivate and inspire others to commit to and execute the specifics of the vision.

Managers, on the other hand, plan, organize and control the processes necessary to move toward the vision defined.

Managers ensure we staff properly,  stay on budget and that employees meet specific goals. They keep records, measure results,  track performance, recognize and reward employee achievement, and monitor accountability.

Where do leadership and managerial skills overlap?

It is important to recognize that leadership and managerial skills overlap. In implementing an enterprise risk management initiative, we need to clearly delineate the leadership and managerial functions of key personnel. Clearly, the individual responsible for the switch from a targeted approach to an enterprise-wide initiative must have the leadership skills necessary to define, communicate and motivate others to execute while having some skill at planning, organizing and controlling. This leader must be positioned at the executive table and have credibility at all levels of the organization. On the other hand, those charged with execution must be very skilled at the management disciplines while having some leadership responsibility within their defined areas of responsibility.  

For example, a manager in charge of safety initiatives designed to protect staff and reduce the company’s workers’ compensation experience modification rate  would need to clearly define the need, communicate it throughout the organization and motivate managers and professionals to behave safely (leadership skill) while developing a plan to implement specific safety programs, track their results and recognize performance (management skill).

Consequently, because both leadership and management skills are required in varying  degrees depending on initiative responsibilities, we need to be able to identify the presence of both when preparing to staff for implementing such a major change initiative.

How to identify  leadership and management skills

How do we identify our  leadership and management skills? One way is to use an assessment tool.  This could be an externally completed or self-assessed questionnaire that measures  both leadership and management skills.

For example, we could  use an assessment tool to rate a manager’s activities, such as monitoring results, creating teams, and/or identifying and correcting deviations from plan.

A good assessment/development tool  measures both how importantly the employee rates the activity and how comfortable and effective he or she is with it. Further, a quality self-assessment tool often  uses a forced distribution method to minimize the chances of employees over- or understating their  abilities.

Once we have an accurate assessment of staff leadership and management skills, we will know where gaps exist and be in a position to close them.  The tool should include a development aspect that lists activities for managers to complete to improve deficient skill level(s).

For instance, one activity might be a project in which the manager is asked to create allies and gain their input, since creating collaboration is essential to leading.  Another activity might require the manager to learn to use a variety of means to convey a message and/or to increase the volume and scope of that communication via different mediums and techniques, since infusing an organizational culture with the leaders’ vision is another essential leadership function.

How to recognize leaders using behavioral interview techniques

In addition to recognizing leadership skills in existing staff, we need to know how to recognize them in potential hires.

One way to do this is by using behavioral interview techniques.

These are questions that target specific skill sets leaders need, such as envisaging direction, communicating and motivating, and asking candidates to describe how they have successfully applied these skills in previous positions.

For example, we might ask, “Tell me about a time when you had a view of how things could be and turned it into a vision statement that you and/or your company or department subsequently implemented?”

In today’s risk management environment, you need to be preemptive, not reactive, and this takes leadership.  Make sure you assess your organization’s leadership capability before implementing your enterprise risk management initiative.

Richard A. Coskren, CPCU, is the immediate past President and CEO of the Insurance Educational Association, a member of the Aspen Risk Management Group adjunct staff, and current President and CEO of Polestar Performance Programs. Contact Aspen Risk Management Group at www.aspenrmg.com, or 619-294-9863

Celene Adams is a San Diego-based freelance writer.  Contact Celene at www.celeneadams.com, or 619-825-6062