Risk Manager Definition
A risk manager is an individual who has been tasked to run a portfolio of derivative instruments that are adjusted for risk to increase return on investment. A risk manager’s role and duties vary from one organization to another depending on the size, nature and the expectation that management has towards the department he heads: risk management. However some of the activities carried out by a risk manager are common to many organizations and include:
An organization has different interrelated departments. A risk manager plays the role of coordinating the different departments to enable smooth flow of information and communication. This includes the risk analysis, assessment and implementation strategies that the risk management department has resolved. This is important so as to source for funds from other departments to be able to shield the company from losses. Also for effective implementation, all the relevant departments and personnel must know the risk policy of the company. Some of the information required for effective policymaking in the department of risk management in an organization is found in different departments and effective cooperation and communication enables sourcing of it without trouble. This is the duty of a risk manager to ensure that.
Risk management is costly and can sometimes be expensive if not well managed. It is the duty of a risk manager to ensure that an organization does not lose money in the process. However it is also paramount for the manager of risk to ensure that enough allocation is made so as effectiveness is seen in the same department. Risks that can be controlled prior to their occurrence should be hedged and proper structures put up to ensure that. Insurance coverage that is sought for the various properties in the organization should be at a reasonable cost. It should however be adequate and effective to reduce probability of even greater costs in future in case of occurrence of risk. Facilities rented, leased, purchased or constructed by a company, must have provision for loss control. This must be effective and the risk manager ensures that it is not resulting in too costly an affair to the organization.
A risk manger has the duty to report to the various departmental heads and the top management on the activities of the department he heads. This includes the proposed policies to handle risks, cost changes, claims analysis, relationship of claims to the premiums paid and measures put in place to reduce the extent of exposure to risk. The risk management department also has some allocation made to it after a certain period of time and changes and usage of the allocations must be accounted for. Any department that risk management has had a direct relationship should also be given information. For example a motor vehicle may have crashed and the accounting department wants to know the value of the motor vehicle as per the calculation made by the risk management department.
The risk manger has the role of indentifying and quantifying an organizations exposure to accidental loss and risks. It is important so as cost can be estimated for the same and proper mechanisms put in place to ensure effective ways to handle the loss. It is also helpful in knowing the measures that have to be put in place to transfer the risk, avoid it or retain it and the cost associated with each of the alternatives.
Head of Department
In many organizations, the risk manager is the head of the risk management department. He is held responsible for any errors and mistakes that the department can involve itself. The manager is directly answerable to the top management and frequently gives reports concerning the activities of that department. He involves himself in all contract negotiations involving insurance indemnity, pure risks assumptions and provisions prior to their execution. As the head of department, it is the duty of a risk manager to establish the policies and procedures of the risk management department.