Magazine article Risk Management

Path from the Past, Vision of the Future: I Grew Up on Staten Island in New York, before the Construction of the Verrazano Bridge, When the Island Was Remote and Rural, with No Connection to New York except by Boat. Staten Island Is Only 8 Miles Wide by 17 Miles Long and in Those Days, with No Traffic, You Could Get Anywhere in Less Than Thirty Minutes. (Cover Story)

Magazine article Risk Management

Path from the Past, Vision of the Future: I Grew Up on Staten Island in New York, before the Construction of the Verrazano Bridge, When the Island Was Remote and Rural, with No Connection to New York except by Boat. Staten Island Is Only 8 Miles Wide by 17 Miles Long and in Those Days, with No Traffic, You Could Get Anywhere in Less Than Thirty Minutes. (Cover Story)

Article excerpt

Our entire frame of reference was the island. We spoke of the best school on the island; the best team on the island; the best restaurant on the island. Our mindset was, in a word, insular.

When I was recently asked to speak at a risk management conference about the role of the risk manager, this island of thought came to mind. I began to consider the degree to which this subject reflects the risk managers' insularity. We are focusing on ourselves, remaining within our comfortable frame of reference. Our immediate concern should not be with ourselves but with the nature of risk within the corporation, risks that are emerging as some of the most significant issues in modern business. This is a question of emphasis but it is an important one.

Let us consider the risk manager's mindset. We are all familiar with the oral tradition on the evolution of this field: risk and insurance management began as a clerical, insurance-purchasing function. Over time, the job evolved into a professional management role identifying, assessing and treating risk, only to become involved in the commerce of insurance procurement as a last resort.

To a significant extent, risk and insurance management, as typically practiced, remains a procurement function. It is true that the modern risk manager is very much involved in the identification, evaluation and treatment of risk, but these activities continue to be defined in relation to insurance.

Insurance, according to our own mythology, is the foundation of our frame of reference: we self-insure as an alternative to it. We improve loss control to decrease its costs. We explore alternative financial mechanisms as a substitute for it. Insurance is our island, to which other professionals have historically had only limited access. We have been safe here. But now, our island is connected by bridges and superhighways to all that surrounds it. We are only a small part of a much larger risk management infrastructure. Being the best on the island is not only no longer good enough, it is barely relevant.

On the most personal level, this subject is about whether we will continue to hold our jobs as risk managers.

Reflection

When I was twenty years old, having completed my junior year in college, I was working at a small Wall Street firm as a securities receive-and-deliver clerk. I had taken a leave of absence from school while awaiting orders to active duty in the military. Before leaving, I was also planning to get married. Since the stock market was not strong in 1970, before getting married, I asked a partner in the firm if my job was secure. "I go before you go," he told me. I felt safe and secure, perhaps for the last time in my career.

The week I returned from my honeymoon, I went. Since I was going into the military anyway, they laid me off instead of others. Telling my nineteen-year-old wife of two weeks that I no longer had a job, I did not expect the sun to rise the next day. But it did, and my career advanced to the position of clerk/typist at another firm in the financial district, where much of my time was spent bolting and unbolting IBM electric typewriters to desks. My orders to active duty ultimately arrived and, in the interim, my wife had secured a job at the same firm as an executive assistant.

The day I returned from Fort Knox in June, I was told my job had been eliminated in reorganization. They told me to return to college in September, and assured me that my wife's job was secure. If I were willing to forego my two weeks of severance pay, I could take advantage of the special outplacement program. What was supposed to be dinner and a review of relevant opportunities translated into a hot dog on a bench in Battery Park with a human resources representative commenting on the want ads.

In September, as I prepared to return to school, the firm terminated my wife's employment. I advised her against the outplacement program. …

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