Magazine article Risk Management

Brain Drain

Magazine article Risk Management

Brain Drain

Article excerpt


Henry Good remembers when longevity mattered. An independent risk management consultant whose career spanned 35 years at Rohm & Haas, 20 as director of insurance, Good felt the trust and respect he received from the C-suite were the direct result of that longevity. "They knew me and I knew them," he says.

That same trust was not afforded his replacement, whom Good says did not have the same influence on decisions that he had. "He was an unknown, even though he came from within the company." Good says this is typical of how risk managers are viewed by the corporate upper echelon. Trust and respect is earned, not part of the job description.

Good's experience is one that is about to play out all across corporate America as baby boomers, who started retiring in 2011, head for the exit in droves. With more than 78 million boomers taking their knowledge and on-the-job skill sets with them as they leave, the risk management function is facing a serious brain drain.

How Serious?

The severity of the problem depends on who is doing the talking. Despite the decade-plus of discussions and alarms being sounded throughout corporate America, there are those who do not believe the problem is all that serious. A 2003 Wharton School study titled "Will There Really Be a Labor Shortage?" suggests that the expected loss of labor overall is exaggerated. The study also suggests that "employers may well face new and more difficult challenges in recruiting and hiring than previous generations faced. But the challenges have to do with changes in the employment relationship that increase retention problems, not a shortfall of workers caused by demographic changes."

A February 2012 report from the Bureau of Labor Statistics (BLS) seems to suggest something different. The BLS states that, by 2020, there will be 10.5 million more members of the U.S. labor force. However, between 2010 and 2020, the BLS predicts a total of 54.8 million job openings, over 60% of which will be the result of current workers retiring or otherwise permanently leaving the workforce.

The news gets a bit more grim. The same BLS report predicts that in four out of five occupations, the openings due to replacement needs will exceed the number due to growth, and that all occupations will have replacement needs.

For the insurance industry, the need may be even greater. A 2007 study by the professional services firm Deloitte revealed that 88% of Chartered Property Casualty Underwriter (CPCU) members were 40 years of age or older, along with 70% of company adjusters. Life agents over the age of 45 made up 60% of the industry's workforce.

No matter whose estimates are to be believed, the boomers will soon make a large impact on the economy. A recent study from the San Francisco Federal Reserve Bank suggests that an anticipated shift from buying to selling stock by the boomers could lead to a drop in real stock prices of 13%, with relatively no uptick in their levels until 2027.

What Is Leaving

From a corporate standpoint, there is more being lost than risk management expertise. According to Good, businesses will lose something just as vital: the wealth of skills that many risk managers learn over time - something that cannot be taught in a classroom.

This is because, he says, risk managers too often create an uneasy relationship with the broker community. They rely on broker advice as a sole source of information, which he says breeds an unhealthy level of dependency.

Good sees how this can develop, as he entered his risk management position in 1988 with virtually no mentoring. The risk manager he replaced was transferring to a position in London and the plan was to transition the duties and all the job particulars over to Good during the Christmas holidays. …

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