Is risk management a trade or a profession? − FERMA at 40

For a long time, specialists in auxiliary nursing, teaching and public relations have debated whether their respective fields can be considered a ‘profession’ or whether ‘trade’ is a more accurate description.

Risk management has recently been the subject of a similar discussion, with FERMA’s European risk management certification programme – expected to launch next year – turning a spotlight on the matter.

For FERMA, the International Federation of Risk and Insurance Management Associations (IFRIMA) and some of other member associations, it is clear that risk management is a profession. The issue is whether it is recognised as such elsewhere.

FERMA president Julia Graham says that obstacles need to be overcome before risk management gains this recognition in Europe and further afield. To achieve this, a lot of work is being done to harmonise various definitions of risk management.

“We use different language all over the world. ‘Cocoa’ is the term used in the US, but elsewhere we might say ‘chocolate’,” says Graham. “Likewise, ‘risk’ has many definitions and these differ from country to country. Our aim is to harmonise these different definitions.”

Indeed, several definitions of ‘risk management’ have created confusion among businesses. A working group created by IFRIMA to define ‘risk management profession’ (named the Risk Management Global Alignment Advisory Group) found, for example, a lack of understanding across various industries about certain risk concepts and terminology. It also called for an improved understanding of how to apply risk management standards and models.

The group – made up of professionals from the Committee of Sponsoring Organizations, the International Federation of Accountants, the Institute of Internal Auditors, RIMS and FERMA – aims to clarify those two areas and scope out a definition for ‘risk management profession’. It will detail some of these findings in a draft report due to be presented at IFRIMA’s board meeting in Rio de Janeiro in December.

Some risk managers on the ground also support the associations’ efforts. Adrian Clements, general manager, asset risk management at ArcelorMittal Luxembourg, says: “Because there are several opinions as to what risk management is, chief finance officers, chief executives and chief operating officers become confused when they speak to risk managers. As a result, risk managers are not taken seriously.”

FERMA vice-president Michel Dennery adds that it is important to clarify roles and responsibilities. He explains: “Risk management is a relatively new job and is not yet well recognised as a key function in or outside Europe. We used to refer to the role as ‘insurance management’, but we now accept that it is much bigger than that and, actually, insurance management is different from risk management.”

Much work will be necessary before these associations achieve their goals. But if all goes well, as IFRIMA president Carl Leeman concludes, such efforts to define ‘the profession’ will be a significant contribution towards enhancing the international recognition of risk management.