At the recent Association of Insurance and Risk Managers (AIRMIC) Convention, held at Gleneagles on 2-3 November, Felix Kloman, editor and Publisher of US journal Risk Management Reports, urged delegates to rid themselves of their "cherished but mistaken beliefs". Guest speaker Kloman claimed there were four false conceptions of risk and risk management, which, if not corrected, could "subvert its essence".
Risk managers should stop believing that risk is bad; that the goal of risk management was to benefit shareholders; that risk management is the responsibility of specialists, and that risk can be transferred. These ideas had "grown insidiously and perniciously" within the discipline of risk management.
Too often, risk was viewed as negative, he said, yet risk and uncertainty are important stimulants for life. "Our ever increasing ability to measure risk comes to naught if we al1 try to avoid it... Risk always ivolves a potential reward whether real or imagined. To deny the reward element is to distort any subsequent decision."
He stressed that risk management's most important role is as the mechanism that corrects erratic steering. "The proper course is to serve all stakeholders, from employees and customers to suppliers, investors, lenders, regulators and the community at large." Here, Kloman suggested, risk management faced the major challenge of creating intelligent communication with these groups - "the weakest area of our discipline today".
The idea that risk management was a specialist role was the next myth to be countered, he claimed. Recent moves towards strategic, integrated or holistic
risk management, and the new management role of the generalist chief risk officer were signs that reality was already breaking through in this area.
Kloman said his first law of risk management was: "There is no such thing as risk transfer; there is only risk sharing. We must accept full responsibility for the risk decisions that we make We can find partners with whom to share some portion of the risk, but the final onus is ours."
