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The risk manager's salary survey.

AS A SENIOR-LEVEL risk manager, did you earn $68,000 and receive a bonus of nearly $9,000 in 1991? Did you have over 16 years of experience, nine of which were with your present employer? Have you earned a graduate degree or professional designation? if you answered yes to these questions, then consider yourself a "typical" risk management executive, according to the 1992 "National Compensation Survey of Risk Management Professionals," conducted by Ernst & Young's Risk Management Consulting practice in New York, in conjunction with Richard Meyers & Associates, a New Jersey-based recruiting service.

The survey, which gathered data from 450 senior-level risk managers, affords a view of the profession in terms of compensation packages, reporting structures, departmental size, career development and future outlook for advancement.

In addition to the senior risk manager, data was captured for other titles within the risk management domain, such as assistant risk manager, risk analyst or insurance administrator, claims manager, safety manager and benefits manager. Richard Meyers, president and executive recruiter at Richard Meyers & Associates, says the survey was intended to be a source of information for employers to evaluate the structure of the risk management department, and determine whether the company's risk manager is being fairly compensated relative to others in the profession. Comparisons are further broken down by company Size and revenue, years of risk management experience, education, sex and geographic location.

Salary compensation was the main focus of the survey, according to Mr. Meyers. "The consumer products, general services, and chemical industry groups reported the highest average base salaries in 1991," he says. Richard Carris, a manager in Ernst & Young's Risk Management Consulting practice who analyzed the results, reported that for the senior risk managers in each of these industries, the average base salaries were $83,566, $73,690, and $73,118, respectively. For other positions within the risk management domain, the average base salary across all industries was $49,783 for an assistant risk manager; $35,233 for a risk analyst or insurance administrator; $44,791 for a claims manager; $51,907 for a safety manager-and $44,629 for a benefits manager. Bonuses for these positions ranged from $ 1,500 for a risk analyst to $3,618 for an assistant risk manager.

Douglas Hartman, director of Ernst & Young's Risk Management Consulting practice, notes, "As we discovered in our 1990 survey, we again find the larger the company, the higher the average salaries for the senior risk manager." The range in 1991 was $50,000 for organizations with under $250 million in revenue to over $95,000 in base salaries for the largest organizations With over $10 billion in revenue. The highest compensation package recorded was $160,000 in base salary with a $25,000 bonus.

Reporting structures

ON AVERAGE, two professionals reported directly to the risk manager. Though at times the risk manager was the sole functionary in the "risk management department," by and large, the existence of an actual risk management department was pervasive. However, the survey found that benefits managers were frequently located in the human resources department, while safety managers occasionally were situated in the engineering department. The data regarding the chain of command revealed that 45 percent of the respondents reported to the senior financial executive; 23 percent to the treasurer-, 9 percent to the legal executive; 6 percent to the CEO; and the balance reporting to various entities such as the human resources officer, president, executive vice president, or vice chair.

The survey also revealed that males held 75 percent of the senior risk manager and safety manager positions, and females held about 75 percent of the risk analyst/insurance administrator positions. The other positions, such as assistant risk manager, claims manager and benefits manager, had a near-equal split among the sexes.

Educated, Finance-Oriented

WHEN COMPARED to the 1990 Ernst & Young/Richard Meyers & Associates survey, certain trends in the risk management profession become apparent. For one, risk management appears to be more of a financial function, since nearly three-quarters of the respondents reported to either the senior financial executive or the treasurer. This is compared to just two years earlier when less than half of the respondents reported to the finance-oriented departments.

"Risk management is becoming, more and more, a financial function, as opposed to an insurance function," stresses Mr. Meyers. "The responsibilities of present-day risk managers far exceed the property and casualty function of the 1960s; they are neither insurance nor risk managers, but business managers."

The survey also showed there was an increase in the number of risk managers holding professional designations, such as the Associate in Risk Management and Chartered Property Casualty Underwriter, in addition to graduate degrees in business. Approximately 70 percent of the 100 highest compensated risk managers hold a professional designation, while 36 percent hold a graduate degree. Michael Tannenbaum, executive vice president at Richard Meyers & Associates, is quick to point out that as a key executive in the organization, the risk manager has to understand the company's line of business, as well as the insurance function, in order to protect the corporation's assets.

The average base salary raise in 1991 ranged from a high of 4.85 percent for the senior risk manager, to a low of 4.20 percent for the benefits manager. The projected percentage increases in base salaries for 1992 were roughly equal to those in 1991. Some of the factors respondents cited as influencing base pay increases include: inflation, company profitability, risk management and departmental accomplishments, education and experience, efficiency and quality of work, salary surveys and the state of the economy.

As reported in the 1990 survey, the typical senior risk manager earned $73,153 in salary and bonus in 1989. "Given the fact the average compensation package increased just 6 percent over the two-year period to $77,579 in 1991," notes Mr. Carris, "the risk manager's salary, when set against rises in the U.S. Consumer Price index, barely held the line on inflation or actually decreased, depending on the manager's geographic location." Of the approximately 100 risk managers who reported compensation packages equal to or exceeding $100,000, most were located in New York, Philadelphia, Chicago, St. Louis, Dallas, Los Angeles, San Francisco, and Kansas City, Missouri. Mr. Carris points out, however, that risk managers were not worse off than other professionals across the nation in light of increases in compensation and keeping pace with increases in the cost of living.

The confidential questionnaire provided position descriptions for the respondents. For instance, for the purposes of this survey, the senior risk management executive is described as one whose responsibilities include "overall management of the organization's risk management program, with the primary focus on protecting the assets and earnings from significant impairment due to a fortuitous event. The individual manages the purchase of all commercial property and liability insurance and is instrumental in the monitoring of selfi-insured programs such as workers' compensation. In addition to risk financing, the senior risk manager can be responsible for risk control programs, in-house claims administration and litigation."

By contrast, the risk analyst, or insurance administrator, is described as "the support person to both the risk manager and the assistant risk manager... responsible for computer entry, coverage analysis, claims handling, and processing premium allocations and retro-adjustments. The analyst would communicate with insurance agents and brokers regarding policy renewals, changes in exposures and additional/return premiums." The inclusion of such descriptions helped to eliminate the ambiguity that generic titles sometimes cause.

The Future

IS THERE STILL A career in risk management? The risk managers themselves seem to think so. Regarding job security, on a scale from one to five (with one being the most secure), the risk managers had an average response of two. When queried about the anticipated size of their departments for the coming year, roughly three-quarters of the risk managers expected no change, but the balance anticipated an increase in department size by a margin of three to one. "Risk managers on average feel quite happy and secure in their positions; results that were surprising given last year's economic downturn," Mr. Carris reported.

For the moment, however, the United States is experiencing a recession, and the risk management department is not immune from cutbacks and downsizing. Yet, while we are seeing the number of risk management positions declining, some companies in the $200 million to $500 million range are adding risk management departments. in addition, there are companies acquiring other divisions, which provides tremendous challenges and growth opportunities for the risk manager. The growing number of mergers and acquisitions, where smaller companies are suddenly transformed into large conglomerates, necessitates staffing new risk management departments. it is "the quality of opportunity, as opposed to the number of opportunities," according to Mr. Meyers, that is increasing for the individual who accepts broader training, diversification, and increased responsibility.

Final Analysis

THE FINAL REPORT, according to Audrey Shoglow, an Ernst & Young senior market research analyst, incorporating data from approximately 250 more surveys received after the deadline and not available for this preliminary analysis, is scheduled for release prior to the 1992 RIMS Annual Conference. It will include additional information such as salaries based upon gross revenue, industry and geographic location, as well as a demographic breakdown of the respondents, reporting structures and projected compensation increases for 1992. The report can be obtained for $100. Contact: Richard Carris, Risk Consulting Manager, Ernst & Young, 277 Park Avenue, New York, N.Y. 10172, or call (212) 773-3000.
COPYRIGHT 1992 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Ernst and Young's 1992 "National Compensation Survey of Risk Management Professionals
Author:Kurland, Orin M.
Publication:Risk Management
Date:Mar 1, 1992
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