what makes a great risk manager?surVeY summarY rePorT

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What Makes a Great Risk Manager? SURVEY SUMMARY REPORT

What are the personality traits of today’s risk professionals? Do they have the skills needed to support changing business needs? How can senior management get the best from their risk team?

foreword

Businesses facing uncertain times are increasingly looking to the risk management function to help identify critical risks and propose mitigation strategies to enable sustainable growth. Organizations are also maturing in their approach to risk management and risk is gaining a voice at a senior level. To support these increasing demands the role of risk professionals is rapidly evolving.

Risk managers have typically come in all shapes and sizes and from diverse backgrounds. Until now very little research has been carried out into the defi nition of the personality traits that make a great risk manager and whether their skills need to change to meet emerging challenges. In mid 2011 Active Risk (formerly Strategic Thought Group) commissioned research into the personality traits of today’s risk managers. This report is the initial summary of those fi ndings. It highlights some important issues of which senior management and risk professionals should both be aware to ensure the ongoing success of risk management and Governance Risk and Compliance (GRC) programmes.

summarY of keY fIndIngs:

  Risk managers with ‘traditional’ skills (analytical, logical, cautious, factual) are still in the majority (60%).

  A signifi cant group of risk managers do not exhibit traditional characteristics but are more ‘drivers’ and ‘evangelists’ (40%) – indeed half of this group showed no predisposition to the detail of the risk process.

  It is important to be aware that there are a range of personality types who share risk manager as a job title, more so than in longer established jobs such as accountants, auditors and sales professionals. It is vital when hiring and promoting risk professionals to avoid trying to fi t a ‘square peg into a round hole’.

  Senior management should build a risk team with the range of skills needed to meet current business objectives. This blend of skills may need to change over time as the organization becomes more risk mature and starts to roll out an enterprise-wide programme.

  As organizational risk maturity increases the risk team may take in a wider variety of personality types and become less homogenous. Therefore there needs to be a focus on keeping it working as a cohesive unit as the personality types could clash.

  Thought needs to be given to developing a long term career path for risk professionals with appropriate training which acknowledges the different needs of the range of personality types.

  As a team which works across the business risk managers need to be aware of other personality types which they will encounter in different departments and adapt their style accordingly so that they can collate accurate risk information, drive the take up of a risk culture and communicate effectively.

  The reporting line of the risk function should be reviewed periodically to ensure that this helps the team meet the organization’s needs rather than creates a confl ict in styles and objectives.

what makes a great risk manager? survey summary report

abouT The research

Phase one of the Active Risk commissioned research ran for three months through mid-2011. Risk professionals from around the world were invited to take part in the research by completing an online confi dential psychometric survey. Almost 200 responses were received spread across geographic regions and a range of industries.

All individuals’ survey responses were confi dential and each participant was provided with a personal profi le report based on their answers to the questions. This summary looks at the aggregated data of the respondent population which has enabled the defi nition of typical personality profi les for today’s risk managers.

The survey was based on the well-established DISC profi ling methodology which categorizes respondents into a range of personality types which have recognized characteristics. The DISC methodology has been in use for decades and so there are already typical profi les for many job roles such as CEOs, CFOs and sales professionals – but up to now nothing for risk managers. Now that the Active Risk research has identifi ed risk manager profi les it is enabling comparison to the other job roles and hence the development of, for example, suggested communication strategies between the risk function and other departments.

To analyze the data collected, Active Risk worked with an independent psychologist who is an expert in the DISC profi ling methodology and has extensive experience of the requirements needed to effect cultural change and to improve organizational communication.

The archeTYPaL rIsk manager

The traditional view of risk managers is that they must be analytical and cautious, numerate, precise and principled. They must show good judgement and be capable of collecting, recording and processing large amounts of data in a methodical way. Risk managers should be able to present risk data in the context of corporate governance, risk and compliance needs. Often they have been unkindly viewed as the ‘guys from the department of no’ who sat somewhat separate from the rest of the business

The survey results showed that, though the majority of today’s risk managers have characteristics which conform to the stereotype, there are many more dimensions to risk managers than fi rst thought.

The maJorITY of rIsk managers fIT The sTereoTYPe – buT Is ThIs whaT busIness needs?

It was apparent, even from the fi rst batch of survey results, that 60% of risk managers had psychometric profi les that matched or incorporated the traditional characteristics associated with the role. This percentage stayed constant even as the sample size increased and became more diverse in terms of nationalities and industries.

The personality traits commonly associated with risk managers are referred to in the DISC methodology as those of the ‘Reactive Introvert’ type. Reactive Introverts are viewed as experts, capable of demonstrating strong analytical skills and applying logic and caution to deal with often complex subjects where accuracy and precision are essential. This profi le matches the demands traditionally placed on risk

The dIsc PersonaLITY ProfILIng meThodoLogY The DISC methodology is well established and is widely used by organizations, HR professionals, consultants and coaches to assess personality types. This information is often used to analyze and build effective teams. DISC is a quadrant model which classifi es individuals on two axes – Proactive/Reactive (vertical axis) and Introverts/Extroverts (horizontal axis) – and determines the order of signifi cance in which each of the four resulting personality quadrants applies.

  Dominance (Proactive Introverts) – relating to control, power, aggression and the drive to achieve

  Infl uence (Proactive Extroverts) – relating to social and communication skills

  Steadiness (Reactive Extroverts) – relating to patience, persistence, constancy and thoughtfulness

  Compliance (Reactive Introverts) – relating to precision, order and caution

Individuals possess all four elements but in different combinations. Each has a blend with a primary (or stronger) type, followed by a secondary (or lesser) type.

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© Active Risk Ltd. All rights reserved.

managers – but does it provide the skills needed as business demands change? When risk management was all about collecting data, ticking boxes and filing reports someone who was a ‘perfectionist, who follows the rules, is uncompromising, and even pedantic’ fitted the bill perfectly.

However Reactive Introverts are not usually persuasive commentators. They tend to present their case in a factual manner but often without any persuasive skill or apparent passion. As a result, although they may have a very good point to make or a watertight case, it can often lack the inspirational delivery required to gain acceptance or to overcome resistance. The “Accenture 2011 Global Risk Management Study” report published in July 2011 shows the growing importance of risk management capabilities as a source of “sustained growth and long-term competitive advantage” and notes companies are understanding “the importance of infusing a risk culture throughout their organization” but that “too few companies are achieving these goals”. Could traditional risk managers be holding their companies back due to their presentational shortcomings?

In the DISC methodology most individuals are a blend of personality traits. Nearly a third of the 60% of risk managers classified as Reactive Introverts also had

significant levels of Proactive characteristics. The good news is that this brings them an important persuasive edge. It is this element of persuasion that would increase the chance of success in presenting a case to the board, embedding a risk culture throughout the business and rolling out new risk management processes.

Is a new breed of rIsk managers emergIng?

The remaining 40% of risk managers surveyed displayed ‘Proactive Introversion’ (less than 10% of the survey population) or ‘Proactive Extroversion’ (over 30%) as their dominant characteristic. This ‘Proactive’ grouping has as its most powerful traits those not usually associated with traditional risk managers.

The grid above highlights the potential for conflicting behaviours.

Proactive Introversion represents hard driving individuals determined to see a project brought to a successful conclusion. These characters are demanding and do not take no for an answer. Surprisingly in the context of risk management they often sort issues ‘on the fly’ and sometimes break the rules. Meanwhile Proactive Extroverts are natural communicators, blessed with social skills and capable of using an endless supply of argument and charm until the task is achieved but are also prone to exaggeration.

The Traditionalists The New Breed

‘TechnIcIans’ Reactive Introverts – over 60%

‘drIVers’ Proactive Introverts – less than 10%

  Analytical

  Logical

  Planners

  Naturally cautious

  Attention to detail

  Sticks to facts/follows rules

  Ignores emotionally charged arguments

  Serious and responsible

  Suspicious of others

  Brief and to-the-point

  Very pragmatic

  Produces results ahead of expectations

  Focused and determined

  Prefers results to facts

  Demanding, not always reasonable

  Impatient, no time for lots of detail

  The end justifies the means

‘eVangeLIsTs’ Proactive Extroverts – over 30%

  Inspiring leaders

  Very optimistic

  Diplomatic and persuasive

  Verbose and prone to exaggerate

  Over familiar

  Can appear to lack gravitas

what makes a great risk manager? survey summary report

© Active Risk Ltd. All rights reserved.

Furthermore only half of this Proactive grouping had a predisposition to handling ‘technical complexities’ taking them further away from the traditional expectation of risk managers as data gatherers and process followers. The survey data is highlighting the existence of a group of risk managers who are the evangelists and drivers necessary to embed a risk culture and drive change through organizations. These skills will be needed increasingly as businesses become more risk mature and take an enterprise-wide view.

buILdIng and eVoLVIng The rIsk managemenT Team

The evidence shows that there is clearly room for a significantly greater variety of skills and personality types within the risk management function than has previously been acknowledged. Although, in psychometric terms, the groups may be very different, there is an obvious benefit to the organization in such diverse personalities working together.

Senior management has to be clear in what it is trying to achieve through the risk function and build an appropriate team to support this need. What worked in the past may no longer be appropriate to meet future needs as the organization’s risk maturity increases. As cultural change programmes and communications become more important ‘traditional’ risk management skills will not be enough. If the team cannot be bolstered with these evangelical skills then senior management will have to shoulder these communication responsibilities themselves so that risk management initiatives are not disregarded by the business.

Changing business requirements may result in the risk team becoming less homogenous than other groups in the business such as the Sales Team, IT department or Finance & Admin. A risk management team consisting of the range of personality types revealed by the survey could easily be a source of serious conflict or at least a regular source of irritation for the team members themselves. Therefore work needs to be done to make the team ‘self aware’ about their different strengths and to ensure they act as a cohesive unit.

makIng The rIsk managemenT funcTIon more effecTIVe Through beTTer communIcaTIon

Senior management needs to provide a supportive environment for the risk management function to do its job effectively within the wider business. Traditional risk managers (Reactive Introverts) will appreciate their opposite numbers in other departments recognising that:

  Risk management initiatives and programmes have been carefully devised.

  The risk function and processes are not intended to thwart other departments meeting their objectives and targets but to help make these more certain of success and to serve the business overall.

Senior management can go a long way to making the risk function as successful as possible by emphasising their support for the team and the corporate risk initiatives.

The new breed of risk managers, the Proactive Introverts (Drivers) and the Proactive Extroverts (Evangelists) must understand and modify their communication styles to get the best from risk team colleagues and when presenting to different departmental audiences.

The Proactive Introverts (Drivers) need to understand that:

  Their direct, demanding attitude is often taken for aggression.

  Testing the weight of another’s argument, a technique often used again and again by a Proactive Introvert, will only yield the same response from their more traditional colleagues as Reactive Introverts use their best argument first and then merely repeat it.

  Traditional risk managers like notice of a question. They do not like making instant decisions. They need time to get the facts first.

The Proactive Extroverts (Evangelists) need to recognise that:

  Using emotionally charged arguments will never sway their more traditional colleagues, only the facts.

  Sounding over positive and using too many words is often seen by Reactive Introvert colleagues as an indication that either the Proactive Extrovert has no idea what he is talking about or that he is not telling the truth.

rIsk managers under sTress

The DISC profiling methodology reveals more than just information on personality traits. It is apparent that a significant proportion of survey respondents are exhibiting medium to high levels of work-related stress. This could be a symptom of the increased focus on risk management from top levels of the organization and also the changing demands of the role.

In concLusIon

Phase one of our risk survey has produced some interesting results both on how the profi le of risk managers is evolving to meet changing business needs and how senior management can best support and get the most out of the risk function.

Phase two of the research will provide country and regional comparisons and look at where the risk function sits within the organization and the implications for effective communication strategies.

Stress levels may result in risk professionals desiring to move back to their original job specialisms and others might be discouraged from taking on such onerous responsibilities in the fi rst place. Clearly, risk managers need both a supportive top management culture, receptive functional managers and all the specialist tools that are available to them to ease the administrative burden.

buILdIng a career PaTh To reTaIn greaT rIsk managers

To retain great risk managers thought should be given to establishing a career path with appropriate training. The distinct personality types involved within the risk function will have different needs and diverse career aspirations.

The traditional Reactive Introverts (Technicians) may well be happy to have a long term career in the discipline with risk-related professional training. To make them more effective in their communication with the rest of the organization presentation skills training courses and coaching may be required.

It is unlikely that the Proactive Introverts (Drivers) and the Proactive Extroverts (Evangelists) will be satisfi ed with training solely focused on the risk discipline. They may see the risk function as providing a career stepping stone due to its interactions across the whole business and exposure to senior management. The focus should be on retaining them on risk management projects for suffi cient time for them to add maximum value.

Risk professionals can still take part in the survey and receive a confi dential personalised profi le report by visiting www.activerisk.com/survey

To access more research fi ndings and related white papers visit Active Risk’s risk manager resource library at www.activerisk.com/riskmanager

auThors:

Peter Robertshaw – Active RiskMary Phillips – PRARoy Norris – White House Consulting

In conducting this survey Active Risk used the services of the independent White House Consulting for data analysis and to produce confi dential personalised reports for survey respondents.

White House has been providing specialist consultancy services for more than fi fteen years. Based upon the application of psychology and the behavioural sciences, White House Consulting is dedicated to achieving greater productivity and improved profi tability at both individual and corporate level.www.whitehouseconsulting.org

what makes a great risk manager? survey summary report

© Active Risk Ltd. All rights reserved.

abouT acTIVe rIsk & acTIVe rIsk manager

Active Risk addresses enterprise-wide risk management (ERM) requirements with advanced software and services that can be implemented across organizations in all industry sectors.

Active Risk Manager (ARM), is recognized as having the most extensive range of ERM capabilities available today. ARM enables the identifi cation, communication, analysis and mitigation of risks and opportunities available in both quantitative and qualitative formats. It covers project and portfolio risk, supply chain risk management, business continuity, controls management, reputational risk, health and safety, incident management, governance, compliance risks and more.

Active Risk, formerly Strategic Thought Group, was founded in 1987 and is headquartered in the UK with its US operation, Active Risk Inc, based in the Washington DC area.

what makes a great risk manager? survey summary report © Active Risk Ltd. All rights reserved.

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