A risk manager is responsible for identifying, analysing and managing risks. Every business faces a wide variety of threats that it needs to respond to and mitigate to minimise losses and increase the probability of success. The risk manager’s job is essential in decision making as they can help to calculate the risk related to new contracts and assets. Of course, risk managers cannot predict the future but they can still find strategies that will allow them to be proactive rather than reactive.
A company may choose to hire a different employee to handle the various types of risks. They might recruit a risk manager for credit and operational risks and another for market and financial risks. The overall goal of a risk manager is to prevent risks from materialising to the best of their ability.
7 essential skills for a risk manager
-Working under pressure
As risk managers are expected to assess and calculate risk, analytical skills are crucial. They do not only involve figures, but rather information that will assist in getting insights from risk data and business performance. A risk manager may need to compare current events with historical ones to identify the level of risk a company is exposed to.They need to be aware of any weaknesses a company may have and do further research to determine how they can turn a weakness into a strength or minimise it.
A risk manager not only needs analytical skills for risk-related decisions but decisions related to managing people as well. So they have to be focused on achieving their objectives and managing a well-organised team.
Communication is essential for every business role. A risk manager needs to be able to communicate and present complicated information to different audiences and ensure they understand what the risk means and how it could affect the organisation. They might need to convey complex data using simpler terms or find ways to illustrate difficult concepts using tools such as a risk matrix. Communication skills can also be used for negotiating and relationship building. Risk managers will have to interact with stakeholders and staff, which means that they will have to develop their soft skills constantly.
Creating communication channels is one strategy they can use to stay connected with employees and notify staff if something urgent is required.
Laws and regulations are frequently changing. A risk manager needs to keep up with the changes and make sure they understand all rules that are relevant to their business. Risk managers may work with compliance experts to increase their comprehension of new updates and adapt their approaches to risk management. Laws and regulations themselves could pose a risk to business survival, so the potential threat needs to be communicated effectively. Compliance is a risk that needs to be taken seriously as it can lead to financial and customer losses.
A risk manager needs to have an in-depth understanding of financial information and financial tools. Every business will eventually face some kind of financial risk. A risk manager needs to measure the risk and translate it into financial figures. This will ensure that they have a more accurate picture of how risk can impact the organisation. Knowing the costs of low productivity and high staff turnover can assist them in their decision-making process and in the analysis of the results.
It is essential for a risk manager to keep up with changing market trends and stay updated with new market conditions. They need to have a great knowledge of the industry and the target audience of the organisation. The more information they have, the easier it will be for them to identify and assess risks. Based on market conditions and the state of the company, they will need to prioritise certain risks over others.
A risk manager needs to also understand the competitors that are in the market. They have to know more about their products, services and analyse to what extent they could pose a threat. Risk managers at Nokia failed to step up when the business was facing a huge threat from Apple. They were too afraid to speak up and acknowledge how the market is changing which caused Nokia to lose its position as a market leader.
Problem-solving is important, especially for the mitigation, review and reporting stages of risk management. When a risk manager comes up with strategies, they need to decide whether those strategies are best suited for the risk they are facing. Most of the time they will face four options: to accept, avoid, minimise or transfer the risk. Different options need to be chosen depending on the scenario. For example, the risk of a fire breaking out can be transferred to an insurance company.
Risk managers should analyse each risk and decide what is the best way to manage it and minimise the influence it will have on the organisation. Problem-solving skills are critical as without them a risk manager is not able to pay attention to detail and make the correct decisions.
Working under pressure
A risk manager will be likely placed in a stressful scenario many times during their career. They need to learn how to work under pressure to ensure that they do not panic and stay calm and concentrated. Knowing how to manage high levels of stress will be very helpful as it will allow them to have a clear mind and make meaningful calculations and predictions. They have a huge responsibility that most of the time leaves little room for error which can take a toll on their mental health. Risk managers should learn how to prioritise their own wellbeing as good mental health can be beneficial for both them and their job.
The main thing to remember is that risk managers should always focus on improving and learning. The risk environment is changing and while it is impossible to predict every threat and error, a better education contributes to better decision-making. If something did not work out or a mistake was made, then that is a possibility to learn more and adapt to the new situation. A risk manager should be able to analyse what went wrong and find ways to avoid the same mistake from happening again in the future.
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