Risk Management Explained

Invariably as a risk manager, I am asked the question I would anticipate with fear and trembling:

“So, what exactly does a risk manager do?”

In earlier times, I would begin to explain risk control, identifying losses, insurance, risk retention, blah, blah, blah. After about 30 seconds, the puzzled look is replaced with the rather uncomfortable “eyes glazed over”, and I imagine that I begin to sound much like the parents in the Charlie Brown cartoons. Even my beautiful wife of over 16 years tells people that it has something to do with insurance… or something. She does show a remarkable interest in captives, and not due to their cash flow or tax implications. She just wants to go to Bermuda.

As a risk control specialist, I knew that there had to be a way to explain my chosen vocation without causing folks to run the other way the next time they see me. A loss exposure which affects everyone, male and female, with no accurate forecast of when and where it might occur, and the consequences of improper preparation coupled with an inadequate response could lead to catastrophic results.

Then it dawned on me. Smacked me right in the face, it did. A circumstance and situation every man has experienced or will experience in his lifetime:

“Honey, does this outfit make me look fat?”

You’re smiling, aren’t you? Admit it. You have either asked it, or had it asked of you. It is a question so fraught with peril and danger that it could lead to losses for years to come.

For me it came around the second year of my marriage to my aforementioned beautiful wife. I will forego the details of the actual encounter, and blame it on long term memory loss. I had been a risk manager for a little over a year, but it didn’t matter. I was in the middle of a disaster, I had not done any pre-event planning, and I really had not entertained the possibility of this loss exposure. I was in big trouble.

You see, ladies, there is no good answer to this question. If I answer yes, it begins a dialogue on weight, body image (“So, you think I’m fat?”) etc. If I say no, I risk being untruthful to my sweetie. She also goes out looking like the Michelin man in an outfit at least two sizes too small, which she will eventually rationalize, and then I’m really cooked.

So what do I do? I have to say that I was very proud of my response, which did not prevent a loss from occurring, but did help to reduce the loss significantly and prevent future losses of mammoth proportions. I looked her straight in the eye, pointed a finger at my midsection, and said:

“Does this shirt make me look stupid?”

Now don’t get me wrong. I was still in big trouble, but I was able to minimize my losses, as well as set the groundwork for future loss exposures. I explained that no, I didn’t think she was fat, and that even Olive Oyl would look fat in a too small outfit. I also explained that I love her too much to lie to her, and that she needed to know that she could trust me to tell her the truth. Then I gave her the one truth that is universal in this situation—

If you feel the need to ask this question… it does!! So don’t ask—CHANGE!!

So that is how I explain what I do. Identifying, controlling, reducing, preventing, and now contingencies based on loss history. This makes me sound much more exciting than I am, living a life in the reckless and carefree world of risk management. And wouldn’t you know, I had some guy ask me about loss control and the cost of risk in a social situation.

I told him about Bermuda.