Thursday, August 9, 2012

Roles of Risk Manager or Risk Management Function / Department

In small organizations, risk management is performed by specialist risk manager. In large organizations, risk management is performed by risk management function / department.

 

Role of Risk Manager or Risk Management Function / Department

Risk manager is responsible for leadership and direction of his/her department. Risk manager should coordinate work in different parts of the organization so that employees understand impact of their part of the work on other part of the organization.

Risk manager is responsible for receiving reports from all departments to identify risks faced in various parts of the organization.

Risk manager is responsible of devising policies on risk management.

Risk manager is responsible for sending reports to risk management committee to review their work and recommending to the board if necessary.

Risk manager is responsible for spreading risk awareness and embedding risk into the culture of the organization through establishing common language for risk management so that everyone understands what is going on and what kind of behaviour is expected. Establishing common language is necessary as employees from diverse backgrounds have different jargons and may have difficulty communicating with each other.

Risk manager is responsible for risk assessment using appropriate framework. It means considering Probability and impact of each risk and categorizing risk having similar characteristics, prioritizing risk categories and putting a monetary value on each risk.

Risk manager is responsible for deciding appropriate responses to risk on behalf of the board.

Risk manager is responsible for ensuring that overall risk profile of the organization remains within acceptable limits set by the board. In doing so, he/she may take resource allocation or investment decisions such as buying call or put options to hedge foreign exchange risk.

Risk managers are responsible for dealing with stakeholders internal or external to the organization. Risk manager should ensure that appropriate insurance cover is available to cover all damages and liabilities. In addition, he/she should also ensure organization does not breach any loan covenants to avoid risk of legal action against organization. For these purpose, risk manager has to make frequent meetings with representatives from insurance, banking companies etc.

Risk manager has operational role in risk management. He/she should not advise any course of action to the board on strategic matter. Final responsibility for all roles of risk manager rests on board of directors.