Have you wondered why the words ‘risk management' are heard so widely today?  Have you considered what can be achieved with an understanding of the term?  Indeed, is the term used or misused in today's business world?

Education and training are the key to understanding this new world of risk that is the environment that we must deal with today to achieve business survival and success.  It is difficult to give a brief overview of the educational needs of a risk manager because they are a diverse breed covering many disciplines and functions. Importantly to start with we should distinguish between education and training as the words are used interchangeably and without due regard to their fundamental meaning.  Education is about stretching the individual to achieve an understanding of the "why" of a problem or process; it is about mind setting and changing, a true functional thought process.  Training on the other hand supplies the what and the how, without this component the fundamental educational process fails.  In order to understand the educational and training needs we need to briefly describe the environment that exists today.

As Peter Bernstein showed in his history of risk, Against the Gods, risk became an acceptable term when the vast majority of people decided they could control their own future, and that God did not preordain every facet of human life.  Thus began the struggle to identify and mange risk.  Along the way risk has come to be many things to many people: from finance; to insurance; to occupational health and safety; to engineering tolerances; and all points in-between.  Accordingly the educational imperatives will be driven by the chosen profession of the risk manager.

In the past, firms had the luxury of employing large numbers of people in middle management positions.  These managers ensured the needs and wants of the organisation's functions: from production, to quality control, to administration and management.

By having a large management structure that was used for checking and ensuring compliance, risk was contained and controlled in a simpler and more structured world.

The winds of change started to sweep the world in the early 80s, and continue to this day.  Competitiveness, efficiency and productivity have become the by-words of today's business environment.  Any country or business that ignores the pressures generated by the forces of change is only delaying the inevitable.

One of the more significant outcomes of the change process over the last decade is the virtual elimination of the middle management ranks that had grown to an enormous size since the end of the Second World War.  Without middle management, how can a business be effectively controlled?  That is the question that must be answered for business to survive into the future.

Australian business and government have made great leaps over the last decade but must continue to change and adapt for us to keep our regional advantage.  Understanding risk management and applying the principles of risk management is a start.  However, a new paradigm must be accepted and adopted.  Risk managers have a duty to contribute to the development of risk management as a recognised and separate business discipline that enables a company to chart its future in an effective and orderly way.  Indeed the profession could argue it is in the same position that marketing was in the late 40s and finance was in the mid 70s: it is a new and emerging force in the effective management of a successful business.  What is needed is for the understanding of the term ‘risk management' to be greater than the current accepted meaning and for a more diversified theoretical approach to emerge.  This can only happen with a strong offering of educational products like the Master of Risk at my University which is specifically tailored to the philosophy of risk and its ultimate management.

One way of looking to the future is to look to the past for lessons.  In the 60s an effective management tool emerged called ‘project management'.  It was narrowly focused - implemented mainly by engineers in significant projects - and there it has remained.  The basis of project management was the understanding of the fact that a project had a beginning, middle and an end.

A successful firm in the future will need to adopt the principles of project management, with teams forming and breaking up according to task in order to operate on a tactical level, with an effective holistic risk management process overlaid to ensure survival in a strategic sense.  Risk management must emerge as an effective management tool or one of three outcomes will eventuate:

businesses will eventually descend into chaos, as there is no functional link between senior management and business functionsmiddle management will re-emerge to take back the function of risk managementtechnology will replace management.

The above environment created an opportunity for a series of competencies to be developed by Monash University on behalf of the Australasian Institute of Risk Management.  These competencies are constantly being reviewed and refined.  Currently they are divided into three categories and 12 competencies.  It is the responsibility of all management to have input into these emerging competencies that may define management thought into the future.

The competencies are:

A. Generic Management Competencies:

1. Manage own performance and professional development within the context of the organisation.

2. Model defined standards of professionalism and management performance.

3. Develop and maintain positive relationships internally and externally to an organisation to achieve planned outcomes.

4. Plan to meet and ensure delivery of client and organisation requirements

B. Strategic Risk Management Competencies:

5. Facilitate development of a risk management organisation culture.

6. Evaluate the impact of current and changing requirements of risk management across an organisation.

7. Manage and contribute to risk management education and training within the organisation.8. Facilitate internal and external development of risk management as a profession.

C. Operational Risk Management Competencies:

9. Identify risks and resolutions in area/s of expertise and provide effective communication of outcomes.

10. Coordinate and manage the engagement of specialist risk identification and risk management consultants and effectively communicate their findings and resolutions.

11. Develop quality organisation risk management systems and processes.

12. Facilitate implementation and monitoring of continuous improvement of the process of the management of risk within an organisation.

The above competencies are generalist in nature but specific enough to be applied on an organisational basis regardless of the profession or education background of the occupant of the title "risk manager."

Undergraduate education sets the career pathway for an individual for the early years after their graduation.  Graduate education allows the individual to fine tune their skills and change direction in need.  Training fills the skills need and supplies direct application to the day to day environment between educational developments.

Education and training is the key to the future understanding of risk management in its 21st century form.