B-Schools Tackle Risk Management

With the debt market meltdown, the specialty examining exposure to risk is in the spotlight at business programs across the country

by Alison Damast

It's often said there's a career out there for everyone.

Aaron F. Cooper II, a self-described worrywart, never thought his penchant for devising foolproof backup plans could translate into a calling. But that all changed when he signed up for an elective in risk management while at the University of Georgia's Terry School of Business executive MBA program last fall. "It entails pretty much everything I've always been interested in my entire life, even before I knew risk management existed," said Cooper, 27, a telecommunications engineer at AT&T (T).

Cooper is part of a new wave of students hitting business school campuses. For years, risk management—the process of analyzing exposure to risk and determining how best to handle it—occupied a sleepy corner in business schools, a subject mainly of interest to those who want to enter the insurance field. But with the recent turmoil in the financial markets and a push for more accountability, risk management has rocketed in status at business schools.

In the past decade, a growing number of B-schools have added concentrations in the subject, ramping up the number of classes they offer. Executive MBA programs are also incorporating risk management electives into their curriculum, responding to increased demand from executives and companies. In some instances, schools such as Georgia's Terry are developing custom programs on the topic for top executives and boards of directors.

Huge Increase in Courses

"Certainly, the attention seems to increase," said Robert Hoyt, who runs Terry's risk management program. "We're real bullish now about what the opportunities will be for the future."

Hard statistics on enrollment in risk management courses aren't easy to find, but the Association to Advance Collegiate Schools of Business says that 58 business schools reported offering a concentration in risk management in the 2006-07 academic year, up from 11 in 2005-06. At the University of Texas at Austin's McCombs School of Business, enrollment has doubled in the past decade, with classrooms filled to capacity at 120 students. Executive MBA students are clamoring for more courses in the area. Nearly 70% of the executive MBA students at the Terry College of Business sign up for the enterprise risk management elective, the school said.

Despite the increased attention focused on risk management deficiencies at some companies, several professors at business schools specializing in the field said they are not making major changes to how they teach the subject. However, they plan to incorporate lessons learned from the subprime credit crisis and recent natural disasters into class discussions and assignments this fall.

The Importance of Risk

The collapse of investment firm Bear Stearns (JPM) and the recent floods in the Midwest (BusinessWeek.com, 4/17/08) provide real-life case studies for students, said Patrick Brockett, director of the risk management program and insurance program at McCombs.

"All of these things have heightened the awareness of how important a factor risk plays in running a business," Brockett said. "I think the students, even the students who don't want to concentrate in risk management, recognize they need to understand something about risk management in order to adequately run a firm."