risk management article - baden-baden magazine
Post on 12-Apr-2017
Embed Size (px)
The Chambers Dictionary defines Insurance as: An agreement by which one party promises to pay another party money in the event of loss, theft or damage to property, personal injury or death, etc.... Leading us to conclude that Insurers should be the ultimate Risk Managers within the financial sector.
However, how do insurers manage and mitigate their own risk? Up until 2007 the economy was booming, return on investments was high and, arguably, risk taking prevailed over risk manage -ment. Chief Risk Officers (CROs) meanwhile, were left fighting for attention and usually remained unheard. Oliver James Associates (OJ) decided to speak to these CROs within Insurance and Rein -surance companies to find out about the evolution of the CRO and Risk Management Strategy since 2007.
The general consensus highlighted two key challenges; Solvency II, and managing the financial (Euro) crisis. Another important influ -ence was the speed of new developments. Today, the vulnerability of financial markets, increased globalisation of businesses, popu -lation increases and factors such as climate change are causing more uncertainty, and therefore, increased reliance on scenario-based decision making. This has accentuated the importance of the CRO and impacted their role in a number of ways.
Risk Management has moved from being an insurance function into more of a commercial function; it no longer means stopping deals from being brokered, but ensuring that every person from front to back office is aware of the risk framework within the com -pany. The task of implementing this company-wide Risk Manage -ment framework has been made easier by Management Boards, recognising the importance of the CRO by either integrating them onto the management committee or increasing their areas of re -sponsibility.
Consequently CROs have to take a broader perspective and a more holistic view of an organisation. Internal risk measurements, Economic Capital modelling, and macro-economic developments are all influencing the approach on taking risk. With the regulatory pressure on top of their traditional role, the CROs work is a con -stant act of balancing economic costs versus financial rewards.In the past CROs and Risk professionals may have relied pre -dominantly on their quantitative and numerical skills as well as an in-depth understanding of risk. Nowadays, they have taken on a more prominent role within the industry, not only requiring eec-tive communication and networking skills with internal and external stakeholders (Regulators, Rating Agencies), but also the need to orchestrate a harmonious approach to risk internally. Processes have deepened and broadened whilst reporting requirements have increased. Subsequently, the need for efficient IT systems and Data warehousing has become critical, but could easily result in informa -tion overload.
The CRO of today, and indeed tomorrow, has to accurately validate and interpret this information, as well as taking an objective view on what risk measures and key indicators should be in place for the business to progress. Technical knowledge alone will no longer suffice, but must be complemented with informed and accurate decision-making skills.
When we asked our CROs what has motivated them to step up to the job, the answer was simple: being able to influence, develop and execute the right strategy for the company by creating a bal -anced approach between short-term risk and long term profitabili -ty. They seem to finally be getting the opportunity to show the value they can add to a successful business and a structured future.
Audrey Dresen specialises in Insurance roles in Switzerland whilst Manuel Lovell covers Insurance across Germany.
Oliver James Associates has teams focusing on Insurance across the UK, Ireland, Continental Europe and Asia.
They are a specialist recruitment partner to the Financial Services sector; using a research driven approach to placing market-leading talent across the world. Their experienced consultants are special -ists within their vertical markets and excel at finding exceptional individuals for challenging roles. The company have twice been recognised in The Sunday Times Virgin Fast Track 100 and recently received a Recruiter Award for Excellence.
CRO The rising star in the Insurance world?By Audrey Dresen and Manuel Lovell
Audrey DresenManaging Consultant
firstname.lastname@example.org+44 (0) 207 310 8647+41 (0) 43 508 0444
Manuel LovellSenior Consultant
email@example.com+44 (0) 207 310 8580+41 (0) 44 580 3711+49 (0) 8922 061003