Chief Risk Officers (CROs) are “integral to the future success of insurance companies,” but need to develop a new set of strategic skills to match demands of the future, according to a joint report by Mazar, accounting and advisory services firm and risk technology research firm, Chartis Research, which found many re/insurance companies lacking in strategic risk protocols.
Enterprise Risk Management (ERM) is crucial to insurers’ success, and as such, CROs will need to be able to move into leadership roles, steering re/insurers towards insight-driven risk-based solutions and “providing guidance and direction to accurately manage risks and maintain profitability,” the report found.
Sidhartha Dash, a research director with Chartis Research, commented that technology is creating new possibilities of what’s feasible for CROs; “we’re seeing risk management technology in insurance evolving. CROs can now sit in a ‘strategic layer’ in the firm, using a range of technology tools to achieve the right risk management approach for their organizations.”
Firms are also advised to progress away from ERM that works towards matching up to compliance requirements to ERM programmes that add greater value through strategic risk management that includes all aspects of a firm’s processes.
Gez Llanaj, Head of Risk & Capital in Mazars’ Financial Services team, explained; “’Doing ‘your best’ in risk management is not good enough anymore. Many insurance companies have little or no strategic risk protocols in place, and the research findings in this report clearly indicate that for insurance companies to survive, they will need to embrace integrated strategic, financial, operational and IT transformational programmes.
“A strong Solvency II ratio is not a guarantor of a successful insurance company. Insurers will need strong risk leadership, risk ownership, and an enterprise risk framework, all working in harmony to embed and execute risk decisions at all levels – and these will ultimately be the responsibility of, and delivered through, a properly empowered CRO.
“The most recent WannaCry cyber-attack is yet more evidence of the increasingly complex world of risks, and highlights why a modernised ERM framework driven by strong CROs is essential to preserve value for all firms.”
This, the report said, is most likely to be directed through strong CRO leadership, with additional guidance from the Chief Investment Officer.