A company’s chief risk officer has many roles but the right technological support can drive the risk conversation at board level and help make the role invaluable, argues Elaine Barclay of InsuBiz.
The world is unpredictable. We are currently living through a time of extreme uncertainty—economically, politically, and environmentally. Regulation and state, federal and international policy are constantly changing and risk is becoming more complex, more interconnected and more ‘risky’—as organisations constantly rethink and reform in a bid to drive revenue and profit.
So, as risk professionals, what can we do to support and assist our businesses? Risk is increasing exponentially as business experimentation continues, but as the board actively seeks to push the boat out, who is checking the lifebelts first?
Should we help drive change and innovation, empowering our businesses to respond quickly to market changes, turning risk into results and creating competitive advantage, or is it safer to do the same things over and over again, expecting to achieve a different outcome?
Companies that understand risk and see it as an opportunity will automatically create competitive advantage. So how does the management of risk and the role of the chief risk officer (CRO) or risk manager find a higher profile and a willing ear at board level and in the hearts and minds of management and employees, to enable them to make a tangible contribution?
As custodian and manager of all your risk strategy and insight, this should be a given, but is it?
One of the key findings from the 15th Captive Insurance Companies Association (CICA) Captive Market Study was that the biggest challenge a CRO has is a lack of management support. How can this be, when according to a 2014 Towers Watson survey more than 50 percent of CROs they interviewed reported directly to the CEO?
"Information at your fingertips can be analysed in many different ways to make it easier for the business to digest and make the CRO role a catalyst for change."
Historically, the role of CRO has been filled from individuals with an underwriting, actuarial, accounting, economics or legal background. Not often seen as trailblazers or risk-takers, but as far-from-innovative number crunchers, they can easy be perceived as a barrier to progress. After all, is it not the job of the CRO to constantly point out the risks, compliance pitfalls and adverse impact a change could expose the business to?
Particularly with increasing regulation in the captive space, the role of the CRO could become more of a compliance manager rather than a value creator for an organisation.
Defining the role
Given my own experience within the industry over the last 30 years I believe this is a valid point, but it is more likely that in many organisations the role and responsibilities of the CRO have not been defined clearly enough and expectations are a little blurred around the edges.
Once a person is in situ, discussions on residual risk, mitigation and resilience testing can seem so far removed from the day-to-day needs and activities of the business that they are not taken seriously enough.
All too often, risks are managed on a siloed basis detached from a company’s strategy, using a language incomprehensible to others and with no recognised business benefit. In this environment it is easy for a CRO to become estranged from the rest of the organisation. Their goal should be to communicate, coordinate and administer the risk function, but ultimately it should be a strategic role—working with the business to find the optimum balance between risk and reward.
How can we have a meaningful voice at the table when it is really needed? As a CRO, you are required to be many things: an analyst, presenter, negotiator, underwriter, influencer, facilitator and challenger. Who else within the C-suite has unfettered access to all the operational, strategic, financial and compliance risks across their organisation and how they are interconnected?
Do you use this information to make yourself invaluable? Do you drive the risk conversation at board level, providing positivity and insight and discussing the total cost of risk?
Rather than being seen as a strategic thinker and problem-solver, many risk managers simply maintain a compliance role, reporting to a committee or briefly joining board meetings whenever risk appears on the agenda. To be effective they must scan the horizon and contribute the insights and the comprehensive analysis needed to add the appropriate balance in key management decisions.
Bring on the technology
Technology is waiting in the wings to support and empower you. Today’s technology platforms enable you to electronically collate and consolidate data from multiple sources across your organisation and map it to a centralised database, not only saving you time, but improving accuracy and giving you deeper insight than ever before.
Automated processes reduce the scope for human error, improve the accuracy of your data collection and so give you greater confidence in the decisions you make and the advice you provide.
With a clear line of sight across the current and future risks your business is exposed to, across your insured and/or self-insured insurance programme, across claims and risk management activities and across the flow of information to your captive manager and regulator, it is much easier to have time to horizon-scan and be taken more seriously at board level.
Meet risk head on. Reduce your reliance on reinsurers and brokers—they have their own businesses to run with differing KPIs from yours—and take more control. Information at your fingertips can be analysed in many different ways to make it easier for the business to digest and make the CRO role a catalyst for change rather than a harbinger of doom.
It becomes possible to look at risk in the round rather than in a clumsy compartmentalised way. The board will thank you for it.
When computer-aided design was introduced draftspeople clung to their drawing boards. Is a spreadsheet any better than a drawing board?
InsuBiz went back to the drawing board to replace the outdated spreadsheet systems. Designed by insurance professionals, it is tailored to the needs of the CRO providing what you need rather than the software an IT designer thinks you need.
A user-friendly, secure system provided by a team of insurance professionals sensitive to your needs. InsuBiz speaks your language and knows your business—where’s the risk?
Elaine Barclay is UK business development manager at InsuBiz. For your local InsuBiz contact please visit www.insu.biz
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