6 | MARCH 2019 | Claims Magazine | PropertyCasualty360.com
Risk management in today’s global marketplace is much like being a juggler — except the objects being juggled continue to increase with no
end in sight. Even when a groove is established and everything is seemingly under
control, something can spring up and
cause the objects to come crashing down.
The risks of today have been fermenting for some time. Nonfinancial risks like
cybersecurity, third-party and conduct
risk, in particular, continue to erode the
stability of those in the insurance indus-try. The rise of chief risk officers (CRO)
and enterprise risk management (ERM)
programs are two clear ways the industry
has responded to the changing times, but
it can’t stop there.
“Despite the relative calm in the global
economy, risk management today is con-
fronting a series of substantial impending
risks that will require financial services
institutions to rethink traditional ap-
proaches,” reads the executive summary
in Deloitte’s Global risk management sur-
vey, 11th edition.
The survey gathered the views of
CROs or their equivalents at 94 financial
services institutions around the world,
most of which are headquartered in the
U.S./Canada, Europe or the Asia Pacific.
The participating institutions provide
a range of financial services, including
banking (61%), investment management
(49%) and insurance (46%).
While advances in technology have
certainly helped, there is much work to
be done before risk managers and risk
management programs are keeping up
with the pace that risks are developing at. With this in mind, here are the
biggest takeaways from Deloitte’s latest report and what it means for the
Who’s on board?
Following the financial crisis in 2008, risk
governance and the role of the board of
directors in risk management increased
substantially in importance.
Deloitte’s analysis found board of direc-
tors at most institutions have a wide range
of risk management responsibilities:
• review and approve an organization’s
formal risk governance framework
•monitor new and emerging risks
•review/approve recovery solution
planning (57%), among others.
Another rising trend is the presence of
one or more risk management experts on
a board risk committee, something that
is becoming a regulatory expectation for
larger institutions. Eighty-four percent
(84%) of respondents in the survey said
their institution has one or more risk
management experts on its board risk
committee, up from 67% two years ago.
The CRO is almost universally found
in most financial institutions as 95% of
respondents said they have a CRO or
some equivalent position.
An ERM program, which is designed to
implement a process to identify and manage risks facing an institution, is also increasing in prevalence with 83% of institutions responding to the survey stating they
have an ERM program in place, up from
73% in a previous Deloitte survey.
Brexit uncertainty, a brewing trade war
between the U.S. and China, and an increasing number of natural disasters are
just a few elements among the volatility
that surrounds today’s global marketplace.
The role risk management plays going forward will be called upon even further to
counter any future unpredictability.
Size matters when testing risk
To assess the risks in the insurance industry today, a wide variety of methods have
been employed. The methods tend to
vary when factoring in an insurer’s size.
Stress testing is used more often by
larger insurers. Stress testing is used as a
Nonfinancial risks top
concerns for financial
By Denny Jacob, PropertyCasualty360.com