Getting the risk management basics right

Risk Series for Insurers – Paper 6
This paper focuses on the traditional role of risk management

January 24, 2017

Part six of Willis Towers Watson's seven-part risk series, focuses on the traditional role of risk management

Following on from Paper 5, where we discussed how putting in place a successful capital management program is essential if insurers are to deliver improved returns and not just for the short term.

In this edition, 'Getting the risk management basics right', we look at the importance of the risk management framework to support traditional risk management, drawing onto two recent examples from outside the insurance sector to highlight cases where poor risk management has materially weakened the firms in question. The case studies focus on conduct risk and information security risk.

Many firms still don’t take risk management seriously – failing to invest sufficiently in the basic organizational ingredients, such as culture and governance, and key processes, including identifying, assessing, selecting, monitoring and managing risk. Often this reflects the perceived wisdom that money poured into such activities would be better invested into commercial activities, where a return can be expected. In our view this is a critical ‘own goal’.

Unfortunately for customers and investors, the lack of investment in the risk management basics may not be apparent until the firm’s resilience is tested.

The next and final article will present the results of a market survey on the topics covered throughout the series.

If you have any queries or would like to discuss how risk is managed in your business, please contact Marcus Bowser, Kirsty Leece, Liz Davis or your Willis Towers Watson consultant.