Using data and analytics to inform risk management strategies is not limited to insurers: Businesses are now seeing the benefits as well, as they aggregate data and engage in risk modeling (internally or with third parties).
A big hurdle for corporate entities is the dissemination of information and integration of risk modeling into the risk value proposition. Once again, technology is coming to the rescue. Relevance of a specific risk has hampered the engagement of risk within the C-suite. Historically, risk has been judged qualitatively and in a siloed manner, resulting in CFOs and CROs using it as supplemental information with no linkage to the big picture. Technology can now put all of these risk modeling analyses on the same platform and promote an explicit big picture risk strategy.
Quantitative decision support (return on investment) can now be applied to insurance spend and risk management resource allocation. But this is just the beginning: Aggregated risk strategies for property and casualty insurance, pensions, and health and benefits are now starting to be analyzed. Once this view is embraced by the C-suite, business, market and operational risks are likely to follow. The profile of risk management is about to change in a big way.
Risk vs. return won’t just be for portfolio investment theory anymore. Rather, it will be the driver of corporate business strategy.
