Archive for January 2017

Updating your Risk Register

January 26, 2017

It is quite easy for an ERM program to become irrelevant.  All it takes is for it to stay the same for several years.  After just a few years, you will find that you risk management processes are focused upon the issues of several years ago.  You may be missing new wrinkles to your risks and also repeating mitigation exercises that are no longer effective or needed.

That is because the risk environment is constantly changing.  Some risks are become more dangerous while for others the danger is receding.  No firm anywhere has an unlimited budget for risk management.  So to remain effective, you need to constantly reshuffle priorities.

One place where that reshuffling is very much needed is in the risk register.  That is a hard message to sell.  Risk Identification is seen by most as the first baby step in initiating and ERM program.  How could a well developed, sophisticated ERM program need to go back to the first baby step.

But we do need to go back and somehow get people to seriously re-evaluate the Risks on the Risk Register.  That is because risk management is fundamentally a cycle rather than a a one way development process.  We are all brainwashed that constant growth and steady improvement is the fundamental nature of human enterprise.  For risk management to really work, we need that cycle model where we go back and do all of the same steps as last year all over again.

One way to freshen up the process of reviewing the risk register is to bring in outside information.  The link below provides some good outside information that you can use to stimulate your own review.

Willis Re took the top 15 risks from a dozen insurer risk registers and combined them to get 50+ unique risks.  Then over 100 insurer executives and risk management staff helped to rank those 50 risks.


2017’s most dangerous risks for insurers

We took a list of over 50 risks commonly found on insurer risk registers, and asked, “Which risks present the most danger to your firm in 2017?”


Take a look.  How does the resulting ranking look compared to your risk register?  Do any of the top 10 risks show up as middling priority in your program?  Are any of the bottom ten risks near the top of your priority ranking?  So your review can focus on a discussion of the most significant deviations between your ranking and the ranking from the link above. You need to convince yourself that you have good reasons for different priorities or change your priorities.

Keys to ERM – Discipline

January 11, 2017

keys

There are four keys to ERM – The second is Discipline

Discipline is tightly linked with Transparency, another Key to ERM.  Transparency helps to encourage and enforce Discipline.

There are three ways that Discipline is Key to ERM.

Enterprise risk management brings discipline to the mitigation of individual risks, to aggregate risk management and ERM also promotes a disciplined commitment to a comprehensive approach to risk management.

Enterprise risk management brings the discipline to risk management by making explicit plans for managing risk and then following up, checking on the execution of those plans, and reporting the results of those checks. To some, this seems like lots and lots of needless redundancy, but they miss the point. Discipline makes risk management reliable instead of being another wild card in an uncertain world.

ERM encourages insurers to clearly state their approach to risk as well as the amount and types of risks that they will accept. Clear and coherent communication is an often-underappreciated discipline that is much more difficult than it appears. ERM provides a script and outline that makes it easier to speak clearly about risk and risk management.

ERM always starts with a risk identification and prioritization step, so that while all risks are considered, time and resources are used wisely by focusing only on the most significant risks.

Discipline is unlikely to be maintained in secret. Because of Transparency, is is easily and widely known when Discipline falters.   Insurers that want to have an effective and Disciplined ERM program will have both Discipline AND Transparency.

This is an excerpt from Discipline is key to ERM on the WTW Wire Blog.


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