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Introduction

The key findings of the #AIRMIC ‘Roads to Revolution‘ (2018) report are clear – to build dynamic approaches to #risk and #resilience firms must:

  1. Transition from legacy to ‘open source’ governance structures
  2. Embed an enhanced model of resilience, that addresses the challenges of transformation

In Blog #41, we highlighted the specific challenge of ‘how can risk professionals help firms achieve #resilience and #transformation simultaneously’?

In an environment where the #PRA continue to conduct Business Model Analysis, including the review of #business and #capital plans and form judgments on the adequacy of management actions, the challenge of achieving resilience and transformation simultaneously may appear insurmountable.

In this Blog, we attempt to set-out some pragmatic solutions on ‘how’ risk professionals can help firms achieve resilience in an environment where business risks are highly connected, whilst simultaneously transforming the legacy business model to achieve growth and value creation.

A new context

A clear message from the #AIRMIC report is that transforming a firm’s business model to ensure resilience, value and growth is not optional.

Whilst firms must embrace business model #innovation and #diversification, risk professionals must assess the risks and opportunities this transformation presents.

  • Risk professionals must understand that digital transformation is a technology-enabled business transformation, not a technology-led (Cloud Computing, Big-Data Analytics, Artificial Intelligence, Hyper-Connectivity, Augmented and Virtual Reality or Distributed Ledger) transformation
  • Risk professionals must acknowledge whilst cybersecurity and data protection present major risks or threats, they are a consequence of developing new digital capabilities
  • Risk professionals must appreciate that taken collectively, advances in technology present firms with a number of unique born-digital strategic and organisational opportunities and risks
  • Risk professionals must understand the underlying business and organisational dynamics and develop a new risk-mindset that challenges traditional assumptions and embraces creative thinking
  • Risk professionals must move away from a near-universal focus on the technical aspects of risk management, to one that seeks to understand the context within which the firm operates
  • Risk professionals must develop integrated knowledge that not only embraces risk management and solvency, but develops an understanding of corporate strategy that underpins the firm’s legitimacy
  • Risk professionals must develop an intimate understanding of the key drivers of competitive advantage
  • Risk professionals must understand there is a new risk in town – the interconnected and often intangible risk
  • Risk professionals will need to facilitate risk owners understanding of how these intangible risks may materialise
  • Risk professionals will need to develop business insights that enhance synergies and deepen understanding of exposures
  • Risk professionals must help the Executive Leadership Team and Board devise practical plans that support a relentless focus on the development of firm-wide digital capabilities
  • Risk professionals must help firms develop context-specific capabilities including; Leadership and governance; Business structure; Strategy, tactics and operations; and People and culture
  • Risk professionals must help firms evolve traditional governance arrangements towards open source frameworks that support; better access to firm-wide resources; evidence-led strategic decision-making and effective board oversight

Key Takeaways

The context within which risk professionals operate is changing dramatically.

New digital capabilities, developed to support the technology-enabled transformation of business models have created new and often intangible risks that firms have not even envisaged, let alone understood.

Risk professionals cannot rely on technical (and static tools) to help firms manage these risks.

A creative mindset is required that makes the connections, imagines how intangible risks may materialise and provides firms with practical insight as to how best anticipate and respond to this new order.

Reciproco provides knowledge integration across risk, solvency and strategy, including digital transformation, leading complex and unique projects in regulated sectors. Helping senior executives and management teams focus on strategic challenges to create a competitive advantage.

Darren Munday is the founder and Managing Director of Reciproco. An experienced executive with over 20 years’ global experience with multinational companies, including Chief Risk Officer reporting to the Board.

Darren is an Honorary Visiting Fellow of the Digital Leadership Research Centre, Cass Business School where he also holds an Executive MBA.  Darren is a Certified Fellow of the Institute of Risk Management (CFIRM) and Chartered Insurance Risk Manager (ACII) of the Chartered Insurance Institute.


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