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Introduction

On 12th June 2018, AIRMIC published its long-awaited Roads to Revolution report.

From the Executive Summary published on AIRMIC’s website we learn the report focuses on building dynamic approaches to risk and resilience throughout a #digital revolution.

Cass Business School, City University of London was engaged to conduct research and focused on answering the question: “How are organisations transforming their business models to ensure resilience, value and growth in the Digital Age?”

The main objective of the report was to provide pragmatic advice for risk professionals….who want to ensure that risk management, resilience and digital transformation permeate their organisations to constantly protect brand and reputation.

Relevance to the London Market

The Report, whilst relevant to risk professionals across all sectors of the insurance market, will hold specific meaning for the London Market.

A work stream of the London Market Group (LMG) is to MAKE LONDON AN EASIER, MORE COST-EFFECTIVE PLACE TO DO BUSINESS by implementing the London Market Target Operating Model (TOM).

The key aims of the TOM are to assist:

  • Face to face negotiation supported and facilitated by electronic data capture for all steps in the process including placing, signing, closing, claims and renewals
  • One touch data capture – a global standard to allow re-use by all
  • Enhanced shared central services – providing common non-competitive services

Whilst face-to-face trading will still be essential, operating costs are uncompetitive.

#LMG (and the Corporation of Lloyd’s) has mandated #PPL (the London Market’s electronic placing platform), on a phased approach to reduce administration costs. The system is LIVE and Brokers and Underwriters are currently exchanging information on risks for a number of classes of business.

Other initiatives include – the launch of a Central Processing Compliance Programme for the audit of #Coverholders and a Global Data Standard and Glossary that will facilitate structured data capture. LMG is also investigating the use of #Blockchain.

Key findings of the report

  1. Leaders will need to grapple with business and organisational trade-offs for risk, risk management and governance
  2. The underlying business and organisational dynamics are so different, there is a need for a rewiring of both risk management and governance
  3. Defining a common language to ensure effective governance systems
  4. AIRMIC has enhanced its Resilience Model to be aligned with advances in technology
  5. Board members seeking assurance about resilience and digital transformation are likely to focus on the Business Enablers:
    • Leadership and governance
    • Business structure
    • Strategy, tactics and operations
    • People and culture

Summary of implications for Risk Professionals

Digital transformation and resilience presents a great number of challenges for the Risk Professional:

  1. There is greater connectivity and interdependence – leading to more connected and concentrated risks
  2. These risks tend to operate on a global scale
  3. People and culture business enablers are key (note ‘culture’ is a cross-sector priority for the FCA)
  4. A need to demonstrate strong business and commercial acumen
  5. Development of analytical skills and methodologies should ‘free-up’ time for more high-value project work (as opposed to routine) risk work
  6. Deploy a more creative lens with regard to emerging risks to help build appreciation of threats for which there is little evidence

Final thoughts

There is a greater number of people calling for Risk Professionals with a ‘unique’ blend of – Technical, Business Acumen and Digital expertise.

A requirement for Risk Professionals to mesh ‘strategic vision, influencing skills and technological fluency’ on top of their core Enterprise Risk Management expertise.

But is this expectation realistic and should the onus be placed solely at the feet of the Risk Professional?

Most Risk Professionals accept there is a need to move away from ‘static’ tools towards horizon scanning and scenario analysis. 

And whilst it is correct to state historically the majority of Risk Professionals have been ‘technical’ people – the message that is being delivered suggests it is for Risk Professionals and for them alone to ‘champion the new type of risk’ and ‘challenge the leadership team’.

If the expectation is that firms will navigate the trade-offs presented by digital transformation by relying solely on the Risk Function, then I’m afraid this assertion is misplaced. It is for all players in the governance system – Board Members, functional leaders, C-Suite Executives to engage and demonstrate leadership, not just the Risk Professional.

 

 

Darren provides Enterprise Risk Management advisory services to the Insurance and Investment Management sectors.  Helping Board and C-level executives address strategic challenges, by delivering solutions that create Enterprise Value and improve business performance.

Darren is 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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