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Introduction

Over the last few weeks, I have been fortunate enough to have spoken with a number of Chief Risk Officers (CROs) in both the London Market and more broadly.

During our conversations I asked “what are the specific challenges you currently face?“.

Given the wide variety of individuals from different backgrounds and firms, you would be forgiven for thinking I received an equally diverse number of answers.

In fact, the challenges CROs face can broadly be summed up with two words – “Value Add”.

Demonstrating value

It is a fair challenge when #Risk Professionals are referred to as ‘technical’ beings. After all, the vast majority of us fought our way through pages and pages of Solvency II text. Now that Solvency II deliverables have largely become Business As Usual, or put another way, its just the way we do things now, how can the #CRO continue to demonstrate value?

Whilst there was inevitable talk of how to improve regulatory reporting, time required to prepare Board Risk Committee reports and regulatory liaison, the conversation quickly turned to demonstrating how CROs can help deliver the Business #Strategy and #Performance Improvement.

Increasing Line Sizes to take advantage of Risk #Appetite ‘headroom’ (e.g. unused capacity), led to discussions as to how best to proactively respond to #strategic risks and how this could be presented to the Board in a compelling way?

When one considers the range of strategic risks, both internal and external, and how they may ‘connect’ to one another in often unusual and complex ways, the number of possible variables are staggering (and unmanageable). From #cultural transformation, competitive threats from established foes and #InsurTech startups to building operational #resilience, where should CROs be spending their valuable time?

From Static to Dynamic

CROs have for a long-time struggled to engage the Business when thinking about ‘Emerging Risks’. The output is generally a static list of unquantifiable risks that end up as a periodic review on a Board Risk Committee agenda.

If we accept from the outset we will not be able to accurately predict how the unique combination of strategic risks will actually manifest, this lets us off the ‘certainty hook’ and allows Risk Professionals to be creative. By thinking about the challenge along continuums, this allows us to move away from the endless ‘technical’ debate and start to think creatively about plausible #scenarios.

There will never be a prefect answer (or scenario that accurately predicts the outcome), but what it will do is allow the debate to move onto the all important Management Actions.

Final thoughts

It is a tough challenge to ask ‘technical’ professionals to put aside what they know (or can prove based on historic data) and to start thinking creatively about what ‘could be’.

Engagement from the business is critical, so is acceptance there is no perfect answer.

Only by partnering with the Business and exploring the ‘unique’ combination of plausible outcomes, will practical Management Actions be identified that ultimately lead to strategy execution and performance improvement.

 

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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