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A complicated context

Digital transformation will have a profound impact on the Chief Risk Officer (#CRO) role and evolution of Enterprise Risk Management in the #insurance industry.

Leading up to and immediately after Solvency II implementation in January 2016, the role of the #CRO was almost exclusively focused on regulation and the procedures that support the implementation of #risk and #capital requirements.

There is little doubt the evolution of technology-enabled business model transformation, has changed the context of risk and capital management within the insurance industry.  The adoption of digital #capabilities has created new and previously unforeseen risks and threats.

The #CRO must respond to strategic and organisational risks that new digital capabilities and resources present.  Looking up and beyond #cultural barriers including structural silos and an aversion to taking risk, the #CRO must consider connected, merged and concentrated risks that when aggregated, may undermine the long-term legitimacy of the firm.

This does present a fundamental question that could define the role of the CRO in future years:

How can CROs help firms achieve resilience and transformation simultaneously, in an environment where business risks are interconnected and often intangible?

In Blog #41, we set out the key findings of the AIRMIC report ‘Roads to Revolution’ (2018) for risk professionals:

  • Better alignment with business priorities
  • More flexible deployment of resources
  • Greater dynamism in stakeholder engagement

Knowledge integration

CROs must demonstrate effective oversight of business transformation, by developing an integrated approach to risk, capital and corporate #strategy.  The challenge of delivering business transformation and resilience simultaneously, requires the Boards of insurance firms to explicitly select between a number opposing trade-offs.

An integrated approach requires CROs to embrace a new mindset.  There will undoubtedly be numerous taxonomies setting out in detail the skills and capabilities CROs require to better align with strategic initiatives, flexibly deploy resources to high value / high impact projects, or achieve greater dynamism in stakeholder engagement, none of which will assist the CRO unless a new mindset is adopted.

A new mindset

Risk professionals have historically been regarded as ‘technical’ people.  When you consider the modern-day requirements of Risk and Capital Management, it is easy to lose focus and become lost in the detail.

A digital world creates an environment where business risks are interconnected and often intangible.

The role of the CRO in transforming legacy business models requires a growth mindset.  One that not only considers the risks, but also opportunities to think creatively to enhance synergies, deepen understanding of risk exposures or close the gap between a firm’s corporate strategy and what is implemented on a day-to-day basis.

The ability to think creatively, look for hidden connections, imagine how connected risks may materialize and above all, formulate and champion pragmatic management actions, resides in a land far away from the realms of the technician. 

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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