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In December 2017, EY published its survey of North American Insurance Chief Risk Officers (CROs) Regulation no more: CROs are reborn as innovators. The survey revealed a shift in responsibilities away from regulatory issues towards disruption, battling cyber threats and leading the change on innovation.
Post-2007 financial crisis, many CROs have focused their attention on:
- Risk Operating model improvements and more formal Enterprise Risk Management (ERM) frameworks; and
- Strengthening and in some cases the rationalisation of teams (refer The Entrepreneurial CRO – Creating smaller, more strategic teams)
A new calling has arrived
The CRO Survey suggests that whilst work continues to embed ERM frameworks within firms, CROs and their teams are spending less time on regulation and instead transitioning (refer The Entrepreneurial CRO – Worth a seat at the table? Redefining the role of the Insurance CRO) towards four key themes:
- From relative stability to disruption (refer The Entrepreneurial CRO – What is the future role of the CRO in the sharing economy?, The Entrepreneurial CRO – Think like a disrupter)
- From clear and well-understood threats to emerging and unknown risks (refer The Entrepreneurial CRO – Strategic and Emerging Risks)
- From serving as a control function to partnering with the business (refer The Entrepreneurial CRO – Applying enterprise risk management to strategy, The Entrepreneurial CRO – How can the risk function become more strategic in its approach?, The Entrepreneurial CRO – An integrated approach to risk, capital management and strategy, The Entrepreneurial CRO – Integrating with Strategy and Performance
- From the risks of action to the risks of inaction in promoting innovation (refer The Entrepreneurial CRO – Bringing it all together)
The report echoes many of the themes covered by myself and others in various publications ~ coping with rapid change, horizon-scanning capabilities, identifying opportunities for growth and ultimately helping firms win in a tough trading environment.
A key point of departure from the past, is a desire and willingness of CROs to be ‘proactive’ and to partner with the Board and C-suite stakeholders, including strategy teams, to ensure the firm is innovating and the right strategic options are selected.
Interestingly some of the most serious concerns relate to inaction, inflexibility, failure to innovate and a slow speed-to-market.
The survey does offer some interesting areas of focus:
? Engaging on high-priority strategic and business-driven issues
? Moving to a more proactive, business-driven posture
? An imperative to innovate
Some may respond to this challenge by retreating further into their comfort zone, which will only serve to reinforce the view that ‘risk people’ are technical bureaucrats.
What the report is light on, is recognising the importance of developing qualitative skills and capabilities that are necessary to allow innovation to occur:
? The imagination and desire to seek out opportunities to create, or re(combine) what already exists
? The ability to generate lots and lots of ideas, from which the best ones can be selected
? An acceptance of the need to pivot, or fail quickly (and cheaply)
? A desire to look outside of the industry and learn from others (including adjacent industries)
? Setting innovation criteria to focus scarce resources on those ideas that have the best chance of success
In late 2017, River Partnership published CRO Survey – Insurance Risk and the Influence on Business Strategy after interviewing 40 CROs drawing together data, opinion and independent research.
The survey emphasises the ‘importance of senior stakeholder engagement skills alongside traits of influential people leadership’ and ‘investment in all areas of modern leadership development’.
The survey suggests the three main traits attributed to the ‘ideal risk manager’ are:
- Emotional intelligence
- Business skills
Whist comprehensive, the survey stops short of articulating the soft-skills required for the industry to innovate successfully.
Think like a disrupter
There is an element of genius in all of us ~ what will it take to unleash the innovator within that can lead to both incremental and breakthrough innovations?
What cultural and organisational conditions need to be created that allow individuals and teams to adopt a ‘have a go’ mentality – no longer fearful of ridicule or falling foul of the accepted corporate norm?
What will it take to embrace failure, learn from mistakes and pivot towards a more innovative and creative future?
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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