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Risk managers should consider taking a more assertive stance in addressing emerging strategic risks, a Deloitte Center for Financial Services report advises.
The report, released Monday, was written by a team of Deloitte's risk experts who reviewed ways insurers can identify strategic risks. It also recommends closely watching three specific technologies.
The New York-based financial service center's study “Strategic Risk Management in Insurance: Navigating the Rough Waters Ahead,” focuses on the increasingly recognized concept of strategic risk and how it can pose threats to a business but how it can also present unique opportunities.
Overall, the report defines strategic risk management as covering a broader area of risk when compared to traditional risk management and that by changing the mindset from defense to offense one can identify opportunities to grow rather than just fending off emerging threats.
According to the report, strategic risk management differs from operational risk management and enterprise risk management in two ways. First, SRM primarily addresses changes that are disruptive in areas — such as the economy — that could pose competitive threats. The second difference is that SRM addresses the potential to achieve growth so that insurers can get an edge over rivals.
“In the strategic risk domain, if you are really out there evaluating large and meaningful movements in the broader economy or in health care developments or technology developments, it may help you identify trends or impactful changes that can help you get ahead of your competition,” said Rich Godfrey, Deloitte L.L.P.'s national insurance advisory leader,
The report gives three examples of strategic risks that insurers should look out for: technology such as the driverless car; medical breakthroughs that are changing how long people live; and new competition such as auto insurance that can be purchased directly online.
It also addresses changing the view of the chief risk officer in identifying a wider array of exposures, rather than being reactive and viewing risk only in a negative way.
“There's an opportunity for chief risk officers to potentially elevate their role as the overseer of known risk to more of an outside viewpoint that they could bring to the senior leadership team of the company and be more involved in the strategy setting, the evaluation of the strategy and the awareness of those existential risks that are not part of the traditional risk management method,” Mr. Godfrey said.
Richard Roberts is the 2015 president of the Risk & Insurance Management Society Inc. Also, he's the director of risk management and employee benefits at Ensign-Bickford Industries Inc. in Simsbury, Connecticut. He recently spoke with Business Insurance Associate Editor Bill Kenealy about the evolving challenges facing risk managers and what he's looking forward to as the RIMS conference kicks off in New Orleans. Edited excerpts follow.