There are significant opportunities in risk
Over the past three years, risk managers have played an increasingly prominent role in the daily functions of insurers.
Why has the role of the risk manager become so important? Surely it cannot merely be driven by the fact that we are living in an increasingly risk based industry.
FAnews spoke to Ronell Platte who has recently been appointed as Chief Risk Officer (CRO), Head of Compliance and IT Management for Infiniti Insurance to find out more about the role that risk managers play in the insurance industry.
An increased role
“The role of the CRO is not new in the financial services sector. However, under the Twin Peaks legislation, the CRO falls under the ambit of the prescribed key control functions. The Prudential standards are prescriptive on the requirements and responsibilities for all key control functions and further outline and govern the role and function of the Head of Risk Management. Key to this role is the responsibility of the CRO to assist the Board and senior management with providing assurance of the level of appropriate risk management measures that have been taken to address existing and potential material risks within an insurer,” said Platte.
She adds that the role of the CRO is not just focussed on the prudential aspects of the company, the CRO must apply a broad risk management approach across the entire business.
“The changes we are seeing in the market conduct legislation also require insurers and the entire distribution channel to apply a risk-based approach, not just from a supervision perspective, but also in the manner the business conducts itself in its day-to day operations. It is up to the risk management team, and the CRO, to manage this,” said Platte.
Future drivers
If the role of risk managers is becoming important, and are being driven by factors beyond the increased risk that is faced in the market, what are the future drivers of this role?
“A company’s appetite for risk, financial stability, capital requirements and customer satisfaction are a few key drivers which will influence the approach to risk management within each company. It is important to note that there is not a one-size fits all approach; the risk management strategy for every company would need to be reflective of the nature, scale and complexity of the business. However, the one thing that would remain constant is the need to have an established risk management function in the company,” said Platte.
The brokers role
Risk management is mainly the responsibility of insurers. However, there is a role that brokers can play when it comes to risk management.
“The broker is also in the business of managing risks. They are selling insurance products to clients to manage their risk. The same principles of identifying, assessing, managing and monitoring risk still apply whether you are an insurer or a broker,” said Platte.
She adds that there is an increased responsibility on all players in the financial services industry to apply a risk-based approach in business operations. It all comes down to the financial stability objective which goes back to the implementation of the Financial Advisory and Intermediary Services (FAIS) Act.
The risks we face
While insurers and brokers are aware of the risks that they are facing on a constant basis, being forewarned is being forearmed. There may be several risks that insurers and brokers are not aware of.
“The impact of digitalisation on existing business models, where new entrants who do not need to deal with legacy systems, could be disruptive and completely shift the dynamics within the industry. Digitalisation and an increased emphasis on data also pose a financial risk and stretches current infrastructure which have to deal with established legacy systems,” says Platte.
Another risk that companies face is the increased level of violent strikes and disruptions within South Africa which causes interruption in service delivery and damage to property. While a big portion of this is covered under Sasria, it is still a major risk.
Another risk that is related to the growing influence of technology is the increased threat of cyber risks. This also has an impact on business interruption and contingency plans.
Editor’s Thoughts:
Risk is associated with disruption, and this disruption often has a negative connotation associated with it. However, there is opportunity associated with risk. If managed properly, risk can open many doors for companies. I’m sure a similar situation faced Jeff Bezos and Larry Page at some stage and look at the way that Amazon and Google are currently dominating their industries. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected]
