Taking ERM to ‘next level’ faces hurdles

Insurers are optimistic about the future role of enterprise risk management (ERM), according to a survey of chief risk officers (CROs) by Ernst & Young LLP.
However, while the ERM building blocks are in place, the industry faces significant challenges as it prepares to move to the next level, according to Ernst & Young’s 2008 Insurance Risk Leadership Survey.
Survey respondents, while optimistic about the future, recognized impediments to integrating risk into the decision-making process.
When asked to rank potential challenges today and in the future, respondents cited a number of challenges, including a lack of data, the inability of some systems to adapt to new modelling capabilities, the lack of business unit buy-in and risk measures that fail to capture business dynamics.
Senior insurance executives held a roundtable to discuss the survey findings, Ernst & Young notes. They were surprised to find the “lack of C-suite buy-in” ranked nearly last on the list of impediments.
They suggested this reflects the emerging dual demands with data and modelling challenges top-of-mind, but with a growing recognition of the importance of packaging information in a way that will be more useful to executive management.
“Insurers could benefit from the lessons learned by the banking industry,” Chris Karow, partner at Ernst & Young LLP, said in a press release.
“The companies that are best weathering the current credit crisis are those with agile risk management processes and systems, as well as an effective way to share quantitative and qualitative information in order to have meaningful management team discussions,” he says. “At the same time, those who strictly focused on measurement or decentralized oversight are finding themselves in the eye of the storm.”