IRM challenges role of post-Solvency II CRO

Written by staff reporter

While the role of the insurance chief risk officer has become more prominent, so far it has largely been shaped by regulation, but, according to a risk industry forum, there is a danger that if the role is too narrowly focused in this area then firms will miss out on the wider, more strategic risk leadership that a great CRO can provide.

These are the views of the Institute of Risk Management’s (IRM) Internal Model Industry Forum (IMIF), which has published a guidance document setting out its vision of how the role of the insurance CRO will have to change to meet the demands of a rapidly transforming industry post Solvency II.

The report also suggests that there will be a continuing shortage of people able to carry out the role unless firms actively consider what they need from their CRO, then develop individuals with the right mix of technical risk competence and business leadership skills, and offer them clear career paths.

One of the report’s contributing practitioners, and a director at BaxterBruce, Justin Elks said there is no such thing as a single perfect CRO for all businesses at all times. “In this report we have developed a model that helps firms consider what they need in the context of their own lifecycle, business model, culture and leadership style. We believe the fundamental objective for all CROs must be to help their firms create, capture and preserve value.

"This means that risk and opportunity must be properly considered at a strategic as well as at an operational level and CROs will need the skills and capability to help their firms do this,” he added.

“IRM has been pleased to support this important piece of work which has highlighted the changing demands on the risk function, and particularly the CRO, in insurance companies," explained IRM chairman and IMIF founder José Morago. "There is great opportunity for talented CROs and other senior risk professionals to add real value to their organisations at a strategic level.”

CROs: Four key shifts (Source: IRM)

Elks says the report argues that what was right for firms a few years ago might not be right now and the group has identified four key shifts in approach that it thinks firms and risk professionals should consider.

• From using risk models for regulatory compliance to gaining greater return on investment by using them to widely support business decisions and to improve the efficiency of supporting processes around risk models

• From a focus on operational risk controls to providing effective and efficient risk management across the organisation to support operational efficiency

• From a regulatory compliance mind-set to a customer focus mind-set

• From implementing process to consider risk in strategy and plans to a wider strategic influence within the business, including acting as an enabler and shaper of innovation

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