Page 16 - RMAI BULLETIN Oct - Dec 2019

RMAI BULLETIN OCTOBER TO DECEMBER 2019

Minimization Programme has to be a self-assessment Need for Embedding Risk Management
process, whereby the company management takes within the Insurance Company's
accountability and responsibility for the risk under its
control and should, therefore, be held to account for Process:
demonstrating that such risks are being appropriately This has to be positioned by senior management if it is
managed. There will often by a requirement for them to succeed. They will need to ensure that strategic
tosignoffonanannualbasisthatthisisthecase. actionsrequiredareimplementedby:-
1. Linking the output into the planning and budgeting
The Inherent Requirement of the Risk processes. The benefits to this are that it helps to
improve the planning process, reduces the chance
ManagementProcess:
of surprises, enhances achievement of objectives,
To properly manage risk, it is necessary to first identify
enhances consistency and ensures more informed
and then assess the risks the business faces. Example
decisions.
areas to assess are strategic, operational, financial and
environmental.Mastworthwhilestrategiesarelikelyto 2. Sharing best practice with other teams. This
carry some degree of risk; therefore such areas need to encourages people to think and promotes positive
be carefully assessed. Having conducted the risk culturalchange.
assessment, it is then necessary to rank the risks by 3. Working with other teams to address exposures
importance. In risk mapping, the probability of the risk identified in business interface; will help to break
is platted an .one axis and its potential impact on the down'silos'andenhancescommunication.
other.Anexampleisprovidedbelow:

Lawprobabilitybut Highprobabilityand Alternative methods for dealing with
highimpact highimpact theirbusinessrisks:
Lowprobabilityand Highprobabilitybut Risks can be managed in a variety of ways and the
lowimpact lowimpact directors need to try to balance the effectiveness of the
method they select against the cost. Risk management
The top right-hand corner shows the risks that have the maybeachievedby:-
highest priority. The impact of risk is not just risk in 1. Transferring the risk, e.g. insurance, reinsurance or
financial terms; it can also impact on a business's outsourcing;
reputation. A good example of this is the recent
2. Avoiding the risk by changing the company's
problems that Arthur Anderson had as the auditors for businesse.g.notdiversifyingintoanewproduct;
the US conglomerate Enron. As a result, Arthur
Anderson lost all credibility and the business failed. 3. Introducing controls to manage the risk, e.g.
Risk management as it stands cannot be outsourced, it businesscontinuityplans(seebelow);
remains the responsibility of the organization’s 4. Deciding to accept the risk, particularly low
management and it is not something that a company impact/low likelihood risks as the cost of dealing
just does once. It needs to be an ongoing process; it will withtheriskmayexceedthebenefitgained.
need to be regularly updated and communicated to all
thosepeapiethatneedtoknow. All firms no matter what their size need to ensure they
develop a business continuity plan. Business continuity
Risk management is also an exercise commonly is about looking at 'what if' scenarios, for example,
conducted within projects. Here the project team will what if the country was affected by flu pandemic or a
identify the risks and issues that could be a barrier to terrorist threat? Have we got a contingency plan that
beingabletoachievetheirobjectivesaccordingtoplan, will ensure that the business will continue to function
budget and timescales. Having identified the risks, the efficientlywithlittleornodisruptiontostaff,customers
team will develop contingency plans to use should the and suppliers? At a high level, the business will need to
risk materialize. By having these ready for use, they will establish a key skills database so that individuals are
bereadytoquicklyaddresstherisksshouldtheyarise. identified within the organization that can provide

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