Page 30 - Risk Management in current scenario

world better to reduce its adverse impact or delay the crystallization of
risk in a similar way no economic theory can lead to insulation.

What is ERM?
Risk management is in existence in insurance sector for 100s of years.
Life insurance companies are managing mortality, longevity, interest rate,
expense and lapse risk for many of years, however the risk management
tools utilized used to be in silo, that is, risk management was limited to
few people or few departments.

On the contrary, ERM is an integration of risk strategy and risk
management across the company. The Board at the top of the ladder is
owners of risk policies implemented by CRO. Risk objective are fully built
into every function head and they are evaluated on those risk objective
apart from other objective of the company. This way it is ensured that
risk objective and risk culture moves down to the DNA of the organization
to fully integrate risk management across the Organization.

Instead of defensive control oriented approach of downside risk and
earning volatility under silo approach, the idea of ERM is to optimize
business performance by optimal allocation of resource through risk
based decision making to make risk management as an offensive tool.
The biggest advantage of ERM is to give diversification e~~ort to company
through correlation of risks to encourage various risks taking ability.

Transition into ERM
The transition of the world is towards ERM where CRO is becoming an
important position in the financial institution. CRO has a big role to play
in the implementation of the Risk Management frame work. In 2015 in
UK, "CRO insurance survey" was conducted by Ernst and Young has
following findings when 40 CROs of life' non-life and reinsurance firms
were interviewed.
1. The standing of CRO's is consistently increasing across market,
however views on CRO role and its evaluation is differ.

28 | Risk Management in Current Scenario