Page 41 - RMAI Bulletin July - September 2021

RMAI BULLETIN JULY TO SEPTEMBER 2021

Y There should be a clear distinction between significant new challenges. Risk management has a
regulation of risk control for insurance and banks major role to play.
even if some of the material requirements are the
same for both kinds of institutions. Risk in emerging economies is higher than in

Y Besides capital requirements and other developed ones. Expectations are that the level of risk
quantitative requisites, regulators should set forth will continue to increase, as will volatility. This,
however, is not a reason for retreating to one’s comfort
and enforce qualitative requirements for internal
zone, as risk creates opportunity and seizing
controls; financial institutions should be required
opportunities is the way in which companies develop
to have written risk control policies.
and grow. The rewards from doing business in and with
Y There should be an efficient auditing of insurance
emerging economies can be sufficient to cover the
and banks with respect to their exposure to risk increased level of risk but they can only be achieved
and their internal controls.
through proper risk assessment up front and continual
Y Well-developed clearing facilities should be in reassessment, because we cannot know the future. All
place, in order to enhance risk management at an we know is that it will be different and that we will
aggregate level; cooperation agreements between probably have to manage risks in coming years’ time
clearings acting in different markets are essential that we cannot currently conceive. This is exciting as
for supervision across markets. well as challenging, and requires everyone to

Y At firm levels, VaR and similar quantitative models understand and manage risk much better than they
are an important tool, but useless without a generally do now.
corporate culture of risk management, that
includes proper internal controls, flow of From humble beginnings, risk and risk management
information, engagement of senior management have grown into a veritable industry. In the future
and qualitative standards in general. companies will succeed not through bigger and bigger
risk management departments but through line
Y Due to the lack of trained professionals, a managers understanding and managing risk effectively.
technical expertise in handling quantitative Tools and techniques will continue to develop and
models should be gradually developed.
technology will help this process, but the key will be
Y Attendance at international seminars and training people, as only they can use judgement and respond
programs is an important source of knowledge for well to the unexpected which occurs all too often in
both regulators’ and firms’ employees. Such emerging economies. Hope for the best but plan for
programs should be regularly held on a domestic the worst must be the watchword when dealing with
basis, as a means of disseminating knowledge, emerging economies.
experience and the culture of risk management.
Reference
Conclusion 1. Hans Helbekkmo et al., Enterprise risk
management—Shaping the risk revolution, McKinsey
The challenges facing risk managers in emerging
& Company and the Risk Management Association,
economies are both numerous and complex. In the
2013, rmahq.org.
early years of the 21st century, Insurers and banks in 2. Tudor, G. (2000) Rollercoaster – The incredible story
emerging economies went through a period of of the emerging markets. London: Pearson
tremendous growth, showing solid fundamentals in Education.
capital requirements, liquidity, and asset quality 3. Daniell, M.H. (2000) World Of Risk – Next generation
compared with insurers and banks in developed strategy for a volatile era. Singapore: John Wiley &
markets. Sons.
4. Economiesuisse (2007), Swiss Code of Best Practice
Over the last few years, though, the business for Corporate Governance,
environment has shifted: an increasingly demanding www .economiesuisse.ch/de/
regulatory and policy environment, growing risk costs, PDF%2 0 D o wnloa d%2 0 F il e s /
and declining profitability levels are presenting pospap_swisscode_corpgovern_20080221_en.pdf.

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