Page 23 - Life Insurance Today July - December 2020

implementation of the actions from the risk management and issues that could be a barrier to being able to achieve
programme rests with operational management. their objectives according to plan, budget and timescales.
Having identified the risks, the team will develop
They are, in this respect, as in other situations, the first contingency plans to use should the risk materialize. By
line of defence. This Risk Minimization Programme has to having these ready for use, they will be ready to quickly
be a self-assessment process, whereby the company address the risks should they arise.
management takes accountability and responsibility for the
risk under its control and should, therefore, be held to Embedding Risk Management within the
account for demonstrating that such risks are being
appropriately managed. There will often by a requirement Life Insurance Company's Process:
for them to sign off on an annual basis that this is the case. This has to be positioned by senior management if it is to
succeed. They will need to ensure that strategic actions
The inherent requirement of the required are implemented by:-
Coporate Governance Process: 1. Linking the output into the planning and budgeting
processes. The benefits to this are that it helps to
To properly manage risk, it is necessary to first identify and
improve the planning process, reduces the chance of
then assess the risks the business faces. Example areas to
surprises, enhances achievement of objectives,
assess are strategic, operational, financial and enhances consistency and ensures more informed
environmental. Mast worthwhile strategies are likely to
decisions.
carry some degree of risk; therefore such areas need to be
2. Sharing best practice with other teams. This
carefully assessed. Having conducted the risk assessment,
it is then necessary to rank the risks by importance. In risk encourages people to think and promotes positive
cultural change.
mapping, the probability of the risk is platted an .one axis
and its potential impact on the other. An example is 3. Working with other teams to address exposures
provided below. identified in business interface; will help to break down
'silos' and enhances communication.
Low probability but High probability and
high impact high impact
Alternative Methods for dealing with
Low probability and High probability but
low impact low impact their Business Risks:
Risks can be managed in a variety of ways and the directors
The top right-hand corner shows the risks that have the need to try to balance the effectiveness of the method they
highest priority. The impact of risk is not just risk in financial select against the cost. Risk management may be achieved
terms; it can also impact on a business's reputation. A good by:-
example of this is the recent problems that Arthur Anderson 1. Transferring the risk, e.g. insurance, reinsurance or
had as the auditors for the US conglomerate Enron. As a outsourcing;
result, Arthur Anderson lost all credibility and the business 2. Avoiding the risk by changing the company's business
failed. Risk management as it stands cannot be e.g. not diversifying into a new product;
outsourced, it remains the responsibility of the
3. Introducing controls to manage the risk, e.g. business
organization's management and it is not something that a continuity plans (see below);
company just does once. It needs to be an ongoing process;
it will need to be regularly updated and communicated to 4. Deciding to accept the risk, particularly low impact/
all those pea pie that need to know. low likelihood risks as the cost of dealing with the risk
may exceed the benefit gained.
Risk management is also an exercise commonly conducted
within projects. Here the project team will identify the risks All firms no matter what their size need to ensure they

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