Page 19 - The Insurance Times December 2024

risk, which could lead to an unprecedented increase in Inadequate risk training also adversely affects risk mitiga-
claims. In 2024, the country had already observed increased tion activities. Senior management understands risk lan-
rain and floods, which may lead to increased non-life claims. guage; however, the same is not valid with lower-down
Given the increasing uncertainties, ERM becomes vital for employees. In most insurance companies, the risk culture is
the insurance sector to serve better customers who are underdeveloped, such as the infrequent tone from the top.
ultimately dependent on their financial security. The concept of Risk Champion is developing.

Challenges Identified in Implementing Insurance companies monitor risks; however, many times,

ERM risks are backwards-looking due to an audit mindset. Insur-
ance companies set risk appetites, but only a few use them
The interview suggested that some insurance companies
for decision-making and monitoring.
identify many risks; however, some focus on the top 10 to
20 risks. The challenge in identifying too many risks is losing
Risk reporting occurs quarterly in the risk management com-
focus on key risks. One of the most clear challenges that
mittee; however, risks are sometimes underplayed.
came out was regarding three lines of defence. In many
insurance companies, the difference between the first and
second lines of defence is blurred. In some insurance com- Conclusion
panies, the second line finds it challenging to get data from Insurance companies in India have an ERM framework;
the first line for risk analysis; most respondents recom- however, implementation challenges exist. The insurance
mended setting up a centralised database. companies' boards and regulators need to work to address
these challenges and develop robust ERM practices. A more
The respondents mentioned less of a challenge in quantify- detailed paper is being prepared to understand the ERM
ing financial risk than non-financial risk due to the difficulty implementation challenges fully.
of attaching a monetary value. It was highlighted that in-
adequate investment in risk training and education leads to This article is an extract from PhD thesis on enterprise risk
untrained resources. management research in India's insurance sector.

Trends in Enterprise Risk Management (ERM)
Enterprise Risk Management (ERM) is evolving to address the growing complexity of risks in a dynamic business envi-
ronment. Organizations are increasingly integrating ERM into strategic decision-making to proactively identify, as-
sess, and mitigate risks that could impact their objectives.

A major trend is the adoption of technology-driven ERM tools. Advanced analytics, artificial intelligence (AI), and
machine learning are enabling real-time risk monitoring, predictive modeling, and automated reporting. These tech-
nologies provide deeper insights into potential risks and enhance response strategies.

Another trend is the focus on non-traditional risks, such as cyber threats, climate change, and supply chain disrup-
tions. Organizations are expanding their ERM frameworks to include environmental, social, and governance (ESG)
risks, recognizing their impact on long-term sustainability and stakeholder trust.

Risk culture development is also gaining prominence. Companies are embedding risk awareness at all levels, encour-
aging employees to identify and escalate risks without fear. This cultural shift fosters resilience and adaptability.

Additionally, regulatory pressures are driving the need for compliance-focused ERM frameworks. Organizations are
aligning their risk practices with global standards and frameworks, such as ISO 31000, to ensure robust governance.

In conclusion, ERM is shifting from a reactive to a proactive approach, leveraging technology and broadening its scope
to manage emerging risks effectively and sustain organizational success.

18 December 2024 The Insurance Times