Enterprise risk management and Solvency II: the system of governance and the Own Risk and Solvency Assessment

2020 ◽  
Vol 21 (4) ◽  
pp. 317-332 ◽  
Author(s):  
Pablo Durán Santomil ◽  
Luis Otero González
Keyword(s):  
Risk Management ◽  
Insurance Industry ◽  
Solvency Ii ◽  
Enterprise Risk Management ◽  
Insurance Companies ◽  
Legal Form ◽  
Content Type ◽  
Enterprise Risk ◽  
Solvency Assessment

Purpose The purpose of this paper is to analyze how enterprise risk management (ERM), the system of governance and the Own Risk and Solvency Assessment (ORSA) have been boosted with the entry of Solvency II. Design/methodology/approach For this analysis, the authors have undertaken a survey of chief risk officers (CROs) working in Spanish insurance companies. Findings The results show that Solvency II has definitely promoted ERM in the European insurance industry and improved the system of governance of the insurance companies, and that the perceived value of the ORSA for the companies is higher than the cost. It is clear that the quality of ERM implemented by companies is higher in those that face more complex risks and with greater interdependencies – that is, larger companies, foreign insurers and insurers with several lines of business – but is unaffected by the legal form of the entity (mutual/corporation). Originality/value This study conducts primary research with surveys of CROs and develops a measure of the quality of ERM implemented by insurance companies.

Enterprise risk management for health insurance from an actuarial perspective

2012 ◽  
Vol 17 (2) ◽  
pp. 259-314 ◽  
Author(s):  
G. C. Orros ◽  
J. Smith
Keyword(s):  
Risk Management ◽  
Health Insurance ◽  
Solvency Ii ◽  
Enterprise Risk Management ◽  
Insurance Companies ◽  
Enterprise Risk ◽  
The Face ◽  
Known Unknowns ◽  
Over Time ◽  
Health Insurers

AbstractThis paper focuses on Enterprise Risk Management (ERM) and strategic business management for health insurance companies in our world of ‘unknown unknowns’ and the emergence of unexpected risks over time. It illustrates how Chief Risk Officers (CROs) can focus on ‘risk and opportunity management’ through an ERM framework, and thereby balance risks against opportunities, whilst being resilient against ‘unknown unknowns’ and their emergence over time as ‘known unknowns’ and ‘known knowns’. The paper has been designed to meet the broad requirements of health insurers that would like to implement an ERM framework for the effective risk management of their health insurance lines of business. Risk management for health insurers in the context of Solvency II and broader European Commission regulatory requirements is also discussed. The authors discuss how insurers can develop and apply risk management to build resilience in the face of the storms and shocks that may lie ahead.

Enterprise Risk Management Maturity Levels of the Insurance Industry in Botswana

2021 ◽  
Vol 2 (Issue 1 (January to March 2021)) ◽  
pp. 23-32
Author(s):  
Moreblessing Ngwenya ◽  
Sam Ngwenya
Keyword(s):  
Risk Management ◽  
Insurance Industry ◽  
Continuous Process ◽  
Enterprise Risk Management ◽  
Insurance Companies ◽  
Maturity Model ◽  
Enterprise Risk ◽  
Term Insurance ◽  
Risk Maturity

Enterprise Risk Management (ERM) has become a necessity in the financial sector to fulfil stakeholder expectations. Studies confirm that ERM impacts positively on the performance of firms. The main objective of the study was to assess ERM maturity levels of the insurance industry in Botswana. This was achieved through first designing a framework to measure enterprise risk management maturity levels. The ERMMF incorporated elements from COSO’s ERM framework and the AON risk maturity model obtained through literature review. Data were sourced from four strata; 9 long term insurance companies (15 respondents), 11 short-term insurance companies (19 respondents), 3 reinsurers (5 respondents), and 44 brokerages (75 respondents). While all organisations in the population were used, a sample of 114 out of possible 134 respondents was used. Data were analysed using SPSS version 16. The findings revealed that the insurance industry in Botswana had somewhat implemented ERM. It is therefore recommended that the insurance industry in Botswana should take ERM as a continuous process for growth in ERM maturity levels as such an improvement is highly likely to enhance their performance.

Does the hiring of chief risk officers align with the COSO/ISO enterprise risk management frameworks?

2017 ◽  
Vol 25 (3) ◽  
pp. 274-295 ◽  
Author(s):  
Erastus Karanja
Keyword(s):  
Risk Management ◽  
Enterprise Risk Management ◽  
Clear Understanding ◽  
Press Releases ◽  
Apparent Lack ◽  
Content Type ◽  
Business Operations ◽  
Enterprise Risk ◽  
The Press ◽  
Iso 31000

Purpose There are two main industry-sanctioned enterprise risk management (ERM) models, that is, COSO 2004 and ISO 31000:2009, that firms refer to when implementing ERM programs. Taken together, the two ERM models specify that firms should implement ERM programs to meet a strategic need, improve operations and reporting or to comply with government regulations or industry best practices. In addition, the focus of ERM implementation should be either the subsidiary, business unit, division, firm/entity or global level. The purpose of this study is to investigate whether firms are aligning their ERM implementations with these tenets: strategy, operations, reporting, compliance and the level of implementation. Design/methodology/approach The proxy for ERM implementation is the hiring of a Chief Risk Officer (CRO). The research data come from a sample of 122 US firms that issued a press release following the hiring of a CRO between 2010 and 2014. The press releases were retrieved and aggregated through content analysis in LexisNexis Academic. Findings The results reveal that many ERM implementations are occurring at the firm/entity level, and with the exception of reporting, firms consider ERM to be a strategic firm resource capable of improving business operations and compliance initiatives. Originality/value There is a dearth of research studies specifically investigating whether ERM programs adopted by firms are aligned with the specification of COSO 2004 and ISO 31000:2009 frameworks. The apparent lack of a clear understanding of the alignment between the firm ERM programs and the industry’s ERM frameworks may limit the development and implementation of ERM and the eventual realization of the benefits associated with a successful ERM implementation.

Enterprise risk management and sustainability of banks performance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Babajide Oyewo
Keyword(s):  
Risk Management ◽  
Banking Sector ◽  
Management Practice ◽  
Enterprise Risk Management ◽  
Annual Reports ◽  
Banking Reform ◽  
Content Type ◽  
Enterprise Risk ◽  
The Impact

PurposeThis study investigates firm attributes (namely level of capitalisation, scope of operation, organisational structure, organisational lifecycle, systemic importance and size) affecting the robustness of enterprise risk management (ERM) practice, the extent to which ERM affects the performance of banks and the impact of ERM on the long-term sustainability of banks in Nigeria. This was against the backdrop that the 2012 banking reform was a major regulatory intervention that mainstreamed ERM in the Nigerian banking sector.Design/methodology/approachThe study employed a mixed methodology of content, trend and quantitative analyses. Ex post facto research design was deployed to analyse performance differential of banks, with respect to the implementation of ERM, over a 10-year period (2008–2017). A disclosure checklist developed from the COSO ERM integrated framework was used to assess the robustness of ERM by content-analysing divulgence on risk management in published annual reports. The banking reform periods were dichotomised into pre- (2008–2012) and post- (2013–2017) reform periods. Jonckheere–Terpstra test, independent sample t-test and Mann–Whitney test were applied to analyse a total of 1,036 firm-year observations over the period 2008–2017.FindingsResult shows that bank attributes significantly affecting the robustness of risk management practice are level of capitalisation, scope of operation, systemic importance and size. Performance of banks improved slightly during the post-2012 banking reform period. This suggests that as banks consolidate on the gains of ERM, benefits of the regulatory policy on risk management may be realised in the long run. Result also shows that ERM enhances long-term performance, connoting that effective risk management could serve as a competitive strategy for surviving turbulence that typically characterises the banking sector.Practical implicationsThe emergence of level of capitalisation, scope of operation, systemic importance and size as determinants of ERM provides empirical evidence to support the practice of reviewing the capital requirements for banking business from time to time by regulatory authorities (i.e. recapitalisation policy) as a strategy for managing systemic risk. Top management of banks may consider instituting mechanisms that will ensure risk management is given prominence. A proactive approach must be taken to convert risks to opportunities by banks and other financial institutions, going forward, to cope with the vicissitudes of financial intermediation.Originality/valueThe originality of the study stems from the consideration that it provides some new insights into the impact of ERM on banks long-term sustainability in a developing country. The study also contributes to knowledge by exposing the factors determining the robustness of risk management practice. The study developed a checklist for assessing ERM practice from annual reports and other risk management disclosure documents. The paper also adds to the scarce literature on risk governance and risk management.

scholarly journals Evaluation of the Level of Enterprise Risk Management Adoption and Maturity of Insurance Companies in Kenya

2017 ◽  
Vol 1 (2) ◽  
pp. 1
Author(s):  
Caroline Njagi ◽  
Dr. Amos Njuguna
Keyword(s):  
Risk Management ◽  
Risk Tolerance ◽  
Enterprise Risk Management ◽  
Strategic Decision ◽  
Insurance Companies ◽  
Top Management ◽  
Organizational Strategies ◽  
Risk Management Framework ◽  
Enterprise Risk ◽  
Risk Appetite

Purpose: The purpose of this study was to evaluate the extent to which insurance companies in Kenya have adopted ERM process, and then to assess the maturity, challenges and strategies in the implementation of this process.Materials and methods: The research design adopted for the study is descriptive research. The researcher conducted a survey on the 49 insurance companies of Kenya to encapsulate the factors that are relevant in articulating the extent of adoption of ERM and the level of maturity. A sample of 196 respondents was selected from a population of 245 respondents. The study used quantitative and qualitative methods of data analysis. Statistical Package for Social Sciences (SPSS) version 20 program was used for analysis. The results were presented using tables and pie charts. Similarly, qualitative data was summarized and categorized according to common themes and presentedin continuous prose form.Results: The study concluded that organizational related challenges hindered implementation of ERM programs. Results revealed that inadequate application of the risk management framework, ambiguity in roles and responsibilities in risk management, complexities in risk measurement, lack of embodiment of ERM in organizational culture, difficulty in risk quantification, linking risk information to strategic decision making, ensuring that all decisions remain within the organization’s risk tolerance, proactively identifying current and emerging risks, cost and budgetary constraints, misalignment of the risk and business operating models, risk management not seen as a priority by top management and inadequate information to make risk-based decisions hindered implementation of ERM frameworks among insurance firms in Kenya. The findings imply that organization related challenges have a significant effect on ERM implementation.Recommendations: The study recommends that there should be better organizational strategies to help improve implementation of ERM programs. It was found that building a strong risk culture, engaging consultants, building a dedicated ERM function, committed board of directors and top management, developing risk appetite statement, appointment of a Chief Risk Officer (CRO) and availing ERM budgets improved the implementation of ERM programs. Key words: enterprise risk management, adoption, maturity

Enterprise risk management and bow ties: going beyond patient safety

2019 ◽  
Vol 26 (3) ◽  
pp. 770-785
Author(s):  
Hossam Elamir
Keyword(s):  
Risk Assessment ◽  
Risk Management ◽  
Patient Safety ◽  
Assessment Tool ◽  
Enterprise Risk Management ◽  
Risk Assessment Tool ◽  
Management Tool ◽  
Content Type ◽  
Enterprise Risk ◽  
Bow Tie

Purpose The growing importance of risk management programmes and practices in different industries has given rise to a new risk management approach, i.e. enterprise risk management. The purpose of this paper is to better understand the necessity, benefit, approaches and methodologies of managing risks in healthcare. It compares and contrasts between the traditional and enterprise risk management approaches within the healthcare context. In addition, it introduces bow tie methodology, a prospective risk assessment tool proposed by the American Society for Healthcare Risk Management as a visual risk management tool used in enterprise risk management. Design/methodology/approach This is a critical review of published literature on the topics of governance, patient safety, risk management, enterprise risk management and bow tie, which aims to draw a link between them and find the benefits behind their adoption. Findings Enterprise risk management is a generic holistic approach that extends the benefits of risk management programme beyond the traditional insurable hazards and/or losses. In addition, the bow tie methodology is a barrier-based risk analysis and management tool used in enterprise risk management for critical events related to the relevant day-to-day operations. It is a visual risk assessment tool which is used in many higher reliability industries. Nevertheless, enterprise risk management and bow ties are reported with limited use in healthcare. Originality/value The paper suggests the applicability and usefulness of enterprise risk management to healthcare, and proposes the bow tie methodology as a proactive barrier-based risk management tool valid for enterprise risk management implementation in healthcare.

Management accounting systems, enterprise risk management and organizational performance in financial institutions

2014 ◽  
Vol 22 (2) ◽  
pp. 128-144 ◽  
Author(s):  
Siti Zaleha Abdul Rasid ◽  
Che Ruhana Isa ◽  
Wan Khairuzzaman Wan Ismail
Keyword(s):  
Risk Management ◽  
Organizational Performance ◽  
Financial Institutions ◽  
Management Accounting ◽  
Enterprise Risk Management ◽  
Accounting Systems ◽  
Content Type ◽  
Management Accounting Systems ◽  
Enterprise Risk ◽  
And Control

Purpose – The purpose of this paper is to examine the linkages between management accounting systems (MAS), enterprise risk management (ERM) and organizational performance by examining MAS information characteristics that match ERM implementation and joint effects of MAS and ERM on organizational performance. Design/methodology/approach – The research method involved administering a questionnaire to 106 financial institutions (FIs) in Malaysia. The respondents were chief financial officers or staff members holding the most senior positions in the finance department of the institutions. Findings – The significant findings on the association between ERM and MAS show that implementation of ERM requires the use of sophisticated MAS information. ERM and MAS complement each other as both are integral to decision making, planning and control in an organization. The finding also substantiates the important role of ERM in enhancing non-financial performance. Research limitations/implications – This study covered only MAS as part of sub-control systems in an organization. Future studies could investigate the link between a more comprehensive management accounting and control system and ERM. Furthermore, this study used perceptual measures of MAS, ERM and organizational performance. Practical implications – The regulating body should promote best management practices of sophisticated MAS and ERM among FIs as these practices will create competitive advantage as well as help those institutions comply with regulations. Originality/value – This study has contributed to the body of knowledge on the linkages between MAS, risk management system and organizational performance.

scholarly journals The effect of enterprise risk management (ERM) on firm value in manufacturing companies listed on Indonesian Stock Exchange year 2010-2013

2018 ◽  
Vol 3 (2) ◽  
pp. 224-235 ◽  
Author(s):  
Iswajuni Iswajuni ◽  
Arina Manasikana ◽  
Soegeng Soetedjo
Keyword(s):  
Risk Management ◽  
Firm Value ◽  
Stock Exchange ◽  
Enterprise Risk Management ◽  
Managerial Ownership ◽  
Manufacturing Companies ◽  
Content Type ◽  
Significant Negative Effect ◽  
Enterprise Risk ◽  
Negative Effect

Purpose The purpose of this paper is to identify the effect of enterprise risk management (ERM) with firm size, ROA and managerial ownership as control variables on firm value that is proxied by Tobin’s Q. Design/methodology/approach Population of this research was manufacturing companies listed on the Indonesian Stock Exchange (IDX) in 2010–2013. The used method in this research is multiple linear regression-ordinary least square and hypotheses testing using t-test to test the regression coefficients with level of significance of 5 percent. Findings The results showed that ERM, ROA and size of the company have a significant positive effect on the firm value. While the managerial ownership has a significant negative effect on the firm value. Originality/value The results showed that firm value increases as ERM, ROA and size of the company improves. While the managerial ownership has a significant negative effect on the firm value.

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