27 April 2020
Paul Harwood, member of the Risk Management Board, shares an alternative view.
In the last article on this topic, I suggested that risk management, as a governance function, had no place in the midst of a crisis. That’s a naïve view: in these circumstances, at least two of the roles of the Risk Management Function are unchanged: first, to improve decision making quality, and second, to enhance implementation activity.
Crises are defined after the event by the quality of the decisions made. There is a temptation under pressure to make fast decisions based on limited, usually operational, data. Whatever the level of planning, the Risk Management Function can bring relevant factors into discussion, adding extra context to the fact base being used. The best risk managers will ensure that their contribution does not slow up decision making and, even more useful, provide a regulatory tick.
The second role is as important. Regulators have been clear that there should be no diminution in insurer risk management. The Risk Management Function can usefully ensure that increased operational risk that inevitably emerges from the massive change to systems and controls can be implemented with risk management are the forefront.
Risk management doesn’t stop in a crisis!
How will the Risk Management Function emerge from the coronavirus event? Better resourced or written off as lacking when it was most needed? Or with an enhanced understanding by firms of the benefits of a high-quality Risk Management Function? I suspect that the answer is in our hands.
If you would like to comment on this article, please send to: risk@actuaries.org.uk or the Risk Management Community LinkedIn group.