Linking formalised risk management activity with strategy continues to be a challenge for organisations in both planning and implementation. Although Solvency II encourages the linkage of the risk management system and internal model to strategic decision-making, it is our experience that there is still no consistent approach being used across the market. There is also a lack of consistent involvement by risk management professionals in those activities that do take place.
Our conversations with chief executive officers and chief risk officers increasingly turn to strategic uncertainty and how it can be managed as effectively as possible. The dialogue deals less with compliance and more with the broader benefits and business value that can be derived. It is no surprise that this topic continues to gain momentum in an economic environment that is uncertain due to recessionary pressures, sovereign debt, the situation with the euro and many other factors.
In this paper, we discuss the importance of strategic uncertainty and propose a structured approach to assessment that directly links risk management components to strategy. We suggest practical steps insurance companies can take to improve and optimise strategic risk management to achieve their overall goals.