Business Risk Management
G003
BRM-3.pptxBusiness Risk Management
Session 3
David Clemson
Today’s Topics
Risk identification
Risk analysis
Underwriting
Risk identification
More art, less science…
Differing approaches, differing views…
Stakeholder mapping
From stakeholder mapping to risk mapping
Using tools from strategic analysis and business analysis for risk analysis
Approaches will vary from business to business and sector to sector…
Steps in Risk Mapping
Like a full strategic planning exercise, not a trivial exercise
Risk appetite across all operating areas?
What are the critical risks? This needs agreement!
1. Measurement
2. Classification
3. Identification
4. Assessment
5. Analysis
Measurement
Establish parameters to quantify impact of any risk
How significant are they?
Need agreement on how they are measured – not just financial!
Qualitative and quantitative approaches
Severity of loss and frequency
Classification
Organise top-down framework for cataloguing risks – operational risk, business risk, market risk
Major areas e.g. property, casualty, health, weather, product liability, credit
Again – what is critical to your enterprise?
Again – needs management agreement across disciplines
Complexity and sensitivity…
See Telecom Risk Map from Shimpi as example
Identification
Develop bottom-up list of specific risks facing the firm using the previously developed classification framework
See Pharmaceutical Industry example from Shimpi
Risk prioritisation will vary by sector and over time
There can be sudden changes which are interesting research areas – see XLRe.com ‘Unseen today, here tomorrow – the perils of ignoring emerging risks’
Assessment
Evaluate significance of each identified risk
Quantitative and qualitative assessment
Frequency and severity – see Pharmaceutical Industry risk profile from Shimpi
Analysis
Model collective impact of risks on the firm
Concept of ‘model office’
Dynamic financial analysis
Speed of business, speed of analysis
Underwriting
How much are you prepared to retain?
Who is ‘placing’ your risks?
Solvency ratings?
A brief word about hedging…
