6 Steps To A Good Risk Assessment Process - Gen Re

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6 Steps to a Good Risk

Assessment Process
November 23, 2015 | By Molly Corbett | English |
Molly Corbett
Enterprise Risk Management Analyst,
Stamford
Read all articles
Effective enterprise risk management is becomingly

increasingly important in todays regulatory environment.
Regulators and rating agencies expect that companies have a
good understanding of their risk pro les and have
http://www.genre.com/knowledge/blog/stepstoagoodriskassessmenten.html
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implemented the appropriate governance structure to

mitigate their risks. The insurance industry is ever-changing,
and it can be challenging for an organization to have a
complete understanding of the risks that can pose potential
pitfalls to its operations.
Conducting a company risk assessment can allow an
organization to obtain a holistic view of the risks it faces,
allowing management to identify these risks and capitalize on
opportunities.
1. Identify Your Companys Risks
Consider what you de ne risk to be. A common de nition of
risk is any event that negatively in uences your ability to
achieve your business goals.
Risks affect a companys ability to survive, successfully
compete within the industry, and maintain its nancial
strength and positive public image as well as the overall
quality of its products, services and people.
Think about risks from your point of view within the company,
considering your groups goals and objectives. You should
consider anything from insurance risk, such as Natural
Catastrophe Risk, to operational risks such as Outsourcing
and Service Provider Risk. A good starting point is to look at
your companys presentation to the Ratings Agencies and
Regulators. In which of these risks have these entities shown
interest? What other risks can you think of?
2. Create Your Companys Risk Library
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Once you have analyzed your companys risks, you should

begin to establish a company risk library. The risk library
provides the framework for the risk assessment process. It
summarizes and de nes, in a common repository, those risks
to which the company is exposed. The library helps to facilitate
discussions of risks and their de nitions, and it promotes both
consistency and a culture of risk awareness. To help streamline
the process at Gen Re, our risk library is broken into four
categories, with multiple risks falling into each individual
category:
Insurance Risk
Market Risk
Operational Risk
Strategic Risk
3. Identify Your Risk Owners
For each of the risks within your risk library, you should
identify the most appropriate person to monitor and manage
those risks - in other words, the risk owner(s). The risk owner
is responsible for assessing risks and identifying associated
controls. This role is also responsible for implementing and
maintaining appropriate controls within its associated area of
responsibility, and for reporting breaches of controls or risk
appetite. There can be more than one risk owner for each of
the individual risks. For example, the risk owners of Business
Interruption/Disaster Recovery Risk may include individuals
from Finance, Human Resources and Business Unit managers.
4. Identify the Controls to Mitigate & Reduce Risks
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Working with the risk owners, identify current controls that

are in place to mitigate and/or reduce risk. For example,
investment guidelines help to mitigate Equity Risk. Each
control should also be assigned an owner or responsible party.
This can be a functional responsibility, instead of an individual
or speci c person.
5. Assess Risk Potential and Impact
The companys risk appetite is based on its own evaluation of
the tradeoff between risk and return. Assessing the nancial
impact and likelihood of risk can aid management in
determining whether the company is operating within its
stated risk appetite and should accept, reject or reduce risk.
Working with the risk owners, evaluate each of the risks in the
risk library, based on:
Financial Impact or Signi cance - How big of an impact
would this risk have if it were to occur? This impact
should be considered, taking into account the
mitigating impact of the risk controls and monitoring of
risk controls.
Likelihood - Consider how likely it is that this risk
would actually occur after the mitigating effects of the
risk controls. The evaluation of each risk can be on
either a quantitative or qualitative basis, dependent on
the availability of information or the con dence in
approach. For some risks, such as Natural Catastrophe
Risk, the company may choose to use outputs from
catastrophe models. For other risks it makes more
sense to develop a scenario-based approach for
evaluation.
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6. Revisit Annually
At this point you have:
Created a risk library and identi ed risk owners
Identi ed mitigating controls
Evaluated each risk for nancial impact and likelihood
The risk assessment is a living process and should be
conducted on at least an annual basis, and certainly more
frequently if there has been a substantial change in your
companys risk pro le. Additionally, it is a valuable exercise to
re-visit the company risk library annually, as risks and
de nitions may develop and change from year to year.
Risk assessment allows management to assess the companys

risks and controls and devote resources where needed.
Evaluating the nancial impact and likelihood of each risk can
be helpful when prioritizing the companys risks. Identifying
risk and control owners helps to clarify roles and
responsibilities in the company and promotes accountability.
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However, for the risk assessment process to be successful, you

must consider what kind of reporting would speak to your
management team. A risk assessment is only as useful as how
it is being used and decisions are being made. The risk
assessment process takes time to do well; therefore, you want
to create output that is helpful to management.
The risk assessment process is ongoing and should be revised
over time. It can take several iterations before you have a
complete picture of your companys risks and truly understand
the controls and processes that mitigate them. The outcome of
the process gives management and its employees a better
understanding of the company risk pro le and the importance
of the control environment in mitigating risk.
Posted In: Enterprise Risk Management
Tags: insurance operations, risk management, rethink risk
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9/19/2016

6 Steps to a Good Risk

Effective enterprise risk management is becomingly

implemented the appropriate governance structure to

Once you have analyzed your companys risks, you should

Working with the risk owners, identify current controls that

Risk assessment allows management to assess the companys

However, for the risk assessment process to be successful, you

The Crucial Role of Reinsurance in

Asia Australasia baby boomers bad faith claims

concussions contractor liability insurance data breach

dread disease insurance driverless cars drugs engineering

re risk ood risk

fracking Germany industry results industry

liability machinery breakdown medical

underwriting issues mental health millennials

management smoking Solvency II supply chain risk

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