Integration can be a big challenge for large insurers’ risk functions. Most have lots of moving parts in many locations, each with specialized risk types and regional differences. The increasing trend to outsource is a further complication.

Insurers must find a balance between centralization and decentralization of their risk management and coordination, one that serves the organization at both the local and group levels. Currently, 54 percent of respondents in Accenture’s 2017 Global Risk Management Study say this coordination is limited. 

2017 Global Risk Management Study: 54 percent of respondents say there is limited coordination between risk management activities and at the local level and the group level.

Not only this, but the lack of integration between the risk function and other business functions is an increasing challenge for insurers. 

2017 Global Risk Management Study. Risk function lack of integration with other business functions an increasing challenge for insurers (2013- 47 percent, 2017- 58 percent)

How to find the right balance?

Centralization is desirable for insurers because it offers an immediate aggregate picture for analysis. In this sense, it’s best for data sets to be centralized. Centralization also provides a standardized and coordinated response to regulation, a consistent set of rules for managing all risks and the capability to perform complex and high-value calculations to measure risk exposure, liquidity, and solvency.

The challenge with centralization is that for more than half of all insurers, organization-wide risk processes don’t capture the nuances of the local markets.

2017 Global Risk Management Study: 52 percent of insurers say organization-wide risk processes don't capture the nuances of local markets.

Further to this, decentralization is valuable because local or specialized teams can focus on local regulatory requirements and market-specific topics. Decentralization can cause issues, though, for local markets to balance risk management at the local level with organization-wide risk priorities.

2017 Global Risk Management Study: 65 percent of insurers say local markets struggle to balance management of risk at the local level with organization-wide risk priorities.

Despite these challenges, risk leaders should strive to create a common data platform for the organization, to avoid inefficiency and data priority turf wars.

These challenges require leaders to develop an integration strategy between risk management at the local and group levels, as well as between business functions. Where it’s possible, there is currently a trend towards greater centralization of risk management at the group level.

2017 Global Risk Management Study. Slow progress for integration between finance and risk. Percentage of insurers said finance and risk leaders have a close working relationship (2015- 9 percent, 2017- 13 percent)

Progress in integrating the finance and risk leadership teams is slow. Risk leaders with the right focus and discipline are expected to have enough strategic influence to integrate risk across the business, coordinate activities, and invest wisely in the overall development of the function. The Global Risk Management Study describes six simple but powerful actions risk leaders can take – you can find the report here.

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