An inaugural market study launched today by leading business and finance advisory firm Grant Thornton has found that insurance companies should seek better balance in risk management across all risk categories, to successfully deliver their business plans within acceptable risk limits. The Risk Appetite study, the first of its kind, canvassed the views of 43 chief executive officers and managing directors from leading London insurers.
The research found that though significant progress has been made by insurers in developing their risk appetite frameworks, there is evidence that this has possibly been to the detriment of focus on managing operational risk, which has been known to contribute to the failure and collapse of insurance companies.
Stephen Kelly, Risk and Capital Management Practice Leader at Grant Thornton, said: "Improvements that have been made have been driven by regulation such as Solvency II, which has caused insurers to introduce quantifiable risk measures. Operational risk, however, remains a particular challenge as it is inherently difficult to quantify. This is due to a lack of reliable historical data and the prevalence of human involvement and potential for human error.
"We are urging insurance businesses not to lose sight of operational risk by ensuring that risk management strategies have been independently challenged and have appropriate balance in their approach, addressing all the risks to which the firm is exposed. Grant Thornton's extensive work with clients to date shows that the winners will be those who risk manage across all their risk profile spectrum."
Grant Thornton intends to conduct a further Risk Appetite market study later this year, with the aim of providing a benchmark for best practice.
Download the Risk Appetite Market Study here
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