Chief risk officers need to simplify the way in which theyreport risks to executive management in order to properly conveythe importance and usefulness of core enterprise risk management(ERM) elements, a panel of chief risk officers (CROs) said.

The Insurance Advisory Services (IAS) practice of Ernst &Young LLP hosted a roundtable to discuss the preliminary findingsof its 2008 Insurance Risk Leadership Survey.

Ernst & Young said the survey found that "while the ERMbuilding blocks are in place, the industry faces significantchallenges as it prepares to move to the next level."

ERM is the process of planning and managing the activities of abusiness to minimize financial, strategic and operational risks inaddition to risks associated with accidental losses.

The survey found that when it comes to ERM-related issues,boards focus attention on equity and operational risk, but spendthe least amount of time on the company's appetite for risk and ERMpolicy, which were cited by the roundtable participants as factorsthat could impact companies sooner.

Ernst & Young said roundtable participants speculated thatthe limited focus on these core ERM elements may have to do withthe complexity with which these issues are presented.

Doug French, managing principal and FSO Insurance AdvisoryServices leader, Ernst & Young LLP, said, "Board members andbusiness unit heads have no desire to be risk managers, and toooften the ERM data presented is difficult to digest and apply tostrategic decision making.

"The best way for CROs to be effective is to package theinformation in a way that is easy to understand. This will lead toinformed questioning and give the CRO the opportunity to providecritical risk insight to guide the company in the right direction.Of course, the value of this insight will be directly dependent onthe ability to measure risk on a timely basis which remains achallenge."

The survey also found that half of responding CROs indicatedthat their risk monitoring responsibilities include monitoringequity, interest rate, credit, or operational risk.

While "the vast majority" said they expect to take on thoseresponsibilities in the future, members of the roundtable weresurprised at how limited CRO risk monitoring responsibilities areat most organizations, Ernst & Young reported.

Ernst & Young said the roundtable participants agreed that"risk monitoring should be a fundamental element of the CROposition."

However, the survey showed that CROs are "optimistic about thefuture role of enterprise risk management." Ernst & Youngreported that while a majority of companies currently rely oninformal processes for evaluating risk versus reward decisions, 60percent of responding CROs said they expect to have formalstructured processes for making these decisions within threeyears.

Additionally, the survey noted that while just 28 percent ofinsurers are using economic capital as a key performance measure,90 percent of surveyed CROs expect EC to be "either a key or mainperformance measure for their companies within three-to-fiveyears."