Enterprise risk management continued to move more toward the mainstream in Corporate America this year, with its implementation being driven by anxious boards and by CEOs more acutely aware than ever of the need to understand and mitigate existential threats.
This increasing stature of the concept, especially at Fortune 1000 firms, is good news for risk managers: It means greater recognition of the strategic contributions they can make, and ERM’s growing acceptance should open up more opportunities for risk managers to consult with a company’s top decision-makers.
In our own insurance industry, ratings agencies are helping push the practice of ERM further up the C-suite “Must Do” list.
In fact, reinsurance giants are not only leading the charge on ERM within the insurance sector—they are so advanced that they can serve as models for almost any company considering a program.
“Reinsurers are sophisticated when it comes to developing ERM systems, and it’s a cultural phenomenon at these companies,” says Peter Dickey, assistant vice president of A.M. Best’s reinsurance ratings division. “It’s accepted from the board to the lowest person, and they make sure that message gets through to everyone.”
While many small to midsize companies in the U.S. believe there is something to be gained through ERM practices, they are still moving slowly toward building an infrastructure for it, says Stefan Holzberger, A.M. Best’s vice president of rating criteria and regulatory-policy development.
One element of ERM, and an emerging discipline in 2011, is strategic risk management (SRM), which was defined and recognized by the Risk and Insurance Management Society at its annual conference this May.
SRM, a central component of ERM, focuses on the biggest and most likely risks to shareholder value. This process helps risk managers identify and assess those issues that could most severely impair an organization’s ability to execute its business strategies.
