One of the lessons from my post on the objective of risk management was
that there are different perspectives on this subject. I asked a number of leading industry experts to share
their perspective on the objective of risk management.
I am delighted that James Tufts, Group Chief Risk Officer at
Guardian Financial Services has agreed to share his thoughts. I will
continue sharing perspectives from leading industry experts in the next few weeks.
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The objective of risk
management
James Tufts, Group Chief
Risk Officer, Guardian Financial Services
Risk management is fundamental to what an
insurance company does and the core of its business purpose. Insurers
take on risk and through a variety of different techniques and tools, they
manage those risks such that they can charge an appropriate premium to
customers, service those customers, meet regulatory requirements and produce an
acceptable return on capital for the owners – this is the embodiment of risk
management.
Risk management is therefore fundamental to all
the activities in the business and the Enterprise Risk Management (ERM)
framework is the core model for how the business operates.
Perhaps surprisingly, the objective of the “Risk
Function” should not be “risk management”. That’s a business objective.
The objective of the “Risk Function” is to provide the ERM framework and
the source of challenge and oversight on all aspects of the business model,
relative to this framework. It is only when this distinction is fully
understood and internalised in a company that risk management adds value.
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If you work in financial services, I would be keen to hear your
thoughts about this perspective on the objective of risk management. If
you don’t, I would be keen to know if this resonates with your
experience.
You can subscribe to future posts here.
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