Thursday 4 September 2014

Guest Post: the Objective of Risk Management – a CRO View

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.


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.


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. 

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