Insights from the Outsmarting Uncertainty webinar series
What practical steps can you take to embed modern, analytical risk management that drives financial success and, with it, your own standing within your organization? A recent WTW Outsmarting Uncertainty webinar provided risk managers with the answers. Experts provided a roadmap to refined risk management approaches capable of strengthening both organizational resilience and the influence of the risk function.
The webinar was the final installment of the four-part ‘curriculum’ created to connect the fundamentals of risk finance. It focused on providing risk professionals with the motivation and the means to modernize both the perceptions and the application of modern risk management to connect risk areas. Below, we summarize the key takeaways in four steps, from understanding the building blocks of a modern, smarter approach to risk, to finally achieving cultural change around risk management.
Introducing modernized risk management starts with broadening your horizons. This applies to both the inputs going into your risk management approach — which includes all the available data, technology and risk expertise you can leverage to manage risks effectively — and the outputs possible from the process.
You can the recommendations emerging from more analytical risk management approaches to extend beyond buying insurance. With greater insight, you can expand your focus to targeting specific risk exposures, reducing costs and minimizing potential downsides.
Analytical risk insight can empower you to widen your own horizons. With impactful, quantitative insight, you can become the go-to colleague to support optimized capital allocation decisions.
Understanding the risks to financial resilience within a robust risk tolerance framework is the bedrock for evaluating risk transfer options and an area we explored in detail in an earlier webinar in the fundamentals of risk finance series.
Once you have established a framework for evaluating decisions against both the risk the business can take and the risk it’s willing to take, you’re ready to apply quantitative analysis. Starting with one critical risk area can be a good idea as you build up ‘muscle memory’ on moving away from more traditional risk management approaches.
While quantitative modeling of risk is crucial, embedding a modern approach that calls on this analysis does not mean outsourcing risk management to quantitative modeling experts. To be most effective, risk professionals need to own and translate modeling insights.
Combining your specific risk management expertise and knowledge of the business with modeling capabilities will make you more able to influence strategic decision making.
Quantitative modeling helps you do the ‘day job’ of buying insurance more effectively. These cost efficiencies can enhance how stakeholders across the business perceive your expertise. More generally, by owning quantitative insights, analysis and recommendations, you'll showcase the value of a smarter risk management approach and with it, your personal value-add.
Quantitative risk insight can enable you to build partnerships with leaders in diverse business areas, including finance, cyber, M&A and enterprise risk management. Expanding your remit through partnerships can position you as a valuable contributor to major capital allocation decisions and paves the way for further cross-functional collaboration.
One example we're increasingly seeing is risk professionals using analytical risk management approaches to partner with chief information security officers (CISO). Together risk professionals and the CISO can assess and mitigate cyber risks, applying a quantitative risk framework to cyber risk, jointly owning an effective and efficient approach to a critical risk area.
Whether it’s your CISO or CFO, once one senior stakeholder who's closer to a specific risk recognizes your value, you can expect more doors to open on further partnerships. Such collaboration takes you beyond the tactical, year-on-year ‘buying insurance day job’ of a more traditional risk manager to making greater strategic contributions.
One ultimate goal of analytical risk management is to create a ‘risk-forward culture’. Under this cultural change, modern risk management can have the most positive impact on the bottom line. Colleagues across the business will see risk management more as a value generator than a cost center.
This relocates the risk function from being in the ‘one to avoid’ category to colleagues identifying it as a valuable resource for optimized decision making. By forming cross-functional partnerships and delivering smarter decisions, you can create short-term financial gains and enhance medium-term performance by avoiding, mitigating, or reducing adverse scenarios. The most significant long-term contribution of modern analytical risk management practices is the ability to free up capital for business ventures that generate growth and increase profitability.
Watch the Outsmarting Uncertainty risk finance fundamentals series on-demand.
For a smarter way to modernize your risk management and create more value from risk, contact WTW’s Risk & Analytics specialists.
