95% of insurers who responded to a recent risk management survey conducted by Moore Stephens said they identified regulatory risk as the single biggest challenge facing them over the next two years - ahead of operational and financial risk, with 93% of brokers placing regulatory risk at the top of the two-year agenda, ahead of strategic and financial risk.
The Moore Stephens risk management survey showed that most firms were aware of the risk management requirements demanded by the regulators relative to their own businesses. Only 6% of respondents considered that they were not as informed as they should be about the requirements.
The survey revealed that a high percentage of firms – with insurers once again ahead of brokers – had set up an appropriate risk management framework, including board-level leadership. Similarly, the majority of firms were generally quite adept at evidencing the manner in which they had incorporated risk management into their businesses, with formal policies and monitoring systems. But two-thirds of respondents admitted that they did not separate risk appetite from risk management in their internal policies and procedures.
Risk management was shown to be in its infancy in many of the businesses surveyed. Two-thirds of all businesses responding had been practising risk management for three years or less.
On the basis of responses received, brokers appeared to be better than insurers at communicating risk management policy to their staff. Overall, commercial risk management issues seem to be generally limited to senior managers and audit and risk committees, with only a moderate level of perceived involvement by other staff. Generally speaking, risk management seems not to be integrated with reward and appraisal processes, and there is very little evidence of effective self-assessment within firms.
Overall, there was a disappointing level of recognition on the part of respondents of the true benefits of risk management to improved business performance and strategic planning, rather than just satisfying the regulators. All this indicates the industry is adopting a "tick box" approach.