In today’s business world, a continuous flow of information is filtered every minute from operational and transactional systems, scanning and facilities management systems, inbound and outbound customer contact points, and from mobile media and the Web, says Volker von Widdern.
This is nothing new, but what has changed is the velocity of growth, the volume and diversity of the data, and the need to make better use of information to transform business operations.
Creating value from the right data insight can provide companies with the competitive advantage, but it’s making sure these insights are hitting the sweet spot that is most vital. For data insights to make a strong business impact, they need to be embraced by decision-makers.
For insurers, data has become a key element of consideration enabling them to use analytical tools to better understand risks, make more informed decisions, and ultimately reduce costs.
According to Volker von Widdern, MD at Marsh Risk Consulting, “Technology also presents businesses with new tools that facilitate the search for an improved understanding of the risk drivers and exposure assumptions. These provide guidance on risk quantification and facilitate an improved understanding of risk.”
Therefore, technology not only supports the ability to collect large amounts of data, but more importantly, provides the ability to understand and take advantage of its full value.
“For example, the total cost of motor claims could be declining, but the average cost could be increasing – what does this tell us? Perhaps the cost of repairs is increasing despite improvements in driver techniques. Perhaps the increase in average cost is based on the fleet profile change, but this may not be consistent with the expected frequency of claims. These and many related factors should be investigated,” he adds.
Von Widdern further explains that quantifying risk depends on the measurement potential on the risk drivers and the degree of certainty that is applicable to the drivers and their related assumptions.
Risk management is not solely a financial issue as it is made up of other key elements including qualitative measurements such as client satisfaction scores which are leading indicators of repeat sales; quality and compliance related scoring attributes; financial impact costs mainly driven by hazard, operational and financial risks; strategic exposures such as brand leverage and trust, which influence price earnings ratios, as well as time elements such as risk duration.
Marsh Global Analytics helps organisations filter through the vast amounts of available data and find risk information to help guide their organisations’ strategic risk planning.
“The main function is to optimise risk financing. When planning the optimal basis of presenting a risk portfolio to insurers, MGA will assist Client Executives with the feasible and value-adding retention options. These options should be compared to the Risk Bearing Capacity and cash generating ability of the client, so that a balanced view of the benefits of risk retention and the consequences of funding the retentions are maintained.”
In today’s business environment, the effective management of enterprise risk is a key factor in planning for any organisation’s long-term viability.
Von Widdern indicates, “We always recommend a quantitative and qualitative evaluation of strategic risks. King III requires that risks should be properly evaluated and understood, but does not prescribe the methods that should be applied.”