How the “strategic CRO” will help insurers keep pace with a changing risk landscape
Insurance Risk management Risk
Research by analytics and consulting firm LCP into the “risk function of the future” highlights the importance of general insurance Chief Risk Officers (CROs) in influencing strategy. Firms where CROs have a “seat at the table” as part of important decisions tend to be the best prepared to tackle new and emerging risks, creating the best chance of success.
LCP’s research, performed in collaboration with over 50 CROs and board members, also identified the importance of greater use of automation and AI, combined with strong relationships between the risk function and all parts of the firm.
60% of CROs say the automation of routine work will be an important area of development, especially when it comes to routine risk management work. Taking this further and developing an AI-supported “risk management engine” will allow risk teams to dive deeper into a broader range of risks whilst also freeing up more time to spend on business partnering.
LCP’s report sets out a blueprint for the risk function of the future, which fuses human judgement and relationship-building with technology and AI to help the firm actively manage the balance between risk acceptance and risk mitigation. This role is becoming ever more important as the risk landscape shifts in response to megatrends such as climate change, AI, geopolitics and social/cultural change. These were among the top challenges CROs expected to tackle over the next decade.
Other key findings in the report include the following:
- CROs’ top risks today are Cyber risk and AI, climate change and ESG, geopolitical risk and economic uncertainty.
- 55% said that cyber risk will be the top risk in ten years, while 45% said climate change and AI will be the key risks.
- Climate risk management ranked as the top skill that CROs would most like to develop in their teams by 2030.
Ed Harrison, Principal at LCP, commented:
“Insurers face a dramatic shift in the risk landscape, driven by megatrends in AI, climate change, geopolitics and culture. At the same time, risks are becoming increasingly interconnected.
“Risk teams must evolve, too. The risk function of the future will fuse data-driven insight and human judgement seamlessly to help the business balance risk acceptance and risk mitigation as the ground rules keep changing.
“Central to the risk function of the future will be the ‘strategic CRO’ who connects risk and strategy at the highest level within the business, and a risk management ‘engine’ that delivers better risk intelligence than ever before.”