Strategic Risk Management: Facilitating Risk-Based Insurance Decisions

Abstract:     
Many risk management functions do reasonably well identifying, modeling and mitigating more 'knowable' risks. However, such functions face a bigger challenge identifying, qualifying and mitigating more ambiguous threats, such as the one(s) that characterized the recent financial crisis. This paper presents an approach for addressing this challenge by way of strategic risk management. We first propose a formal definition for strategic risk management, and then we describe the functions comprising it, all of which are illustrated by way of practical, insurance industry-oriented examples. Despite the insurance focus of this paper, the solution that we propose is broadly applicable across the financial services sector, and beyond.

Number of Pages in PDF File: 17

Keywords: strategic risk management, risk management, ambiguous threats

JEL Classification: D81, G22, L21, L29, M29

working papers series