Enterprise Risk Management: A View from the Insurance Industry

LAW AND ECONOMICS OF RISK IN FINANCE, Peter Nobel and Marina Gets, eds., pp. 111-120, Schulthess, Zürich, 2007

U. of St. Gallen Law & Economics Working Paper No. 2008-19

11 Pages Posted: 2 Jun 2008 Last revised: 7 Aug 2008

Andreas Grünbichler

University of St. Gallen - Swiss Institute of Banking and Finance

Wolfgang Errath

affiliation not provided to SSRN

Date Written: June 2007

Abstract

The term Enterprise Risk Management (ERM) represents a holistic approach to managing the risks that a company faces in a changing environment. Risk can be considered as a function of change, and risk management may thus be described as a technique for coping with the effects of change. Although risk management practices and methodologies have been around for decades, the area of ERM has recently gained attention from executive management, investors, rating agencies, regulators and academics.

While risk management functions initially only monitored adherence to risk and other policies, they later on implemented the first risk measurement and quantification approaches. The next natural step was that risk management not only provided the risk status, but also took responsibility for hedging and risk mitigation activities, followed by satisfying the need for more risk-and-return analysis and recommendations. Nowadays, risk management functions further ex-pand their activities into the area of strategic analysis and business decision support. To put it in other words, risk management has moved from a passive analysis and quantification function to a proactive business enabler and strategy consultant role.

Organizations of all types and sizes face a range of risks affecting the achievement of their objectives and influencing all decision-making. ERM supports intelligent and effective decision-making in order to optimize the level of calculated risk taken and to recognize opportunities where taking risks might benefit the organization.

Zurich Financial Services defines Enterprise Risk Management as the structured Group-wide view to identifying, measuring, managing, reporting and responding to risks that affect the achievement of Zurich's strategic and financial objectives, including both upside and downside risks on both sides of the balance sheet.

Keywords: Enterprise Risk Management, Insurance Industry, risk measurement, Zurich Financial Services

JEL Classification: G22, K22

Suggested Citation

Grünbichler, Andreas and Errath, Wolfgang, Enterprise Risk Management: A View from the Insurance Industry (June 2007). LAW AND ECONOMICS OF RISK IN FINANCE, Peter Nobel and Marina Gets, eds., pp. 111-120, Schulthess, Zürich, 2007; U. of St. Gallen Law & Economics Working Paper No. 2008-19. Available at SSRN: https://ssrn.com/abstract=1138211

Andreas Grünbichler (Contact Author)

University of St. Gallen - Swiss Institute of Banking and Finance ( email )

Rosenbergstrasse 52
St. Gallen, CH-9000
Switzerland
+ 41 71 224 7074 (Phone)
+ 41 71 224 7088 (Fax)

HOME PAGE: http://www.sbf.unisg.ch

Wolfgang Errath

affiliation not provided to SSRN

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