By CYRIL TUOHY, managing editor of Risk & Insurance®
Professional risk managers crave easy-to-use software tools and analytics to help them evaluate their enterprise risk management (ERM) programs and comply with new requirements, a new survey finds.
The survey results are hardly surprising given the new capital requirements imposed on financial institutions in Europe by Basel II and the major healthcare changes that will become the law in the United States over the next two to three years.
Still, the survey provides a "blueprint and game changers for next-generation risk management practices," said Susan Hauser, vice president, worldwide industry and global accounts with Microsoft Corp.
Survey respondents, Hauser added, "clearly confirm the global demand for easy-to-use automation and analytics."
Respondents included 1,662 members of the Professional Risk Managers' International Association (PRMIA), 84 percent of whom represent financial institutions and 16 percent of whom represent nonfinancial institutions.
Risk managers from financial and nonfinancial sectors see ERM as a leading trend, and risk managers at financial institutions place an emphasis on liquidity risk buffers and stress testing. Nonfinancial firms focus more on operational risk and cash flow at risk, the survey also found.
The survey "provides a benchmark to risk and compliance practitioners across both financial and nonfinancial sectors who are facing decisions today that will define their standards and systems for years to come," according to Geoff Kates, chairman of PRMIA.
PRMIA, a member-supported nonprofit organization dedicated to implementing best practices of risk management, represents 70,000 risk managers in nearly 200 countries around the world.
ANALYTICS NOT FOR ALL?
While the survey reaffirms the importance of clear analytics in helping risk managers come to a decision, industries have vastly different adoption rates. Companies in the high-tech sector, for example, are more likely to be using advanced analytics than, say, the fishing industry.
Within an industry--insurance for example--personal-lines carriers like Progressive and Geico have adopted analytics more readily than a workers' compensation insurer, often because consumers are more demanding.
"Look how long it's taken us to reach the point where we use analytics," said Maddy Bowling, a workers' compensation consultant, who spoke in an interview with Risk & Insurance® earlier this year.
STRATEGY VS. TACTICS
Risk managers typically work with analytics technology provided by brokers or their third-party administrators.
Picking the easiest-to-use analytics software package, however, doesn't guarantee that a company will meet its compliance requirements.
Survey respondents said that more automation and self-serve analytical tools will allow them more time to evaluate and implement strategic and proactive risk mitigation activities, rather than deal with tactical tasks like data aggregation.
Obtaining risk data for management and board reporting continues to present obstacles, including lack of effective tools for aggregation or analysis and the unavailability of the data, the survey respondents also said.
Microsoft Corp., the Redmond, Wash. software giant, co-sponsored the survey with the Professional Risk Managers' Association. Microsoft supplies front and back-end software to insurance carriers and vendors.
September 21, 2010
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