Zurich Insurance Group is an international company that works to insure entities locally and globally according to their customer needs. As a renowned corporation, Zurich has leveraged its position by increasing the efficiency of its internal business operations. The organization has remained keen to mitigate any existing and emerging risk that could impact its sustainability. It is in this regard that it has sought to employ the Enterprise Risk Management (ERM) tools as a way of enhancing a culture of risk prevention. The success of Zurich Insurance Group as a leader in the field of insurance has depended mainly on its ability to protect its assets by using ERM and Business Resilience Programs across the organization.
How Do Zurich ERM Tools Help Them Better Understand Their Existing and Emerging Risks?
First, it is important to note that the primary function of the Enterprise Risk Management (ERM) tools to leverage the process of decision-making. Most fundamentally, at Zurich Insurance Group, it has remained keen to assist the company in understanding not only their existing but also the emerging risks. Research has shown that the ERM takes a 360-degree model in risk and opportunity management thereby putting the company in a strong position to remain aware of the strategic and operational risks that happen in a day-to-day basis; a factor that creates values for all the stakeholders including the employees and customers. The Zurich Insurance Group possesses an ERM Healthcheck that creates a platform for understanding the current financial ERM strategy used by the financial institution in a bid to find the much-needed opportunities for improvement. Another important aspect of the ERM held by the company is known as the Total Risk Profiling (TRP).
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The TRP provides the company with a chance to identify, assess, and monitor holistic risks and further forge improvement actions via a structured methodology. As such, TRP has been suggested as one of the tools that have managed to create an effective and consistent risk management culture across the organization. "TRP uses facilitator-led workshops to develop your risk profile, quantify your risk tolerance, and develop action plans" (Lin, Wen, & Yu, 2012). The second important tool that the organization uses in understanding their existing and emergent risks is known as the ERM gap analysis. Zurich ensures that it undertakes a detailed gap analysis of the ERM model in a bid to increase a sense of direction and effectiveness. It is essentially a diagnostic process that identifies the areas of strength and weaknesses within the company to improve the likelihood that the company yields positive outcomes. Therefore, in conclusion, the ERM can improve success by creating a culture of risk identification and business intelligence.
How Are Zurich’s Risk Roles and Responsibilities Impacting Their Risk Culture?
First, it remains fundamentally critical to note that Zurich is a leading insurance company that provides services to its customers in local and global markets. It has a broad employee base that goes up to 53,000 and offers products in various areas including casualty, property, and life insurance products covering over 210 countries (Strategic Enterprise Risk Management). Its customer base is composed of private individuals, small and large companies, and multinational corporations. Zurich depends on strong risk culture and corporate governance as the main drivers in developing its risk management framework. Fraser, Simkins, & Narvaez, (2014) asserted that through a series of policies, processes, and responsibilities, Zurich leverages a culture of disciplined risk-taking across the company. First, is vital to understand the roles and responsibilities of Zurich as pertains to risk management.
Zurich ensures the protection of the capital base by preventing the prospects that the risks do not go past the company’s risk tolerance. Secondly, the Group aims at building a strong brand reputation as an entity that improves the culture of risk awareness and promotes an informed and disciplined risk-taking. Thirdly, its role is to ensure that it has a robust decision-making platform that provides not only consistent but reliable risk information. Such risk roles and responsibilities have played a significant role in the development of a risk culture within the company. The culture has since been emphasized by a management framework whose primary role is to provide "a governance process with clear responsibilities for taking, managing, monitoring, and reporting risks" (Lin, Wen, & Yu, 2012). The culture of risk management has seen the articulation of roles and responsibilities that promote risk management throughout the company from the positionof the Board of Directors and Chief Executive Officer to the functional areas. Zurich furthermore has shown reliance on policies and guidelines as a way of emphasizing their risk culture. For instance, the Zurich Risk Policy acts as the primary risk governance document for the company as its primary function is to provide a rationale for the Group's risk tolerance.
Why Is It Important to Include Business Resilience Program in Your Organization’s ERM Program?
Many organizations are slowly moving towards the direction of the enterprise risk management (ERM) with many stakeholders showing that they need it like never before. However, in the wake of this demand, only a few companies can boast of possessing a plan to respond to a wide range of threats that could implicate the major assets owned by the business. A Business Resilience Program enables an organization to develop a comprehensive strategy based on the understanding of all the assets facing risks. In essence, the ERM hinges on intended comprehensiveness. Many regard it as an enterprise-wide approach that works to identify the vast array of threats that could implicate a business. However, research has shown that in most circumstances, the ERM does not work. The main problem identified with the ERM approach is that it focuses on a particular group of assets that mainly fall in the area of information technology, data, and finance (Flaharty, 2013). As such, companies are in a much-increased risk of neglecting other valuable assets that are difficult to quantify including human capital. Also, of importance to note is that many companies begin by minimizing the threats before necessarily identifying their most valuable assets.
Flaharty (2013) asserted that creating a strong Business Resilience Program calls on entities to identify all their critical assets and then react by developing strategies aimed at mitigating the impact of the potential disruptions. As such, organizations poise themselves to create better risk management strategies. The problem that comes with EMR is that it can overemphasis on a particular class of assets thereby overlooking those whose disruptions can severely bankrupt or damage the business. Therefore, business resilience primarily focuses on the assets and not necessarily the events. It is incumbent upon organizations to provide a broad definition of assets to ensure that they achieve a comprehensive outlook of the possible risks that can affect the company. The first step towards resilience is to identify all the assets whose disruption could massively impact the well-being of the company. The organization should then resort to employing the event-neutral strategies that would effectively mitigate the risk. Although resilience demands that the business have a full range of knowledge regarding their assets, some do not have. In many circumstances, the knowledge is largely dispersed across an organization meaning that there isn’t any form of consolidation that could provide a company with an overview of its risk factors. In conclusion, a Business Resilience Program goes beyond the boundaries of ERM in not just identifying the risk, but also the particular assets whose disruption would affect the long-term sustainability of the company.
How Is Zurich’s Capital Management Program Helping Their ERM Program?
The Zurich Capital Management has developed into a world leader in matters of investment thus providing world class quality products to corporate, retail, and institutional clients across the world. The program is based on three critical values that include flexibility, transparency, and provision of competitive rates. In terms of flexibility, the program emphasizes that all assets entrusted to this program are not subjected to any restrictions whatsoever. Clients have the liberty to withdraw their investments at any particular time without incurring costs. Regarding transparency, the program provides the clients with direct access to financial investments. The competitive rates have come as a result of Zurich's partnership with banks leading to more favorable rates. As noted earlier, the ERM program is all about the identification of risks within the organization and the creation of a culture that promotes the same. Flexibility, transparency, and the competitive rates seen in the Capital Management program are all strategies aimed at reducing risks by providing clients with autonomy, freedom, and integrity. As consumers continue to enjoy such programs, it develops a culture of sensitivity to client assets at their disposal.
In conclusion, Zurich Insurance Group has remained keen to improve its internal business environment by clearly developing mechanisms and strategies for risk reduction. The EMR has provided with a platform to assess its operations and further create a culture of risk reduction. However, research has continued to show that EMR on its own is not enough especially for the long-term sustainability of the business. It is in this regard that a Business Resilience Program comes into place to support the EMR by identifying all the company's most valuable risks and preventing them from any eventuality that could cause damage. Therefore, Zurich acts as an example to any international organization that might want to learn lessons regarding the management of risks.
References
Flaharty M. (2013). In Any Event: ERM through Business Resilience. FTI Journal http://www.ftijournal.com/uploads/pdf/FTI_Journal-In_Any_Event.pdf
Lin, Y., Wen, M. M., & Yu, J. (2012). Enterprise risk management: Strategic antecedents, risk integration, and performance. North American Actuarial Journal, 16(1), 1-28.
Fraser, J., Simkins, B., & Narvaez, K. (2014). Implementing enterprise risk management: Case studies and best practices. John Wiley & Sons.
Strategic Enterprise Risk Management: Tools create shareholder value, Zurich https://www.erm-strategies.com/blog/wp-content/uploads/2013/05/Strategic_ERM_at_Zurich-Executive_Summary.pdf
