Measuring payback from risk management

While it is possible to quantify the value of risk management initiatives in respect of high frequency low impact insurable risks, it is far less easy to measure the payback from risk management in respect of the strategic risks that organisations face. And since there are some business risks that quite simply have to be managed in order to avoid surprises and reflect the board’s concerns, there may be dangers in placing too great an emphasis on measuring return from investment.

Having said that, there are some techniques, both quantitative and qualitative, that can provide an indication of the impact of risk management in reducing the likelihood of such events occurring. Further, with insurers seeking to differentiate and provide better terms for those companies with good risk management, part of the payback might be demonstrated by an advantageous premium rate.

These were some of the conclusions of our panel of experts participating in this issue’s roundtable discussion. It was also clear that, with stakeholders’ ever increasing focus on risk management, companies need to address their structures for identifying, managing and measuring risks and demonstrate the benefits.