We are currently in the midst of a "risk revolution" similar to the "strategy revolution" of the 1970s and 80s. Back then, companies began to focus on those parts of their business of which they were the natural owner (i.e., where they had a competitive advantage). Now, the emergence of sophisticated risk-transfer markets is allowing companies to own only those risks of which they are a natural owner, allowing our clients to shift from pure risk mitigation to risk-return optimization.
The risk return optimization is comprised of five key elements:
Identifying and understanding major risks
Providing clarity about the risks that will affect a company's future performance and deep insight into the risks that matter the most.
Deciding which risks are natural
Understanding which risks a company is competitively advantaged to own and which they should seek to transfer or mitigate.
Determining the capacity and appetite for risk
Understanding if companies hold the amount of risk needed to deliver the returns they seek.
Embedding risk in all decisions and processes
Determining whether critical business decisions are made with a clear view of how they change a company's risk profile, and if core business processes are consistent with their approach to risk.
Aligning governance and organization around risk
Determining if the systems and infrastructure are in place for companies to monitor and manage risks that are being taken within their business.
