III Linking ERM to Strategy and Strategic Risk Management
A Strategic Approach to Enterprise Risk Management at Zurich Insurance Group
Director of Strategic Business Risk at Zurich Insurance Group
President and Owner of ERM Strategies, LLC
This case study describes how the Zurich Insurance Group has implemented and evolved its enterprise risk management (ERM) approach for more than 10 years across the globe. It describes how Zurich has organized its governance structures and ERM champions to help integrate ERM into the business model that focuses on promptly identifying, measuring, managing, monitoring, and reporting risks that affect the achievement of strategic, operational, and financial objectives. This includes adjusting their risk profiles to be in line with Zurich's stated risk tolerance to respond to new threats and opportunities in order to optimize returns.
ENTERPRISE RISK MANAGEMENT AT ZURICH
As a large global insurance carrier, Zurich Insurance Group has relied on its ERM program for more than 10 years as a means to help Zurich remain profitable. With over 60,000 employees around the world and serving customers in more than 170 countries and territories, Zurich is exposed to a wide range of risks from its customers to its own operations. Yet Zurich recognizes that taking the right risks at the right time is a necessary part of growing and protecting shareholder value. Naturally, Zurich aims to capitalize on appropriate market opportunities that could attract the best talent and investor capital. To achieve this, Zurich utilizes insight from its ERM program to help balance growth opportunities with the reality that it is operating in a complex world economy.
ERM not only is embedded in Zurich's business, but is also aligned with its strategic and operational planning and budgeting process. Zurich assesses risks systematically and from a strategic perspective through its proprietary tools that allow it to identify and then evaluate the probability of a risk scenario occurring, as well as the severity of the consequence should it occur. Zurich then develops, implements, and monitors appropriate improvement actions. Its ERM tools are integral to how Zurich deals with change, by helping to evaluate strategic risks as well as risks to its reputation. At the senior management level, the ERM process is annually reviewed and tied to the strategic planning process, but is also embedded in the ongoing business.
Listed here are Zurich's major ERM objectives, and a tangible proof point:
• Protect the capital base by monitoring that risks are not taken beyond Zurich's risk tolerance.
• Enhance value creation and contribute to an optimal risk/return profile by providing the basis for efficient capital deployment.
• Support Zurich's decision-making processes by providing consistent, reliable, and timely risk information.
• Protect Zurich's reputation and brand by promoting a sound culture of risk awareness and disciplined and informed risk taking.