CATEGORIZING VARIOUS RISKS AT ZURICH
In order to enable a consistent, systematic, and disciplined approach to ERM, Zurich categorizes its main risks. (See Exhibit 14.7.) This grouping assists Zurich in monitoring any aggregation of exposures that may be accumulating across the enterprise and could, therefore, have a greater impact on the company.
Exhibit 14.7 Categorizing Various Risks at Zurich
Strategic risks are the unintended risks that can result as a by-product of planning or executing a strategy. For example, they can arise from the following:
• Inadequate assessment of strategic plans
• Improper implementation of strategic plans
• Unexpected changes to assumptions underlying plans
Risk considerations are a key element in the strategic decision-making process. The senior leadership team assesses the implications of strategic decisions on risk- based return measures and risk-based capital in order to optimize the risk/retum profile and to take advantage of economically profitable growth opportunities as they arise.
Zurich works on reducing the unintended risks of strategic business decisions through its risk assessment processes and tools. The Group Executive Committee regularly assesses key strategic risk scenarios for the Group as a whole, including scenarios for emerging risks and their strategic implications.
An example of this is when Zurich evaluates the risks of mergers and acquisitions (M&A) transactions from both a quantitative and a qualitative perspective. Zurich conducts risk assessments of M&A transactions to evaluate risk, especially related to the integration of acquired businesses, to help increase the likelihood of successfully attaining the expected benefits. They may also review country-level exposures using the Zurich Risk Room tool.