Board members are being asked to play a larger role in risk governance. Regulatory requirements, rating agency criteria and evolving management practices are increasing the volume and frequency of board information related to enterprise risk management (ERM).
Executive Summary
The complexity of ERM poses special difficulties for P/C insurance company board members who are being asked to play a larger role in risk governance. To adequately assess ERM program effectiveness, board members must cut through the usual ERM updates and get answers to more incisive questions, says ERM Consultant Sim Segal, who proposed 10 questions to help directors better understand the ERM programs of their organizations.Board members must understand and interpret this information to arrive at an evaluation of the quality of the company’s ERM program.
However, ERM presents a special challenge for board members due to a lack of widely accepted practice standards, disparate nomenclature and inadequate sources of board training. As a result, board questioning of ERM practices often misses the mark and can result in board members overestimating the organization’s shock resistance.
To better assess an ERM program, board members must get answers to revealing questions such as the following:
